Document:

axsm_Ex10_1

			

					

						 

					

					

						Exhibit 10.1

				
	

					

						 

					

					

						 

				
	

					

						

					

					

						Axsome Therapeutics, Inc.

				
	

					

						25 Broadway

				
	

					

						9th Floor

				
	

					

						New York, NY 10004

				
	

					

						Tel:  +1 212.332.3241

				
	

					

						Fax: +1 212.320.0245

				
	

					

						www.axsome.com

				

		

			 

		

		
			April 16, 2018
		

		
			 
		

		
			Nick X. Pizzie,  C.P.A., M.B.A.
		

		
			2 Smithwold Road
		

		
			Somerset, NJ 08873
		

		
			Dear Nick:
		

		
			I am pleased to officially offer you the opportunity to join us at Axsome Therapeutics, Inc. (the “Company”). I truly believe that you will be a great addition to our team. Subject to compliance with the terms and conditions of this letter, we are pleased to offer you employment in the position of Chief Financial Officer. The terms of your employment will include:
		

			
	
			
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			Your initial annual base salary will be $325,000 with an anticipated start date of May 16,  2018. Your base salary, less payroll deductions and required withholdings, will be payable in accordance with the Company’s normal payroll practices. You may also receive a discretionary cash bonus up to 40% of your base salary, contingent upon your performance and that of the Company against goals established by the Board of Directors of the Company (“the Board”), and availability of funds. Your bonus for 2018 will be non-prorated, which for the avoidance of doubt means you are eligible, subject to your performance during 2018, to receive the full 2018 bonus amount you would have been eligible for if you were an employee of the Company for the entirety of the 2018 performance year. You will receive a sign-on payment of $15,000. You shall be required to immediately repay to the Company in full all amounts you receive as part of your non-prorated 2018 bonus and the sign-on payment if you terminate your employment with the Company on or prior to the one-year anniversary of your first day of employment with the Company.

			
	
			
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			Subject to approval by the Board, you will receive options to purchase 132,000 shares (the “Shares”) of common stock under the Company’s Equity Compensation Plan (the “Plan”). Such date on which the options are granted to you is referred to as the “Date of Grant.” The options will have an exercise price equal to the fair market value on the Date of Grant, which will be determined by the Board on such date. The options, if approved, will vest over a four-year period as follows: 25% of the Shares will vest on the first anniversary of the Date of Grant, and the remaining 75% of the Shares in equal increments thereafter each quarter of the remaining three years. The options are governed and subject to the Plan and any grant agreements, which you will receive under separate cover.

			
	
			
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			Naturally, your compensation, including base salary, bonus and options, is contingent upon your continued employment with the Company. Your title and compensation will be reviewed periodically (not less often than annually) by the Chief Executive Officer and the Board.

			
	
			
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			You will be eligible to participate in all employee benefit plans or programs of the Company established hereafter and offered generally to similarly situated employees of the Company, subject to the terms and provisions of such plans including applicable waiting periods. Details about these benefits will be made available for your review.  The Company retains the right to modify, replace or terminate any or all of its employee benefits plans or programs from time to time.

			
	
			
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			You may terminate your employment with the Company at any time and for any reason whatsoever. Likewise, the Company may terminate your employment at any time and for any reason whatsoever, with or without cause or advance notice. This at-will employment relationship cannot be changed except in writing signed by the Chief Executive Officer of the Company.

		
			

		 

 

		

			
	
			
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			Notwithstanding your at-will employment, in the event the Company terminates your employment without Cause within 12 months of a Change in Control of the Company, you will be eligible to receive severance payments equal to six (6) months of your then existing base salary, with payment beginning within 10 days after the Release (as defined below) becomes irrevocable, effective and enforceable.  Payments shall be made in equal monthly installments over a period of 6 months from the date on which the Release becomes irrevocable, effective and enforceable, with each such payment due by the 15th of each month thereafter with the exception of the first payment, which shall be due within 10 days after the Release become irrevocable, effective and enforceable.  The Company’s obligation to make any payment or provide any benefit pursuant to this paragraph is contingent upon, and is the consideration for, you executing a comprehensive separation and general release agreement that includes provisions relating to cooperation, non-admissions, non-disclosure, non-disparagement, return of all property and other terms in a form acceptable to the Company  (“the Release”) and that becomes effective in accordance with its terms on or before the 60th day after the date of termination.  You also must comply and continue to comply with your obligations under the Release and the attached Employee Proprietary Information and Inventions Agreement, and you must reasonably cooperate and be responsive and available upon reasonable requests by the Company to assist the Company pertaining to areas of the Company’s business of which you have knowledge as a result of your employment hereunder.  For the purposes of this paragraph, “Cause” means (i) your repeated intentional failure to perform, or repeated gross negligence in the performance of, one or more of your essential duties and responsibilities to the Company and/or your failure to follow the lawful directives of the Company; (ii) your extended or repeated absence from the Company’s offices or unavailability to perform services hereunder other than as a result of Company-related travel or paid time off; (iii) your conviction of a felony or your commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company; (iv) your unauthorized use or disclosure of any material proprietary information or trade secrets of the Company or any other party to whom you owe an obligation of nondisclosure as a result of your relationship with the Company; (v) any material breach by you of this Agreement or any related agreements with the Company including, but not limited to, any non-competition or non-solicitation provision; (vi) your deliberate and material violation of any Company policy; (vii) your death or any disability that renders you, in the good faith determination of the Company, unable to perform the essential duties and responsibilities of your job with or without a reasonable accommodation. “Change in Control” means the sale of all or substantially all the assets of the Company; any merger, consolidation or acquisition of the Company with, by or into another corporation, entity or person; or any change in the ownership of more than fifty percent (50%) of the voting capital stock of the Company in one or more related transactions.

			
	
			
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			Without the express written consent of the Chief Executive Officer, you shall have no apparent or implied authority to pledge the credit of the Company, to bind the Company under any contract, note, mortgage or other agreement outside the ordinary course of the Company’s business, to release or discharge any debt due to the Company, or to sell, mortgage, transfer or otherwise dispose of any assets of the Company.

			
	
			
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			You will abide by the Company’s  rules and regulations, now existing or established hereafter, including without limitation the Company’s Insider Trading Policy and Code of Conduct and Ethics.  As a condition of employment, you must sign and comply with the Employee Proprietary Information and Inventions Agreement attached hereto as Exhibit A, which includes a prohibition on the unauthorized use or disclosure of the Company’s confidential or proprietary information, a prohibition against engaging in competitive activities or soliciting employees of the Company during, and for one year after the end of, your employment with the Company, and provisions acknowledging the Company’s ownership in, and assigning to the Company all rights to, any inventions developed by you during your employment with the Company.

			
	
			
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			You represent to the Company that your performance will not breach any other agreement to which you are a party and that you have not, and will not during the term of your employment with the 

		 

 

	Company, enter into any oral or written agreement in conflict with any of the provisions of this letter agreement or the Company’s policies. You will not use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other third party with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties.

			
	
			
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			In the event of a breach by you of any of your obligations of this letter agreement, including Exhibit A, you shall cease to be entitled to any further benefits under this letter agreement.  You agree that all bonuses, equity compensation and other incentive compensation provided by the Company shall be subject to any applicable clawback policy implemented by the Board of Directors from time to time.

			
	
			
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			This letter agreement is binding upon and inures to the benefit of both parties and the Company’s assigns and successors, including without limitation any entity with which, or into which, the Company may be merged or which may succeed to the Company’s assets or business, provided, however, that any assignee, or successor in interest, assumes the Company’s obligations hereunder.  Your rights and obligations under this letter agreement are personal and cannot be transferred or assigned by you at any time.

			
	
			
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			This letter agreement, together with (i) any equity award agreements, and (ii) all agreements attached hereto or referenced herein, constitute the entire agreement and understanding of the Company and you with respect to the terms and conditions of your employment with the Company and the eligibility for any potential severance payments following separation from employment with the Company, and this letter agreement shall supersede all prior and contemporaneous written or oral agreements, promises and understandings between you and the Company relating to such subject matter.  This letter agreement may only be amended by written instrument signed by you and the Chief Executive Officer. This letter agreement shall be construed and interpreted under the laws of the State of New York without regard to the conflicts of laws provisions thereof.

			
	
			
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			You will be required to complete and return a W‐9 federal tax withholding form so that we can process your first pay period.  In preparing your W‐9, remember to write your name exactly as it appears on your social security card or work visa.  To the extent required by law, this offer is subject to satisfactory proof of your right to work in the United States. This offer is contingent upon the successful completion of reference and background checks.

			
	
			
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			By signing below, you represent that you are not relying on any representation, promise or agreement that is not expressly written in this letter agreement or in Exhibit A.

		
			Once again, I am thrilled you are joining us. I believe you are really going to enjoy working here, and I know you will add tremendous value. Feel free to call me with any questions.
		

		
			 
		

			
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						Sincerely,

				
	
					
						 

					
					
						 

					
					
						/s/ Herriot Tabuteau, MD

				
	
					
						 

					
					
						 

					
					
						Herriot Tabuteau, MD

				
	
					
						 

					
					
						 

					
					
						Chief Executive Officer

				
	
					
						AGREED TO AND ACCEPTED:

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						/s/ Nick X. Pizzie

					
					
						 

					
					
						 

				
	
					
						Nick X. Pizzie, C.P.A., M.B.A.

					
					
						 

					
					
						 

				
	
					
						Date: April 17, 2018

					
					
						 

					
					
						 

				

		
			 
		

		
			
		

		
			

		 

 

		

		
			EXHIBIT A
		

		
			 
		

		
			EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTcentennial2ndarcreditagr

                                                               SECOND AMENDED AND RESTATED CREDIT AGREEMENT                               dated as of May 4, 2018                                       among                       CENTENNIAL RESOURCE PRODUCTION, LLC,                                   as Borrower,                          Any Parent Guarantor Party Hereto,                            JPMORGAN CHASE BANK, N.A.,                              as Administrative Agent,                                        and                              The Lenders Party Hereto                                                                                                                               JPMORGAN CHASE BANK, N.A.                                  as Lead Arranger,                                                  WELLS FARGO BANK, N.A., ROYAL BANK OF CANADA AND COMERICA BANK,                              as Co-Syndication Agents,   BMO HARRIS BANK, N.A., CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH,                       AND U.S. BANK NATIONAL ASSOCIATION,                             as Co-Documentation Agents,                                        and                            JPMORGAN CHASE BANK, N.A.,                                as Sole Bookrunner                                              US 5625732v.13  

 

                                    TABLE OF CONTENTS                                                                            Page                                     ARTICLE I                    DEFINITIONS AND ACCOUNTING MATTERS   Section 1.01 Terms Defined Above ..............................................................................................1  Section 1.02 Certain Defined Terms .............................................................................................1  Section 1.03 Types of Loans and Borrowings ............................................................................32  Section 1.04 Terms Generally; Rules of Construction ...............................................................32  Section 1.05 Accounting Terms and Determinations; GAAP ....................................................32                                    ARTICLE II                                  THE CREDITS   Section 2.01 Commitment ..........................................................................................................33  Section 2.02 Loans and Borrowings ...........................................................................................33  Section 2.03 Requests for Borrowings........................................................................................34  Section 2.04 Interest Elections ....................................................................................................35  Section 2.05 Funding of Borrowings ..........................................................................................36  Section 2.06 Termination  and  Reduction of  Commitments  and  Aggregate  Maximum              Credit  Amounts;  Increase,  Reduction  and  Termination  of  Aggregate              Elected Commitment Amounts ..............................................................................37  Section 2.07 Borrowing Base .....................................................................................................41  Section 2.08 Letters of Credit .....................................................................................................44                                    ARTICLE III          PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES   Section 3.01 Repayment of Loans ..............................................................................................51  Section 3.02 Interest....................................................................................................................51  Section 3.03 Alternate Rate of Interest .......................................................................................52  Section 3.04 Prepayments ...........................................................................................................53  Section 3.05 Fees ........................................................................................................................55                                    ARTICLE IV            PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS   Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs .............................57  Section 4.02 Presumption of Payment by the Borrower .............................................................58  Section 4.03 Certain Deductions by the Administrative Agent ..................................................58  Section 4.04 Disposition of Proceeds .........................................................................................59                                          i  

 

                                                                                                                                                          Page                                      ARTICLE V       INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY   Section 5.01 Increased Costs ......................................................................................................59  Section 5.02 Break Funding Payments .......................................................................................60  Section 5.03 Taxes ......................................................................................................................61  Section 5.04 Mitigation Obligations; Replacement of Lenders ..................................................64  Section 5.05 Illegality .................................................................................................................65                                    ARTICLE VI                            CONDITIONS PRECEDENT   Section 6.01 Effective Date ........................................................................................................65  Section 6.02 Each Credit Event ..................................................................................................68                                    ARTICLE VII                      REPRESENTATIONS AND WARRANTIES   Section 7.01 Organization; Powers .............................................................................................68  Section 7.02 Authority; Enforceability .......................................................................................69  Section 7.03 Approvals; No Conflicts ........................................................................................69  Section 7.04 Financial Condition; No Material Adverse Change ...............................................69  Section 7.05 Litigation ................................................................................................................70  Section 7.06 Environmental Matters...........................................................................................70  Section 7.07 Compliance  with  the  Laws  and  Agreements;  No  Defaults  or  Borrowing              Base Deficiency .....................................................................................................71  Section 7.08 Investment Company Act ......................................................................................71  Section 7.09 Taxes ......................................................................................................................72  Section 7.10 ERISA ....................................................................................................................72  Section 7.11 Disclosure; No Material Misstatements .................................................................72  Section 7.12 Insurance ................................................................................................................73  Section 7.13 Restriction on Liens ...............................................................................................73  Section 7.14 Subsidiaries ............................................................................................................73  Section 7.15 Location of Business and Offices ..........................................................................74  Section 7.16 Properties; Titles, Etc. ............................................................................................74  Section 7.17 Maintenance of Properties .....................................................................................75  Section 7.18 Gas Imbalances, Prepayments ...............................................................................75  Section 7.19 Marketing of Production ........................................................................................75  Section 7.20 Swap Agreements and Qualified ECP Counterparty .............................................76  Section 7.21 Use of Loans and Letters of Credit ........................................................................76  Section 7.22 Solvency .................................................................................................................76  Section 7.23 Anti-Corruption Laws and Sanctions.....................................................................76  Section 7.24 EEA Financial Institutions .....................................................................................77                                          ii  

 

                                                                                                                                                          Page                                     ARTICLE VIII                           AFFIRMATIVE COVENANTS   Section 8.01 Financial Statements; Other Information ...............................................................77  Section 8.02 Notices of Material Events.....................................................................................81  Section 8.03 Existence; Conduct of Business .............................................................................82  Section 8.04 Payment of Obligations..........................................................................................82  Section 8.05 Performance of Obligations under Loan Documents.............................................82  Section 8.06 Operation and Maintenance of Properties..............................................................82  Section 8.07 Insurance ................................................................................................................83  Section 8.08 Books and Records; Inspection Rights ..................................................................83  Section 8.09 Compliance with Laws ..........................................................................................83  Section 8.10 Environmental Matters...........................................................................................84  Section 8.11 Further Assurances.................................................................................................85  Section 8.12 Reserve Reports .....................................................................................................85  Section 8.13 Title Information ....................................................................................................86  Section 8.14 Collateral and Guaranty Agreements .....................................................................87  Section 8.15 ERISA Compliance ................................................................................................89  Section 8.16 Unrestricted Subsidiaries .......................................................................................89  Section 8.17 Commodity Exchange Act Keepwell Provisions ...................................................89  Section 8.18 Post-Closing Delivery of Account Control Agreements .......................................90                                    ARTICLE IX                             NEGATIVE COVENANTS   Section 9.01 Financial Covenants ...............................................................................................90  Section 9.02 Debt ........................................................................................................................91  Section 9.03 Liens .......................................................................................................................92  Section 9.04 Dividends  and  Distributions  and  Redemptions  of  Permitted  Senior              Unsecured Notes ....................................................................................................92  Section 9.05 Investments, Loans and Advances .........................................................................94  Section 9.06 Designation and Conversion of Restricted and Unrestricted Subsidiaries ............95  Section 9.07 Nature of Business; No International Operations ..................................................96  Section 9.08 Proceeds of Notes ..................................................................................................96  Section 9.09 ERISA Compliance ................................................................................................97  Section 9.10 Sale or Discount of Receivables ............................................................................97  Section 9.11 Mergers, Etc ...........................................................................................................97  Section 9.12 Sale of Properties and Termination of Swap Agreements .....................................97  Section 9.13 Transactions with Affiliates ...................................................................................99  Section 9.14 Subsidiaries ..........................................................................................................100  Section 9.15 Negative Pledge Agreements; Dividend Restrictions ..........................................100  Section 9.16 Gas Imbalances, Take-or-Pay or Other Prepayments ..........................................100  Section 9.17 Swap Agreements ................................................................................................100                                          iii  

 

                                                                                                                                                          Page                                      ARTICLE X                         EVENTS OF DEFAULT; REMEDIES   Section 10.01 Events of Default .................................................................................................103  Section 10.02 Remedies ..............................................................................................................105                                    ARTICLE XI                                  THE AGENTS   Section 11.01 Appointment; Powers...........................................................................................106  Section 11.02 Duties and Obligations of Administrative Agent.................................................106  Section 11.03 Action by Administrative Agent ..........................................................................107  Section 11.04 Reliance by Administrative Agent .......................................................................108  Section 11.05 Subagents .............................................................................................................108  Section 11.06 Resignation of Administrative Agent ..................................................................108  Section 11.07 Agents as Lenders ................................................................................................109  Section 11.08 No Reliance ..........................................................................................................109  Section 11.09 Administrative Agent May File Proofs of Claim .................................................109  Section 11.10 Authority  of  Administrative  Agent  to  Release  Collateral,  Liens  and              Guarantors ............................................................................................................110  Section 11.11 Agents ..................................................................................................................111  Section 11.12 Certain ERISA Matters ........................................................................................111                                    ARTICLE XII                                MISCELLANEOUS   Section 12.01 Notices .................................................................................................................113  Section 12.02 Waivers; Amendments .........................................................................................114  Section 12.03 Expenses, Indemnity; Damage Waiver ................................................................116  Section 12.04 Successors and Assigns........................................................................................119  Section 12.05 Survival; Revival; Reinstatement ........................................................................122  Section 12.06 Counterparts; Integration; Effectiveness ..............................................................123  Section 12.07 Severability ..........................................................................................................123  Section 12.08 Right of Setoff......................................................................................................123  Section 12.09 GOVERNING  LAW;  JURISDICTION;  CONSENT  TO  SERVICE  OF              PROCESS ............................................................................................................124  Section 12.10 Headings ..............................................................................................................125  Section 12.11 Confidentiality .....................................................................................................125  Section 12.12 Interest Rate Limitation .......................................................................................126  Section 12.13 EXCULPATION PROVISIONS .........................................................................127  Section 12.14 Collateral Matters; Swap Agreements .................................................................127  Section 12.15 No Third Party Beneficiaries ...............................................................................127  Section 12.16 USA Patriot Act Notice .......................................................................................128  Section 12.17 No Advisory or Fiduciary Responsibility ............................................................128  Section 12.18 Amendment and Restatement ..............................................................................129  Section 12.19 True-up Loans ......................................................................................................129                                         iv  

 

                                                                                                                                                          Page     Section 12.20 Acknowledgement and Consent to Bail-In of EEA Financial Institutions ..........129  Section 12.21 Exiting Lender .....................................................................................................130                                                      v  

 

                          ANNEXES, EXHIBITS AND SCHEDULES   Annex I                       Allocation of Maximum Credit Amounts and Elected Commitments                                            vi  

 

         THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 4, 2018,  is among: CENTENNIAL RESOURCE PRODUCTION, LLC, a limited liability company duly formed  and existing under the laws of the State of Delaware (the “Borrower”), as the borrower; the Parent  (defined below) from time to time party hereto, as a parent guarantor; each of the Lenders from  time  to  time  party  hereto;  and JPMORGAN CHASE BANK, N.A. (in its  individual  capacity,  “JPMorgan”),  as  administrative  agent  for the Lenders  (in  such  capacity,  together  with  its  successors in such capacity, the “Administrative Agent”).                                   R E C I T A L S         A.    The Borrower, the Administrative Agent and the other agents and lenders party  thereto are parties to that certain Amended and Restated Credit Agreement dated as of October 15,  2014, pursuant to which such lenders provided certain loans to and extensions of credit on behalf  of the Borrower (as renewed, extended, amended or otherwise modified from time prior to the date  hereof, the “Existing A&R Credit Agreement”).         B.    The parties  hereto  desire to  amend and restate in  its  entirety the Existing A&R  Credit  Agreement  in  the  form  of  this  Agreement  to  (i)  renew  and  rearrange  the  indebtedness  outstanding  under  the  Existing  A&R  Credit  Agreement  (but  not  to  repay  or  pay  off  any  such  indebtedness) and (ii) amend certain other terms of the Existing A&R Credit Agreement in certain  respects as provided in this Agreement.         C.    In consideration of the mutual covenants and agreements herein contained and of  the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree  that the Existing A&R Credit Agreement is hereby amended, renewed, extended and restated in  its entirety in the form of this Agreement on (and subject to) the terms and conditions set forth  herein.  The parties hereto further agree as follows:                                    ARTICLE I                   DEFINITIONS AND ACCOUNTING MATTERS         Section 1.01 Terms Defined Above.  As used in this Agreement, each term defined above  has the meaning indicated above.         Section 1.02 Certain Defined Terms.  As used in this Agreement, the following terms  have the meanings specified below:          “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan,  or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to  the Alternate Base Rate.         “Act” has the meaning assigned such term in Section 12.16.         “Additional Lender” has the meaning given to such term in Section 2.06(c)(i).         “Additional  Lender Certificate” has  the  meaning  given  to  such  term  in  Section 2.06(c)(ii)(G).                                          1  

 

         “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest  Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal  to the LIBO Rate for such Interest Period multiplied by the Statutory Reserve Rate.         “Administrative  Questionnaire” means  an  Administrative  Questionnaire  in  a  form  supplied by the Administrative Agent.         “Affected Loans” has the meaning assigned such term in Section 5.05.         “Affiliate” means,  with  respect  to  a  specified  Person, another  Person  that  directly,  or  indirectly through one or more intermediaries, Controls or is Controlled by or is under common  Control with the Person specified.         “Agents” means, collectively, the Administrative Agent, the Arranger, the Co-Syndication  Agents, and the Co-Documentation Agents, and “Agent” shall mean any of them individually, as  the context requires.         “Aggregate  Elected  Commitment  Amounts” at  any  time  shall  equal  the  sum  of  the  Elected  Commitments,  as  the  same  may  be  increased,  reduced  or  terminated  pursuant  to  Section 2.06(c).   As  of  the  Effective  Date,  the  Aggregate  Elected  Commitment  Amounts  are  $600,000,000.00.         “Aggregate Maximum Credit Amounts” at any time shall equal the sum of the Maximum  Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.06.         “Agreement” means this Second Amended and Restated Credit Agreement, as the same  may from time to time be amended, modified, supplemented or restated.         “Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the  Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus 1⁄2 of 1% and  (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a  Business Day, the immediately preceding Business Day) plus 1%, provided that for the purpose  of this definition, the Adjusted LIBO Rate for any day shall be based on the LIBO Screen Rate (or  if the LIBO Screen Rate is not available for such one month Interest Period, the Interpolated Rate)  at approximately 11:00 a.m. London time on such day.  Any change in the Alternate Base Rate  due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate shall be effective  from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the  Adjusted LIBO Rate, respectively.  If the Alternate Base Rate is being used as an alternate rate of  interest  pursuant  to Section 3.03 hereof,  then  the  Alternate  Base  Rate  shall  be  the  greater  of  clause (a) and (b) above and shall be determined without reference to clause (c) above.  For the  avoidance of doubt, if the Alternate Base Rate shall be less than zero percent, such rate shall be  deemed to be zero percent for purposes of this Agreement.         “Anti-Corruption Laws” means all state or federal laws, rules, and regulations applicable  to the Parent, the Borrower or any of their Affiliates from time to time concerning or relating to  bribery or corruption, including, without limitation, the FCPA.                                          2  

 

         “Applicable Margin” means for any day, with respect to any ABR Loan or Eurodollar  Loan, or with respect to the Commitment Fee Rate, as the case may be, the rate per annum set  forth in the Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization  Percentage then in effect:                             Borrowing Base Utilization Grid   Borrowing Base    < 25%       > 25% <      > 50% <      > 75% <      > 90%  Utilization                     50%          75%         90%  Percentage   Eurodollar Loans  1.500%       1.750%      2.000%       2.250%       2.500%   ABR Loans         0.500%       0.750%      1.000%       1.250%       1.500%    Commitment       0.375%      0. 375%      0.500%       0.500%       0.500%  Fee Rate           Each change in the Applicable Margin shall apply during the period commencing on the  effective date of such change and ending on the date immediately preceding the effective date of  the next such change.         “Applicable  Percentage”  means, with  respect  to any  Lender, the  percentage  of  the  Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit Amount as  such  percentage  is  set  forth  on  Annex  I; provided that  in  the  case  of Section  2.08(l) when a  Defaulting Lender shall exist, “Applicable Percentage” as used in such Section 2.08(l) shall mean  the percentage of the Aggregate Maximum Credit Amounts (disregarding any Defaulting Lender’s  Maximum Credit Amount) represented by such Lender’s Maximum Credit Amount; provided that  for purposes of this definition, if the Commitments are terminated pursuant to this Agreement,  then  each  Lender’s  Commitment  and  the  total  Commitments  shall  be  the  amounts  thereof  immediately prior to giving effect to any such termination of such Commitments.         “Approved Counterparty” means each of (a) any Lender or any Affiliate of a Lender and  (b) any  other  Person if  such  Person  or  its  credit  support  provider  with  respect  to  its  Swap  Agreements with Credit Parties has a long term senior unsecured debt rating of A-/A3 by S&P or  Moody’s (or their equivalent) or higher.         “Approved  Fund” means  any  Person  (other  than  a  natural  person)  that  is  engaged  in  making, purchasing, holding or investing in bank loans and similar extensions of credit in the  ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate  of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.         “Approved  Petroleum  Engineers” means (a) Netherland,  Sewell  &  Associates,  Inc.,  (b) Ryder Scott Company Petroleum Consultants, L.P., (c) Miller and Lents, Ltd. and (d) any other  independent  petroleum  engineers  reasonably  acceptable  to  the  Administrative  Agent and  the  Borrower.                                          3  

 

         “Arranger” means JPMorgan Chase Bank, N.A., in its capacity as sole lead arranger and  sole bookrunner hereunder.         “ASC”  means  the  Financial  Accounting  Standards  Board  Accounting  Standards  Codification, as in effect from time to time.          “Assignment and Assumption” means an assignment and assumption entered into by a  Lender and  an  assignee  (with  the  consent  of  any  party  whose  consent  is  required  by  Section 12.04(b)), and accepted by the Administrative Agent, in the form of Error! Reference  source not found. or any other form approved by the Administrative Agent.         “Availability  Period” means  the  period  from  and including  the  Effective  Date  to  but  excluding the Termination Date.         “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 any EEA Financial Institution.         “Bail-In Legislation” means, with respect to any EEA Member Country implementing  Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European  Union, the implementing law for such EEA Member Country from time to time which is described  in the EU Bail-In Legislation Schedule.         “Bank Products” means any of the following bank services:  (a) commercial credit cards,  (b) stored  value  cards,  and (c) treasury  management  services  (including,  without  limitation,  controlled  disbursement,  automated  clearinghouse  transactions,  return  items,  overdrafts  and  interstate depository network services).         “Bank Products Provider” means any Lender or Affiliate of a Lender that provides Bank  Products to the Borrower, any Restricted Subsidiary or any Guarantor.         “Benefit Plan” means any of (a) an “employee benefit plan” (as defined in section 3(3) of  ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in section 4975 of the Code to  which section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of  the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or section 4975 of the  Code) the assets of any such “employee benefit plan” or “plan”.          “Board” means the Board of Governors of the Federal Reserve System of the United States  of America or any successor Governmental Authority.         “Borrowing” means Loans of the same Type, made, converted or continued on the same  date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.         “Borrowing  Base” means  at  any  time  an  amount  equal  to  the  amount  determined  in  accordance with Section  2.07,  as the  same  may  be  adjusted  from  time  to  time  pursuant  to  Section 8.13(c) or Section 9.12(e)(v).           “Borrowing Base Deficiency” means, at any time in question, the amount by which the  total Revolving Credit Exposures exceed the Borrowing Base then in effect.                                         4  

 

         “Borrowing Base Utilization Percentage” means, as of any day, the fraction expressed  as  a percentage, the numerator of which is  the sum  of the Revolving Credit Exposures  of the  Lenders on such day, and the denominator of which is the Borrowing Base in effect on such day.         “Borrowing Request” means a request by the Borrower for a Borrowing in accordance  with Section 2.03.         “Business  Day” means  any  day  that  is  not  a  Saturday,  Sunday  or  other  day  on  which  commercial banks in New York City or Denver, Colorado are authorized or required by law to  remain closed; and if such day relates to a Borrowing or continuation of, a payment or prepayment  of principal of or interest on, or a conversion of or into, or the Interest Period for, a Eurodollar  Loan or a notice by the Borrower with respect to any such Borrowing or continuation, payment,  prepayment, conversion or Interest Period, any day which is also a day on which banks are open  for dealings in dollar deposits in the London interbank market.         “Capital Leases” means, in respect of any Person, all leases which shall have been, or  should have been, in accordance with GAAP as in effect on the Effective Date, recorded as capital  leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment  of rent thereunder; provided that any obligations of such Person (whether entered into before or  after the Effective Date) that would have been classified as an operating lease pursuant to GAAP  as in effect on the Effective Date will be deemed not to be a Capital Lease.         “Casualty  Event” means  any  loss,  casualty  or  other  insured  damage  to,  or  any  nationalization, taking under power of eminent domain or by condemnation or similar proceeding  of, any Property of the Parent or any of its Restricted Subsidiaries having a book value in excess  of the Threshold Amount.         “Centennial Resource Development” means Centennial Resource Development, Inc., a  Delaware corporation formerly known as Silver Run Acquisition Corporation.         “Change in Control” means (a) any Person or “group” (within the meaning of Rules 13d- 3 and 13d-5 of the Securities Exchange Act) other than Riverstone shall have acquired beneficial  ownership or control of Equity Interests representing more than 50% of the aggregate ordinary  voting power represented by the issued and outstanding Equity Interests of Centennial Resource  Development, (b) the occupation of a majority of the seats (other than vacant seats) on the board  of directors of Centennial Resource Development  by Persons who were neither (i) nominated,  appointed or approved for consideration by shareholders for election by the board of directors of  Centennial  Resource  Development  or (ii) appointed  by  directors  so  nominated,  appointed  or  approved, (c) the failure of Centennial Resource Development to (i) own more than 50% of the  Equity Interests of the Borrower with ordinary voting power to elect or appoint the managers of  the Borrower or (ii) Control the Borrower, or (d) the failure of the Parent (at any time that the  Parent is not the Borrower) to own 100% of the Equity Interests in the Borrower.         “Change in Law” means (a) the adoption of any law, rule or regulation after the date of  this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application  thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any  Lender or the Issuing Bank (or, for purposes of Section 5.01(b), by any lending office of such                                         5  

 

   Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request,  guideline or directive (whether or not having the force of law) of any Governmental Authority  made  or  issued  after  the  date  of  this  Agreement; provided,  however,  for  the  purposes  of  this  Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,  guidelines or  directives  in  connection  therewith  or  promulgated  by  the  Bank  for  International  Settlements,  the  Basel  Committee  on  Banking  Supervision  or  the  United  States  or  foreign  regulatory authorities, in each case, pursuant to Basel III, are deemed to have gone into effect and  to have been adopted after the date of this Agreement.         “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any  successor statute.         “Co-Documentation  Agents”  means,  collectively, BMO Harris  Bank,  N.A., Canadian  Imperial Bank of Commerce, New York Branch, and U.S. Bank National Association.         “Commitment” means, with respect to each Lender, the commitment of such Lender to  make Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount  representing  the  maximum  aggregate  amount  of such Lender’s  Revolving  Credit  Exposure  hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.06  and (b) modified from  time to  time pursuant  to  assignments  by or to such Lender pursuant  to  Section 12.04.  The amount representing each Lender’s Commitment shall at any time be the least  of (i) such Lender’s Maximum Credit Amount, (ii) such Lender’s Applicable Percentage of the  then  effective  Borrowing  Base  and (iii) such Lender’s  Elected  Commitment.   The  total  Commitment is the aggregate amount of the Commitments of all Lenders.          “Commitment Fee Rate” is the rate per annum set forth 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, and  any  regulations  promulgated  thereunder.         “Consolidated  Net  Income” means  with  respect  to  the Parent and  the  Consolidated  Restricted Subsidiaries, for any period, the net income (or loss) of the Parent and the Consolidated  Restricted Subsidiaries after allowances for taxes for such period determined on a consolidated  basis in accordance with GAAP; provided that there shall be excluded from such net income (to  the extent otherwise included therein) the following:  (a) the net income of any Person in which  the Parent or any Consolidated Restricted Subsidiary has an interest (which interest does not cause  the net income of such other Person to be consolidated with the net income of the Parent and the  Consolidated  Restricted  Subsidiaries  in  accordance  with  GAAP),  except  to  the  extent  of  the  amount of dividends or distributions actually paid in cash during such period by such other Person  to the Parent or to a Consolidated Restricted Subsidiary, as the case may be; (b) the net income  (but not loss) during such period of any Consolidated Restricted Subsidiary to the extent that the  declaration  or  payment  of  dividends  or  similar  distributions  or  transfers  or  loans  by  that  Consolidated Restricted Subsidiary is not at the time permitted by operation of the terms of its  charter  or  any  agreement,  instrument  or  Governmental  Requirement  applicable  to  such  Consolidated Restricted Subsidiary or is otherwise restricted or prohibited, in each case determined                                         6  

 

   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) any extraordinary,  unusual or non-recurring gains or losses during such period, (e) any non-cash gains or losses or  positive or negative adjustments under ASC 815 as the result of changes in the fair market value  of  derivatives;  and (f) any  gains  or  losses  attributable  to  writeups  or  writedowns  of  assets,  including ceiling test writedowns.         “Consolidated  Restricted  Subsidiaries” means  any  Restricted  Subsidiaries  that  are  Consolidated Subsidiaries.         “Consolidated Subsidiaries” means each Subsidiary of the Parent (whether now existing  or hereafter created or acquired) the financial statements of which shall be (or should have been)  consolidated with the financial statements of the Parent in accordance with GAAP.         “Consolidated Unrestricted Subsidiaries” means any Unrestricted Subsidiaries that are  Consolidated Subsidiaries.         “Control” means the possession, directly or indirectly, of the power to direct or cause the  direction of the management or policies of a Person, whether through the ability to exercise voting  power,  by  contract  or  otherwise.  “Controlling” and “Controlled” have  meanings  correlative  thereto.          “Co-Syndication Agents” means, collectively, Wells Fargo Bank, N.A., Royal Bank of  Canada and Comerica Bank.         “Credit  Parties” means,  collectively,  the  Borrower  and  each  Guarantor,  and “Credit  Party” means any one of the foregoing.         “Debt” means, for any Person, the sum of the following (without duplication):          (a)   all  obligations  of  such  Person  for  borrowed  money  or  evidenced  by  bankers’  acceptances, debentures, notes, bonds or other similar instruments;          (b)   all obligations of such Person (whether contingent or otherwise) in respect of letters  of credit, surety or other bonds and similar instruments;          (c)   all accounts payable and all accrued expenses, liabilities or other obligations of  such Person to pay the deferred purchase price of Property or services;         (d)   all obligations under Capital Leases;          (e)   all obligations under Synthetic Leases;          (f)   all Debt (as defined in the other clauses of this definition) of others secured by (or  for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by)  a Lien on any Property of such Person, whether or not such Debt is assumed by such Person;                                          7  

 

         (g)   all Debt (as defined in the other clauses of this definition) of others guaranteed by  such  Person  or  in  which  such  Person  otherwise  assures  a  creditor  against  loss  of  the  Debt  (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt  and the maximum stated amount of such guarantee or assurance against loss;         (h)   all obligations or undertakings of such Person to maintain or cause to be maintained  the financial position or covenants of others and, to the extent entered into as a means of providing  credit support for the obligations of others and not primarily to enable such Person to acquire any  such Property, all obligations or undertakings of such Person to purchase the Debt or Property of  others;         (i)   obligations  to  deliver  commodities,  goods  or  services,  including,  without  limitation,  Hydrocarbons,  in  consideration  of  one  or  more  advance  payments (not  including  substantially contemporaneous payments), other than gas balancing arrangements in the ordinary  course of business;         (j)   obligations  to  pay  for  goods  or  services  even  if  such  goods  or  services  are  not  actually received or utilized by such Person (other than obligations contained in firm transportation  or supply agreements or other take or pay contracts, in each case arising in the ordinary course of  business);          (k)   any Debt of a partnership for which such Person is liable either by agreement, by  operation of law or by a Governmental Requirement but only to the extent of such liability;         (l)   Disqualified Capital Stock; and          (m)   the undischarged balance of any production payment created by such Person or for  the creation of which such Person directly or indirectly received payment;   provided, however,  that  “Debt”  does  not  include (i) obligations  with  respect  to  surety  or  performance  bonds  and  similar  instruments  entered  into  in  the  ordinary  course  of  business in  connection  with  the  operation  of  Oil  and  Gas  Properties or  with  respect  to  appeal  bonds,  (ii) accounts  payable  and  accrued  expenses,  liabilities  or  other  obligations  to  pay  the  deferred  purchase price of Property or services, from time to time incurred in the ordinary course of business  which are not greater than one hundred twenty (120) days past the date of invoice or which are  being contested in good faith by appropriate action and for which adequate reserves have been  maintained  in  accordance  with  GAAP,  or (iii) Bank  Products  and endorsements  of  negotiable  instruments for collection.  The Debt of any Person shall include all obligations of such Person of  the character described above to the extent such Person remains legally liable in respect thereof  notwithstanding that any such obligation is not included as a liability of such Person under GAAP.         “Default” means any event or condition which constitutes an Event of Default or which  upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.         “Defaulting Lender” means, subject to Section 2.08(l)(v), 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, 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                                         8  

 

   participation in Letters of Credit) within two (2) Business Days of the date when due, (b) has  notified the Borrower, 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, (c) has failed, within three (3) Business Days after written request by the Administrative  Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it  will comply with its prospective funding obligations hereunder (provided that such Lender shall  cease  to  be  a  Defaulting  Lender  pursuant  to  this  clause  (c)  upon  receipt  of  such  written  confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect  parent  company  that  has,  (i)  become  the  subject  of  a  proceeding  under  any bankruptcy  or  insolvency laws or become the subject of a Bail-In Action, 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;  provided that  a  Lender  shall  not  be  a  Defaulting  Lender  solely  by  virtue  of  the  ownership  or  acquisition of any equity interest in that Lender or any direct or indirect parent company thereof  by a Governmental Authority so long as such ownership interest does not result in or provide such  Lender  with  immunity  from  the  jurisdiction  of  courts  within  the  United  States  or  from  the  enforcement of judgments or writs of attachment on its assets or permit  such Lender (or such  Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements  made  with  such  Lender.   Any  determination  by  the  Administrative  Agent  that  a  Lender  is  a  Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and  binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject  to Section 2.08(l)(v)) upon delivery of written notice of such determination to the Borrower, each  Issuing Bank and each Lender.         “Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms  of any security into which it is convertible or for which it is exchangeable) or upon the happening  of any event, matures or is mandatorily redeemable for any consideration other than other Equity  Interests  (which  would  not  constitute  Disqualified  Capital  Stock),  pursuant  to  a  sinking  fund  obligation  or  otherwise,  or  is  convertible  or  exchangeable  for  Debt of  the  type  described  in  clause (a) of the definition thereof or redeemable for any consideration other than other Equity  Interests  (which  would  not  constitute  Disqualified  Capital  Stock)  at  the  option  of  the  holder  thereof, in whole or in part (but if in part, only with respect to such amount that meets the criteria  set forth in this definition), on or prior to the date that is 91 days after the Maturity Date at the time  of issuance of such Equity Interests; provided that (i) any Equity Interests that would not constitute  Disqualified Capital Stock but for provisions thereof giving holders thereof (or the holders of any  security  into  which  such  Equity  Interest  is  convertible  or  for  which  such  Equity  Interest  is  exchangeable) the  right  to  require the issuer thereof to  redeem  such Equity  Interests upon the  occurrence of any change of control or any asset sale offer occurring prior to the date that is 91  days after the Maturity Date at the time of issuance of such Equity Interests shall not constitute  Disqualified Capital Stock if such Equity Interest provides that the issuer thereof will not redeem  any such Equity Interest pursuant to such provisions prior to the date on which there are no Loans,  LC  Exposure  or  other  obligations  hereunder  outstanding  and  all  of the Commitments  are  terminated and (ii) any Equity Interests that are issued to any employee or to any plan for the  benefit  of  employees  of  the  issuer  thereof  or  by  any  such  plan  to  such  employees  shall  not  constitute Disqualified Capital Stock solely because such Equity Interests may be required to be  repurchased by the issuer thereof as a result of such employee’s termination, death or disability.                                         9  

 

         “dollars” or “$” refers to lawful money of the United States of America.         “Domestic Subsidiary” means any Restricted Subsidiary that is organized under the laws  of the United States of America or any state thereof or the District of Columbia, including, without  limitation (except at such times that the Borrower is the Parent), the Borrower.         “EBITDAX” means, for any period, the sum of Consolidated Net Income for such period  plus (a) without  duplication,  the  following  expenses  or  charges  to  the  extent  deducted  from  Consolidated Net Income in such period: (i) interest, (ii) income taxes (however denominated),  (iii) depreciation, depletion, amortization and other similar noncash charges, including, without  limitation, any non-cash compensation charge or expense, including any charge or expense arising  from  the  grants  of  stock  appreciation  or  similar  rights,  stock  options,  restricted  stock,  profits  interests  or  other  equity-based  incentive  awards  or  other  equity-based  compensation, (iv)  exploration  expenses,  including  plugging  and  abandonment  expenses, (v) transaction  costs,  expenses and charges with respect to the acquisition or disposition of Oil and Gas Properties or  the incurrence, issuance, repayment,  refinancing, amendment  or other modification of Debt  or  issuance of Equity Interests, in each case including any transaction undertaken but not completed,  incurred in such period in an aggregate amount not to exceed the lesser of (A) $10,000,000 and  (B) 5% of EBITDAX, in either case, in any Reference Period, and (vi) costs, fees and expenses  incurred  by  the  Credit Parties  in  connection  with  the  closing  of  this  Agreement  and  the  Transactions occurring on or about the Effective Date, minus (b) all noncash income added to  Consolidated Net Income. For the purposes of calculating EBITDAX (including any component  thereof) for any period of four (4) consecutive fiscal quarters (each, a “Reference Period”) pursuant  to any determination of the financial ratio contained in Section 9.01(a), if at any time during such  Reference Period the Parent or any Restricted Subsidiary shall have made any Material Disposition  or Material Acquisition, the EBITDAX for such Reference Period shall be calculated after giving  pro forma effect thereto as if such Material Disposition or Material Acquisition had occurred on  the  first  day  of  such  Reference  Period  (such  calculations  to  be  reasonably  acceptable  to  the  Administrative Agent).         “EEA  Financial  Institution”  means (a) any  credit  institution  or  investment  firm  established in any EEA Member Country which is subject to the supervision of an EEA Resolution  Authority, (b) any entity established in an EEA Member Country which is a parent of an institution  described in clause (a) of this definition, or (c) any financial institution established in an EEA  Member Country which is a subsidiary of an institution described in clause (a) or clause (b) of this  definition and is subject to consolidated supervision with its parent.         “EEA  Member  Country”  means  any  of  the  member  states  of  the  European  Union,  Iceland, Liechtenstein, and Norway.         “EEA Resolution Authority” means any public administrative authority or any person  entrusted with  public  administrative  authority  of  any  EEA  Member  Country  (including  any  delegee) having responsibility for the resolution of any EEA Financial Institution.         “Effective Date” means the date on which the conditions specified in Section 6.01 are  satisfied (or waived in accordance with Section 12.02).                                          10  

 

         “Elected Commitment” means, as to  each  Lender, the amount set forth  opposite such  Lender’s  name  on Annex  I under  the  caption  “Elected  Commitment”,  as  the  same  may  be  increased,  reduced  or  terminated  from  time  to  time  in  connection  with  an  optional  increase,  reduction  or  termination  of  the  Aggregate  Elected  Commitment  Amounts  pursuant  to Section  2.06(c).         “Elected  Commitment  Increase  Certificate” has  the  meaning  given  to  such  term  in  Section 2.06(c)(ii)(F).         “Election Notice” has the meaning assigned to such term in Section 3.04(c)(ii).         “Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).         “Environmental Laws” means any and all Governmental Requirements pertaining in any  way to health, safety, the environment, the preservation or reclamation of natural resources, or the  management, Release or threatened Release of any Hazardous Materials, in effect in any and all  jurisdictions in which the Parent or any Restricted Subsidiary is conducting, or at any time has  conducted, business, or where any Property of the Parent or any Restricted Subsidiary is located,  including, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended,  the  Comprehensive  Environmental,  Response,  Compensation,  and  Liability  Act  of  1980  (“CERCLA”),  as  amended,  the  Federal  Water Pollution  Control  Act,  as  amended,  the  Occupational  Safety  and  Health  Act  of  1970,  as  amended,  the  Resource  Conservation  and  Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the  Toxic Substances Control Act, 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.         “Environmental  Permit” means  any  permit,  registration,  license,  notice,  approval,  consent,  exemption,  variance,  or  other  authorization  required  under  or  issued  pursuant  to  applicable Environmental Laws.         “Equity  Interests” means  shares  of  capital  stock,  partnership  interests,  membership  interests in a limited liability company, beneficial interests in a trust or other equity ownership  interests  in  a  Person,  and  any  warrants,  options  or  other  rights  entitling  the  holder  thereof  to  purchase or acquire any such Equity Interest.         “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and  any successor statute, and the rules and regulations promulgated thereunder.         “ERISA  Affiliate” means  each  trade  or  business  (whether  or  not  incorporated)  which  together with the Parent or a Restricted Subsidiary would be deemed to be a “single employer”  within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section  414 of the Code.         “ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA with  respect to any Plan, other than a Reportable Event as to which the provisions of thirty (30) days’  notice to  the PBGC are waived, (b) the failure to  satisfy the “minimum  funding standard” (as  defined in section  412 of the Code or section 302 of ERISA), whether or not waived, with respect                                         11  

 

   to any Plan, (c) the filing pursuant to section 412 of the Code or section 302 of ERISA of an  application  for  a  waiver  of  the  minimum  funding  standard  with  respect  to  any  Plan; (d) the  withdrawal or partial withdrawal of the Parent, a Subsidiary or any ERISA Affiliate from a Plan  during a plan year in which it was a “substantial employer” as defined in section 4001(a)(2) of  ERISA, or the withdrawal or partial withdrawal of the Parent, a Subsidiary or any ERISA Affiliate  from a Multiemployer Plan, (e) the filing of a notice of intent to terminate a Plan or the treatment  of  a  Plan  amendment  as  a  termination  under  section  4041  of  ERISA, (f) the  institution  of  proceedings  to  terminate  a  Plan  by  the  PBGC, (g) receipt  of  a  notice  of  withdrawal  liability  pursuant to Section 4202 of ERISA, (h) the receipt by Parent, a Subsidiary or any ERISA Affiliate  of  any  notice  concerning  a  determination  that  a  Multiemployer  Plan  is, or  is  expected  to  be,  insolvent within the meaning of Title  IV of ERISA, or (i) any other event  or condition which  constitutes grounds under section 4042 of ERISA for the termination of, or the appointment of a  trustee to administer, any Plan.         “EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published  by the Loan Market Association (or any successor person), as in effect from time to time.         “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such  Loan,  or  the Loans  comprising  such  Borrowing,  are  bearing  interest  at  a  rate  determined by  reference to the Adjusted LIBO Rate.         “Event of Default” has the meaning assigned such term in Section 10.01.         “Excepted Liens” means:                 (a)   Liens for Taxes, assessments or other governmental charges or levies which  are not delinquent or which are being contested in good faith by appropriate action and for which  adequate reserves have been maintained in accordance with GAAP;               (b)    Liens in connection with workers’ compensation, unemployment insurance  or other social security, old age pension or public liability obligations which are not delinquent or  which are being contested in good faith by appropriate action and for which adequate reserves  have been maintained in accordance with GAAP;                (c)   landlord’s,  operators’,  vendors’,  carriers’,  warehousemen’s,  repairmen’s,  mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens, in each case,  arising in the ordinary course of business or incident to the exploration, development, operation  and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not  delinquent or which are being contested in good faith by appropriate action and for which adequate  reserves have been maintained in accordance with GAAP; provided that any such Lien referred to  in this clause that is not a statutory Lien arising by operation of law does not materially impair the  use of the Property covered by such Lien for the purposes for which such Property is held by the  Parent or any Restricted Subsidiary or materially impair the value of such Property subject thereto;              (d)    Liens  which  arise  in  the  ordinary  course  of  business  under  operating  agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm- out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural  gas,  unitization  and  pooling  declarations  and  agreements,  area  of  mutual  interest  agreements,                                         12  

 

   overriding  royalty  agreements,  marketing  agreements,  processing  agreements,  net  profits  agreements, development agreements, gas balancing or deferred production agreements, injection,  repressuring and recycling agreements, salt water or other disposal agreements, seismic or other  geophysical permits or agreements, and other agreements which are usual and customary in the oil  and gas business and are for claims which are not delinquent or which are being contested in good  faith by appropriate action and for which adequate reserves have been maintained in accordance  with GAAP, provided that any such Lien referred to in this clause does not materially impair the  use of the Property covered by such Lien for the purposes for which such Property is held by the  Parent or any Restricted Subsidiary or materially impair the value of such Property subject thereto;                (e)   Liens arising solely by virtue of any statutory or common law provision  relating to banker’s liens, rights of set-off or similar rights and remedies arising in the ordinary  course of business and burdening only deposit accounts or other funds maintained with a creditor  depository institution, provided that no such deposit account is a dedicated cash collateral account  or is subject to restrictions against access by the depositor in excess of those set forth by regulations  promulgated by the Board and no such deposit account is intended by the Parent or any of its  Restricted Subsidiaries to provide collateral to the depository institution;                (f)   Liens in favor of depository banks arising under documentation governing  deposit  accounts  which  Liens  secure  the  payment  of  returned  items,  settlement  item  amounts,  customary bank fees for maintaining deposit accounts, and similar items and fees;              (g)    (i) easements,  restrictions,  servitudes,  permits,  conditions,  covenants,  exceptions, reservations, zoning and land use requirements in any Property of the Parent or any  Restricted 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 and/or  usual and customary purposes, or for the joint or common use of real estate, rights of way, facilities  and equipment, that do not secure any Debt and in the aggregate do not materially impair the use  of such Property for the purposes of which such Property is held by the Parent or any Restricted  Subsidiary or materially impair the value of such Property subject thereto, and (ii) Immaterial Title  Deficiencies;               (h)    Liens on cash or securities pledged to secure (either directly, or indirectly  by securing letters of credit that in turn secure) performance of tenders, surety and appeal bonds,  government  contracts,  performance  and  return  of  money  bonds,  bids,  trade  contracts,  leases,  statutory  obligations,  regulatory  obligations,  obligations  in  respect  of  workers’  compensation,  unemployment  insurance  or  other  forms  of  governmental  benefits  or  insurance and  other  obligations of a like nature incurred in the ordinary course of business;                (i)   title and ownership interests of lessors (including sub-lessors) of Property  leased by  such lessors to the Parent or to any  Restricted Subsidiary,  Liens  and  encumbrances  encumbering  such  lessors’  titles  and  interests  in such  property  and  to  which Parent’s  or  such  Restricted Subsidiary’s leasehold interests may be subject or subordinate, in each case whether or  not evidenced by Uniform Commercial Code financing statement filings or other documents of  record, provided that such Liens do not secure Funded Debt of the Parent or of any Restricted  Subsidiary and do not encumber Property of any Parent or any Restricted Subsidiary other than  the Property that is the subject of such leases and items located thereon; provided further that any                                         13  

 

   such Lien referred to in this clause does not materially impair the use of the Property covered by  such  Lien  for  the  purposes  for  which  such  Property  is  held  by  the Parent or  any  Restricted  Subsidiary or materially impair the value of such Property subject thereto,                (j)   judgment and attachment Liens not giving rise to an Event of Default under  Section 10.01(k);               (k)    Liens of licensors of software and other intangible Property licensed by such  licensors  to  the Parent  and/or  to  any  Restricted  Subsidiary,  including,  without  limitation,  restrictions and prohibitions on encumbrances and transferability with respect to such Property  and the Parent’s and/or such Restricted Subsidiary’s interests therein imposed by such licenses,  and  Liens  encumbering  such  licensors’  titles  and  interests  in  such  Property  and  to  which  the  Parent’s or such Restricted Subsidiary’s license interests may be subject or subordinate, in each  case, whether or not evidenced by Uniform Commercial Code financing statement filings or other  documents of record, provided that such Liens do not encumber Property of the Parent or of any  Restricted Subsidiary other than the software and other intangible Property that is the subject of  such licenses;               (l)   Liens solely on any cash earnest money deposits made by the Borrower or  any of the Restricted Subsidiaries in connection with any acquisitions permitted hereunder; and              (m)    Liens on insurance policies and the proceeds thereof securing the financing  of the premiums with respect thereto in each case to the extent such financing is in the Credit  Parties’ ordinary course of business;   provided, that (i) no  intention  to  subordinate  the  first  priority  Lien  granted  in  favor  of  the  Administrative  Agent  and the  Lenders  is  to  be  hereby  implied  or  expressed  by  the  permitted  existence of such Excepted Liens and (ii) the term “Excepted Liens” shall not include any Lien  securing Debt for borrowed money other than the Indebtedness.         “Excluded  Swap  Obligation” means,  with  respect  to  any Credit Party  individually  determined  on  a Credit Party  by Credit Party  basis,  any  Indebtedness  in  respect  of  any  Swap  Agreement or any other any “swap”, as defined in Section 1(a)(47) of the Commodities Exchange  Act (in this definition, “Swap Indebtedness”) if, and solely to the extent that, all or a portion of  the guarantee by such Credit Party of, or the grant by such Credit Party of a security interest to  secure,  such Swap Indebtedness  (or  any  guarantee  thereof)  is  or  becomes  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 Credit  Party’s  failure  for  any  reason  to  constitute  an “eligible  contract  participant” as  defined  in  the  Commodity  Exchange  Act  at  the  time  such  guarantee  or  grant  of  a  security  interest  becomes  effective with respect to such related Swap Indebtedness.  If any Swap Indebtedness arises under  a master agreement governing more than one transaction, such exclusion shall apply only to the  portion of such Swap Indebtedness that is attributable to transactions for which such guarantee or  security interest is or becomes illegal.         “Excluded  Taxes” means,  with  respect  to  the  Administrative  Agent, any  Lender,  the  Issuing Bank or any other recipient of any payment to be made by or on account of any obligation                                         14  

 

   of the Borrower or any Guarantor hereunder or under any other Loan Document, (a) income taxes  (however denominated) or franchise taxes (including Texas margin tax) imposed on (or measured  by) its net income by the United States of America or such other jurisdiction under the laws of  which such recipient is organized or in which its principal office is located or, in the case of any  Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by  the United States of America or any similar tax imposed by any other jurisdiction in which the  Borrower or any Guarantor is located, (c) in the case of a Foreign Lender (other than an assignee  pursuant to a request by the Borrower under Section 5.04(b)), any withholding tax that is imposed  on amounts payable to such Foreign Lender pursuant to a law in effect at the time such Foreign  Lender becomes a party to this Agreement (or designates a new lending office) or is attributable  to such Foreign Lender’s failure or inability to comply with Section 5.03(f), except to the extent  that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new  lending office (or assignment), to receive additional amounts with respect to such withholding tax  pursuant to Section 5.03(a) or Section 5.03(c), and (d) any withholding taxes imposed by FATCA.         “Existing Letters of Credit” means the letters of credit listed on Annex II hereto.         “Existing Loan Documents” has the meaning given to the term “Loan Documents” in the  Existing A&R Credit Agreement.         “FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement  (or any amended or successor version that is substantively comparable and not materially more  onerous to comply with), any current or future regulations or official interpretations thereof and  any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental  agreement entered into in connection with the implementation of such Sections of the Code and  any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental  agreement.         “FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.         “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.   Notwithstanding anything to the contrary contained herein, in no event shall the Federal Funds  Effective Rate be less than 0%.         “Fee Letter”  means  that  certain Fee Letter  dated  as  of the  Effective  Date  between  JPMorgan and the Borrower.           “Financial  Officer” means,  for  any  Person,  the  chief  financial  officer, the principal  accounting officer, and the treasurer of such Person.  Unless otherwise specified, all references  herein to a Financial Officer means a Financial Officer of the Parent.                                          15  

 

         “Financial  Statements” means  the  financial  statement  or  statements  referred  to  in  Section 7.04(a).         “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 statute 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.          “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction  other than that in which the Borrower is located.  For purposes of this definition, the United States  of America, each State thereof and the District of Columbia shall be deemed to constitute a single  jurisdiction.         “Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic Subsidiary.         “Fronting Exposure” means, at any time there is a Defaulting Lender, with respect to an  Issuing Bank, such Defaulting Lender’s LC Exposure 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.         “Funded  Debt”  means  the  principal  amount  of all  Debt  other  than (a) contingent  obligations in respect of Debt described in clause (b) of the definition of “Debt”, (b) Debt described  in clauses (c), (i), (j), (k), (l) and (m) of  the  definition  of “Debt”,  and (c) Debt  described  in  clauses (f), (g) or (h) of the definition of “Debt” in respect of Debt of others described in clauses (a)  or (b) of this definition         “GAAP” means generally accepted accounting principles in the United States of America  as in effect from time to time subject to the terms and conditions set forth in Section 1.05.         “Governmental Authority” means the government of the United States of America, any  other nation or any political subdivision thereof, whether state or local, and any agency, authority,  instrumentality,  regulatory  body,  court,  central  bank  or  other  entity  exercising  executive,  legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to  government (including any supranational  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,  rules of common law, authorization or other directive or requirement, whether now or hereinafter  in effect, of any Governmental Authority.         “Guarantors” means the Parent and each Domestic Subsidiary (other than the Borrower)  that guarantees the Indebtedness pursuant to Section 8.14(b).         “Guaranty Agreement” means a Second Amended and Restated Guaranty Agreement  executed by the Guarantors in  substantially the  form of Error!  Reference source not found.                                         16  

 

   unconditionally guarantying, on a joint and several basis, payment of the Indebtedness, as the same  may be amended, modified or supplemented from time to time.         “Hazardous Material” means any substance regulated or as to which liability might arise  under  any  applicable  Environmental  Law  including:  (a) any  chemical,  compound,  material,  product,  byproduct,  substance or waste defined as  or included in  the definition or meaning of  “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic waste,”  “extremely  hazardous  substance,” “toxic  substance,” “contaminant,” “pollutant,” or  words  of  similar  meaning  or  import  found  in  any  applicable  Environmental  Law; (b) Hydrocarbons,  petroleum products, petroleum substances, natural gas, oil, oil and gas waste, crude oil, and any  components, fractions, or derivatives thereof; and (c) radioactive materials, explosives, asbestos  or asbestos containing materials, polychlorinated biphenyls, radon, infectious or medical wastes.         “Highest Lawful Rate” means, with respect to each Lender, the maximum nonusurious  interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved,  charged or received on the Notes or on other Indebtedness under laws applicable to such Lender  which are presently in effect or, to the extent allowed by law, under such applicable laws which  may  hereafter  be  in  effect  and  which  allow  a  higher  maximum  nonusurious  interest  rate  than  applicable laws allow as of the date hereof.         “Hydrocarbon Interests” means all rights, titles, interests and estates 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.         “Hydrocarbons” means  oil,  gas,  casinghead  gas,  drip  gasoline,  natural gasoline,  condensate,  distillate,  liquid  hydrocarbons,  gaseous  hydrocarbons  and  all  products  refined  or  separated therefrom.         “Immaterial  Subsidiary”  shall  mean  any  Restricted  Subsidiary  designated  by  the  Borrower as an Immaterial Subsidiary if and for so long as such Immaterial Subsidiary, together  with all other Immaterial Subsidiaries so designated as Immaterial Subsidiaries, does not have total  assets at such time exceeding $50,000,000.00 in the aggregate; provided that no Subsidiary may  be an Immaterial Subsidiary if it owns Oil and Gas Properties that are included in the then effective  Borrowing Base.         “Immaterial Title Deficiencies” means minor defects or deficiencies in title which do not  diminish by more than 5% the total value of the Proved Oil and Gas Properties evaluated in the  Reserve Report used in the most recent determination of the Borrowing Base.         “Impacted Interest Period” has the meaning given to such term in the definition of “LIBO  Rate” contained herein.         “Indebtedness” means any and all amounts owing or to be owing by the Borrower, the  Parent, any other Restricted  Subsidiary, or  any other Guarantor  (whether  direct  or  indirect  (including those acquired by  assumption), absolute or  contingent, due or to  become due, now  existing or hereafter arising):  (a) to any Agent, the Issuing Bank or any Lender under any Loan  Document, including, without limitation, all interest on any of the Loans (including any interest                                         17  

 

   that  accrues  after  the  commencement  of  any  case,  proceeding  or  other  action  relating  to  the  bankruptcy, insolvency or reorganization of any Credit Party (or could accrue but for the operation  of applicable bankruptcy or insolvency laws), whether or not such interest is allowed or allowable  as a claim in any such case, proceeding or other action); (b) to any Secured Swap Provider under  any Swap Agreement including any Swap Agreement in existence prior to the date hereof, but  excluding  any  additional  transactions  or  confirmations  entered  into  after  such  Secured  Swap  Provider ceases to be a Lender or an Affiliate of a Lender and excluding any amounts owing or to  be owing under a Swap Agreement after assignment of such Swap Agreement by a Secured Swap  Provider to another Person that is not a Lender or an Affiliate of a Lender; (c) to any Bank Products  Provider in respect of Bank Products; and (d) all renewals, extensions and/or rearrangements of  any of the above; provided that solely with respect to any Guarantor that is not an “eligible contract  participant” under the Commodity Exchange Act, Excluded Swap Obligations with respect to such  Guarantor shall be excluded from the “Indebtedness” owing by such Guarantor.         “Indemnified Taxes” means Taxes other than Excluded Taxes and Other Taxes.         “Industry Competitor” means any Person (other than Borrower, any Guarantor or any of  their  Affiliates  or  Subsidiaries)  that (a) is  identified  in  writing  by  the  Borrower  to  the  Administrative Agent  and (b) directly or indirectly, is  actively  engaged as  one of its  principal  businesses in lease acquisitions, exploration and production operations or development of oil and  gas properties (including the drilling and completion of producing wells).         “Initial  Reserve  Report” means,  collectively, the reserve reports  and  other  reserve  engineering information provided by the Borrower to the Administrative Agent and the Lenders  prior to the Effective Date and utilized by the Administrative Agent and the Lenders in determining  the initial Borrowing Base hereunder.         “Interest Election Request” means a request by the Borrower to convert or continue a  Borrowing in accordance with Section 2.04.         “Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each  March, June, September and December and (b) with respect to any Eurodollar Loan, the last day  of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of  a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day  prior to the last day of such Interest Period that occurs at intervals of three months’ duration after  the first day of such Interest Period.         “Interest  Period” means  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 (or, with the consent of each Lender,  twelve months) thereafter, as the Borrower may elect; provided that (a) if any Interest Period would  end  on  a  day  other  than  a  Business  Day,  such  Interest  Period  shall  be  extended  to  the  next  succeeding Business Day unless such next succeeding Business Day would fall in the next calendar  month, in which case such Interest Period shall end on the next preceding Business Day and (b) any  Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of  a calendar month (or on a day for which there is no numerically corresponding day in the last  calendar month of such Interest Period) shall end on the last Business Day of the last calendar                                         18  

 

   month of such Interest Period.  For purposes hereof, the date of a Borrowing initially shall be the  date on which such Borrowing is made and thereafter shall be the effective date of the most recent  conversion or continuation of such Borrowing.         “Interim Redetermination” has the meaning assigned to such term in Section 2.07(b).         “Interim Redetermination Date” means the date on which a Borrowing Base that has  been  redetermined  pursuant  to  an  Interim  Redetermination  becomes  effective  as  provided  in  Section 2.07(d).         “Interpolated  Rate”  means,  at  any  time,  for  any  Interest  Period,  the  rate  per  annum  (rounded  to  the  same  number  of  decimal  places  as  the  LIBO  Screen  Rate)  determined  by  the  Administrative Agent (which determination shall be conclusive and binding absent manifest error)  to be equal to the rate that results from interpolating on a linear basis between:  (a) the LIBO Screen  Rate for the longest period (for which the LIBO Screen Rate is available) that is shorter than the  Impacted Interest Period and (b) the LIBO Screen Rate for the shortest period (for which the LIBO  Screen Rate is available) that exceeds the Impacted Interest Period, in each case, at such time.         “Investment” means,  for  any  Person:  (a) the  acquisition  (whether  for  cash,  Property,  services or securities or otherwise) of Equity Interests in any other Person (including, without  limitation, any “short sale” or any sale of any securities at a time when such securities are not  owned by the Person entering into such short sale); (b) the making of any deposit with, or advance,  loan or capital contribution to, assumption of Funded Debt of, purchase or other acquisition of any  other Funded Debt of, or other extension of credit to, any other Person (including the purchase of  Property from another Person subject to an understanding or agreement, contingent or otherwise,  to  resell  such  Property  to  such  Person); (c) the  purchase  or  acquisition  (in  one  or  a  series  of  transactions) of Property (other than Equity Interests) of another Person that constitutes a business  unit both before and after such acquisition; or (d) the entering into of any guarantee of, or other  surety obligation (including the deposit of any Equity Interests to be sold) with respect to, Funded  Debt or other liability of any other Person and (without duplication) any amount committed to be  advanced,  lent  or  extended  to  such  Person,  provided  in  each  case that  accounts  receivable  (including obligations of joint working interest owners) arising in the ordinary course of business  do not constitute Investments.         “Issuing Bank” means (a) JPMorgan and (b) any other Lender identified by the Borrower  pursuant to Section 2.08 (and reasonably acceptable to the Administrative Agent) that agrees to  act as an Issuing Bank, in each case in its capacity as the issuer of Letters of Credit hereunder, and  its  successors  in  such  capacity  as  provided  in Section 2.08(i).  Any Issuing  Bank  may,  in  its  discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing  Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to  Letters of Credit issued by such Affiliate.         “Issuing Bank Agreement” has the meaning assigned to such term in Section 2.08.         “LC Commitment” means, at any time, the greater of (a) $25,000,000 and (b) 5% of the  Borrowing Base, but, in any event, not greater than the aggregate LC Issuance Limits of the Issuing  Banks.                                          19  

 

         “LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of  Credit.         “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all  outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements  that have not yet been reimbursed by or on behalf of the Borrower at such time.  The LC Exposure  of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.         “LC Issuance Limits” means, with respect to each Issuing Bank, the amount set forth on  Annex III opposite such Issuing Bank’s name, or in the case of any Lender that becomes an Issuing  Bank after the Effective Date as contemplated by Section 2.08, the amount set forth in an Issuing  Bank Agreement executed by such Lender.           “Lenders” means the Persons listed on Annex I, any Person that shall have become a party  hereto pursuant to an Assignment and Assumption, and any Person that shall have become a party  hereto as an Additional  Lender pursuant to Section 2.06(c), other than, in each case, any such  Person that ceases to be a party hereto pursuant to an Assignment and Assumption.           “Letter of Credit” means any letter of credit issued pursuant to this Agreement and any  Existing Letter of Credit.         “Letter  of  Credit  Agreements” means  all  letter  of  credit  applications  and  other  agreements (including any amendments, modifications or supplements thereto) submitted by the  Borrower, or entered into by the Borrower, with the Issuing Bank relating to any Letter of Credit.         “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,  the LIBO Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the  commencement  of  such  Interest  Period; provided that  if the  LIBO  Screen  Rate  shall  not  be  available at such time for such Interest Period (an “Impacted Interest Period”) then the LIBO  Rate shall be the Interpolated Rate.  Notwithstanding the above, to the extent that “Adjusted LIBO  Rate” is used in connection with an ABR Borrowing, such rate shall be determined as modified by  the definition of Alternate Base Rate.         “LIBO  Screen  Rate” means,  for  any  day  and  time,  with  respect  to  any  Eurodollar  Borrowing  for  any  Interest  Period,  the  London  interbank  offered  rate  as  administered  by  ICE  Benchmark Administration (or any other Person that takes over the administration of such rate for  dollars for a period equal in length to such Interest Period) as displayed on such day and time on  pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such  rate does not appear on a Reuters page or screen, on any successor or substitute page on such  screen that displays such rate, or on the appropriate page of such other information service that  publishes such rate from time to time as selected by the Administrative Agent in its reasonable  discretion), provided that if the LIBO Screen Rate shall be less than zero percent, such rate shall  be deemed to be zero percent for the purposes of this Agreement.         “Lien” means any interest in Property securing an obligation owed to, or a claim by, a  Person other than the owner of the Property, whether such interest is based on the common law,  statute or contract, and whether such obligation or claim is fixed or contingent, and including but  not limited to (a) the lien or security interest arising from a deed of trust, mortgage, pledge, security                                         20  

 

   agreement,  conditional  sale  or  trust  receipt  or  a  lease,  consignment  or  bailment  for  security  purposes or (b) production payments and the like payable out of Oil and Gas Properties.  The term  “Lien” shall  include encumbrances, easements,  restrictions,  servitudes,  permits,  conditions,  covenants, exceptions or reservations, in each case, where the effect is to secure an obligation  owed to, or a claim by, a Person other than the owner of the Property. For the purposes of this  Agreement, the Parent and its Restricted Subsidiaries shall be deemed to be the owner of any  Property which it has acquired or holds subject to a conditional sale agreement, or leases under a  financing lease or other arrangement pursuant to which title to the Property has been retained by  or vested in some other Person in a transaction intended to create a financing.         “Liquidity” means, as of any date of determination, the sum of (a) the aggregate unused  amount of the total Commitments under this Agreement as of such date (but only to the extent that  the Borrower is permitted to borrow such amounts under the terms of this Agreement including,  without limitation, Section 6.02 hereof) and (b) the aggregate amount of unrestricted cash and cash  equivalents of the Borrower and its Restricted Subsidiaries at such date.         “Loan”  means  any  revolving  loan  made  to  the  Borrower  pursuant  to Article  II,  and  “Loans” means, collectively, two or more such Loans, as the context requires.          “Loan Documents” means this Agreement, the Notes, the Letter of Credit Agreements,  the Letters of Credit, the Fee Letter and the Security Instruments.         “Majority  Lenders” means, (a) if  there  are  less  than  three  Lenders  at  such  time,  all  Lenders, and (b) if there are three or more Lenders at such time, (i) at any time while no Loans or  LC Exposure is outstanding, Lenders having greater than fifty percent (50%) of the Aggregate  Maximum Credit Amounts; and (ii) at any time while any Loans or LC Exposure is outstanding,  Lenders holding Revolving Credit Exposures and unused Commitments representing greater than  fifty percent (50%) of the sum of the outstanding aggregate principal amount of the Loans and  participation interests in Letters of Credit (without regard to any sale by a Lender of a participation  in any Loan under Section 12.04(c)) and unused Commitments; provided that the Maximum Credit  Amounts and the principal amount of the Loans and participation interests in Letters of Credit of  the Defaulting Lenders (if any) shall be excluded from the determination of Majority Lenders.  “Material Acquisition” means  any acquisition of Property or series  of  related acquisitions  of  Property that involves the payment of consideration by the Parent and/or its Restricted Subsidiaries  in excess of a dollar amount equal to ten percent (10%) of the then effective Borrowing Base;  provided that a Material Acquisition shall not include any acquisition of Oil and Gas Properties to  which  no  Proved  Reserves  are  attributed  or  any acquisition of  any  Equity  Interests  in  any  Unrestricted Subsidiary.         “Material Adverse Effect” means a material adverse change in, or material adverse effect  on (a) the business, operations, Property or condition (financial or otherwise) of the Parent and the  Restricted  Subsidiaries  taken  as  a  whole, (b) the  ability  of  the Credit  Parties to  perform their  obligations, taken as a whole, under the Loan Documents, (c) the validity or enforceability of any  Loan Document or (d) the rights and remedies of or benefits available to, taken as a whole, the  Administrative  Agent,  any  other  Agent,  the  Issuing  Bank  or any  Lender under  any  Loan  Document.                                          21  

 

         “Material Disposition” means any Transfer of Property or series of related Transfers of  property that yields gross proceeds to the Parent or any of its Restricted Subsidiaries in excess of  a dollar amount equal to ten percent (10%) of the then effective Borrowing Base; provided that a  Material Disposition shall not include any Transfer of Oil and Gas Properties to which no Proved  Reserves are attributed or any Transfer of any Equity Interests in any Unrestricted Subsidiary.          “Material Indebtedness” means  Debt  (other than the Loans  and  Letters of Credit), or  obligations in respect of one or more Swap Agreements, of any one or more of the Parent and its  Restricted Subsidiaries in an aggregate principal amount exceeding the Threshold Amount.  For  purposes of determining Material Indebtedness, the “principal amount” of the obligations of the  Parent or any Restricted Subsidiary in respect of any Swap Agreement at any time shall be the  Swap Termination Value of such Swap Agreement.         “Maturity Date” means May 4, 2023.         “Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such  Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the same may be  (a) reduced or terminated from time to time in connection with a reduction or termination of the  Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), (b) modified from time to time  pursuant to Section 2.06(c) or (c) modified from time to time pursuant to any assignment permitted  by Section 12.04(b).           “Moody’s” means  Moody’s  Investors  Service,  Inc.  and  any  successor  thereto  that  is  a  nationally recognized rating agency.         “Mortgaged Property” means any Property owned by the Borrower or any Guarantor  which is subject to the Liens existing and to exist under the terms of any mortgages or deeds of  trust that are Security Instruments.         “Multiemployer Plan” means a multiemployer plan as defined in section 4001(a)(3) of  ERISA  under  which  the  Borrower,  a  Restricted  Subsidiary  or  an  ERISA  Affiliate  has  any  obligation or liability.          “New Borrowing Base Notice” has the meaning assigned such term in Section 2.07(d).         “Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender  at such time.         “Notes”  means the  promissory  notes  of  the  Borrower described  in Section 2.02(d)  evidencing the Loans and being substantially in the form of Error! Reference source not found.,  together  with  all  amendments,  modifications,  replacements,  extensions  and  rearrangements  thereof.          “NYFRB” means the Federal Reserve Bank of New York.         “NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in  effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day  that is not a Business Day, for the immediately preceding Business Day); provided that if none of                                         22  

 

   such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the  rate for a federal funds transaction quoted at 11:00 a.m. on such day received by the Administrative  Agent from a federal funds broker of recognized standing selected by it; provided, further, that if  any of the aforesaid rates shall be less than zero percent, such rate shall be deemed to be zero  percent for purposes of this Agreement.         “OFAC” means the Office of Foreign Assets Control of the United States Department of  the Treasury.         “Oil and Gas  Properties” means (a) Hydrocarbon Interests; (b) all rights  and interests  incidental to any Hydrocarbon Interests, including, without limitation, all rights and interests with  respect to any presently existing or future pooled, communitized or unitized acreage which may  affect all or any portion of such Hydrocarbon Interests by virtue of any such Hydrocarbon Interests  being a part thereof (including without limitation all units created under orders, regulations and  rules  of  any  Governmental  Authority); (c) all  operating  agreements,  contracts  and  other  agreements,  including  production  sharing  contracts  and  agreements,  which  relate  to  any  Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons  from or attributable to such Hydrocarbon Interests; (d) all Hydrocarbons in and under and which  may be produced and saved or attributable to any Hydrocarbon Interests, including all oil in tanks,  and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable  to such Hydrocarbon Interests; (e) all tenements, hereditaments, appurtenances and Properties in  any  manner  appertaining,  belonging,  affixed  or  incidental  to  Hydrocarbon  Interests  and (f) all  Property, real or personal, now owned or hereinafter acquired and situated upon, used, or held for  use  in  connection  with  the  operating,  working  or  development  of  any  of  such  Hydrocarbon  Interests  (excluding  drilling  rigs,  automotive  equipment,  rental  equipment  or  other  personal  Property which may be on such premises for the purpose of drilling a well or for other similar  temporary uses)  and including any  and all oil wells,  gas  wells,  injection wells  or other  wells,  buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping  units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and  parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires,  towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together  with all additions, substitutions, replacements, accessions and attachments to any and all of the  foregoing.  Unless otherwise expressly provided herein, all references in this Agreement to “Oil  and Gas  Properties”  refer  to  Oil  and  Gas  Properties  owned  by  the  Parent  and  its  Restricted  Subsidiaries, as the context requires.         “Other Taxes” means any and all present or future stamp or documentary taxes or any  other excise or Property taxes, charges or similar levies arising from any payment made hereunder  or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement  and any other Loan Document.         “Overnight  Bank  Funding  Rate”  means,  for  any  day,  the  rate  comprised  of  both  overnight federal funds and overnight Eurodollar borrowings by U.S.-managed banking offices of  depository institutions (as such composite rate shall be determined by the NYFRB as set forth on  its public website from time to time) and published on the next succeeding Business Day by the  NYFRB  as  an  overnight  bank  funding  rate  (from  and  after  such  date  as  the  NYFRB  shall  commence to publish such composite rate).                                         23  

 

         “Parent”  initially  means  the  Borrower.   If  any  Person  acquires  one  hundred  percent  (100%) of the outstanding Equity Interests in the Borrower and executes and delivers a Parent  Joinder  Agreement  to  the  Administrative  Agent,  that  Person  will  become  the  Parent  and  the  Borrower will automatically cease to be the Parent.           “Parent Joinder Agreement” means an agreement substantially in the form of Error!  Reference source not found. (or otherwise in form and substance acceptable to the Administrative  Agent).         “Participant” has the meaning set forth in Section 12.04(c)(i).         “Participant Register” has the meaning set forth in Section 12.04(c)(i).         “PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.         “Permitted  Senior  Unsecured  Notes”  means  those  notes  (whether  senior,  senior  subordinated, or subordinated) that may be issued by the Parent or the Borrower (or by any Credit  Party as co-issuer); provided that such Permitted Senior Unsecured Notes shall:  (a) be unsecured;  (b) not  provide for any scheduled payment of principal, mandatory Redemptions  or scheduled  sinking fund payment on or before the date that is at least 180 days following the Maturity Date in  effect at the time of issuance (other than provisions requiring Redemption or offers to Redeem in  connection  with  asset  sales  or  a  change  in  control);  and (c) contain  financial  and  negative  covenants and events of default that are, taken as a whole, no more restrictive with respect to the  Credit  Parties  than  the  financial  and  negative  covenants  and  Events  of  Default  herein  (as  determined in good faith by senior management of the Parent).         “Permitted Senior Unsecured Notes Documents” means the Permitted Senior Unsecured  Notes, all guarantees thereof and all other agreements, documents or instruments executed and  delivered by any Credit Party in connection with, or pursuant to, the issuance of Permitted Senior  Unsecured Notes.         “Permitted  Tax  Distributions” means,,  (a)  with  respect  to  any  taxable  period  (1)  for  which  the  Borrower  and/or  any  of  its  Subsidiaries  are  members  of  a  consolidated,  combined,  affiliated, unitary or similar income tax group for U.S. federal  and/or applicable state or local  income tax purposes, or (2) for which the Borrower is a partnership or disregarded entity for U.S.  federal income tax purposes that is wholly owned (directly or indirectly) by a C corporation for  U.S. federal and/or applicable state or local income tax purposes, distributions in an amount not to  exceed the amount of any U.S. federal, state and/or local income taxes that the Borrower and/or  its Subsidiaries, as applicable, would have paid for such taxable period had the Borrower and/or  its Subsidiaries, as applicable, been a stand-alone corporate taxpayer or a standalone corporate  group;  provided  that  distributions  pursuant  to  this  clause  (a)  in  respect  of  an  Unrestricted  Subsidiary  shall  be  permitted  only  to  the  extent  that  cash  distributions  were  made  by  such  Unrestricted Subsidiary to the Borrower or any of its Restricted Subsidiaries for such purpose, and  (b) without duplication of clause (a) and with respect to any taxable period for which the Borrower  is a partnership or disregarded entity for U.S. federal income tax purposes (other than a partnership  or disregarded entity described in clause (a)(2) above), distributions to the holders of the Equity  Interests of the Borrower, on a pro rata basis, at such times and in such amounts as necessary to                                         24  

 

   enable Centennial Resource Development to timely satisfy all of its U.S. federal, state and local  and  non-U.S.  tax  liabilities  to  the  extent  attributable  to  the  Borrower  and  its  Subsidiaries  (determined  by  taking  into  account  any  U.S.  federal,  state  and/or  local  (as  applicable)  loss  carryforwards and  accounting  for  any  limitations  on  such  loss  carryforwards  of  Centennial  Resource Development attributable to its ownership of the Borrower and its subsidiaries for prior  taxable periods).         “Person” means  any  natural  person,  corporation,  limited  liability  company,  trust,  joint  venture, association, company, partnership, Governmental Authority or other entity.         “Plan” means any employee pension benefit plan (other than a Multiemployer Plan), as  defined in section 3(2) of ERISA, that is subject to Title IV of ERISA, section 302 of ERISA or  section 412 of the Code and that (a) is currently or hereafter sponsored, maintained or contributed  to by the Parent, a Restricted Subsidiary or an ERISA Affiliate or (b) was at any time during the  six calendar years preceding the date hereof, sponsored, maintained or contributed to by the Parent  or a Restricted Subsidiary or an ERISA Affiliate.         “Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by section  3(42) of ERISA, as amended from time to time.         “Prime Rate” means the rate of interest per annum publicly announced from time to time  by JPMorgan as its prime rate in effect at its principal office in New York City; each change in the  Prime Rate shall be effective from and including the date such change is publicly announced as  being effective.  Such rate is set by the Administrative Agent as a general reference rate of interest,  taking  into  account  such  factors  as  the  Administrative  Agent  may  deem  appropriate;  it  being  understood  that  many  of  the  Administrative  Agent’s  commercial  or  other  loans  are  priced  in  relation  to  such  rate,  that  it  is  not  necessarily  the  lowest  or  best  rate  actually  charged  to  any  customer and that the Administrative Agent may make various commercial or other loans at rates  of interest having no relationship to such rate.         “Property” means any interest in any kind of property or asset, whether real, personal or  mixed,  or  tangible  or  intangible,  including,  without  limitation,  cash,  securities,  accounts  and  contract rights.         “Proposed Borrowing Base” has the meaning assigned to such term in Section 2.07(c)(i).         “Proposed  Borrowing  Base  Notice” has  the  meaning  assigned  to  such  term  in  Section 2.07(c)(ii).         “Proved Developed Producing Reserves” or “PDP” means “proved developed producing  oil and gas reserves” as such term is defined by the SEC in its standards and guidelines.         “Proved Oil and Gas Properties” means Oil and Gas Properties to which Proved Reserves  are attributed.  References herein to the “total value” of Proved Oil and Gas Properties refer to the  present value of the PDP that are attributed thereto in the then most recent Reserve Report plus  risk-discounted portions (as determined by the Administrative Agent) of the present value of the  Proved Reserves other than PDP that attributed thereto in such Reserve Report.                                          25  

 

         “Proved Reserves”  or  “Proved”  means  collectively,  “proved  oil  and  gas  reserves,”  “proved developed producing oil and gas reserves,” “proved developed non-producing oil and gas  reserves”  (consisting  of  proved  developed  shut-in  oil  and  gas  reserves  and  proved  developed  behind pipe oil and gas reserves), and “proved undeveloped oil and gas reserves,” as such terms  are defined by the SEC in its standards and guidelines.         “PTE” means a prohibited transaction class exemption issued by the U.S. Department of  Labor, as any such exemption may be amended from time to time.          “Purchase  Money Debt” means  Debt, the  proceeds of  which  are  used  to  finance  the  acquisition,  construction,  or  improvement  of  inventory,  equipment  or  other  Property  in  the  ordinary course of business; provided, however, that such Debt is incurred no later than 120 days  after such acquisition or the completion of such construction or improvement.         “Qualified ECP Counterparty” means, in respect of any Swap Agreement, each Credit  Party that (a) has total assets exceeding $10,000,000 at the time any guaranty of obligations under  such Swap Agreement or grant of the relevant security interest becomes effective or (b) otherwise  constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause  another  Person  to  qualify  as  an  “eligible  contract  participant”  at  such  time  by  entering  into  a  keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.         “Redemption” means with respect to any Debt, the repurchase, redemption, prepayment,  repayment, defeasance or any other acquisition or retirement for value (or the segregation of funds  with respect to any of the foregoing) of such Debt.  “Redeem” has the correlative meaning thereto.         “Redetermination Date” means, with respect to any Scheduled Redetermination or any  Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes  effective pursuant to Section 2.07(d).         “Reference  Period” has  the  meaning  assigned  to  such  term  in  the  definition  of  “EBITDAX”.         “Register” has the meaning assigned such term in Section 12.04(b)(iv).         “Regulation  D” means  Regulation  D  of  the  Board,  as  the  same  may  be  amended,  supplemented or replaced from time to time.         “Related Parties” means, with respect to any specified Person, such Person’s Affiliates  and  the  respective  directors,  officers,  employees,  agents  and  advisors  (including  attorneys,  accountants and experts) of such Person and such Person’s Affiliates.         “Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting,  discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping,  or disposing.         “Remedial Work” has the meaning assigned such term in Section 8.10(a).                                          26  

 

         “Required  Lenders” means, (a) if  there  are  less  than  three Lenders  at  such  time,  all  Lenders, and (b) if there are three or more Lenders at such time, (i) at any time while no Loans or  LC Exposure is outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%) of  the Aggregate Maximum Credit Amounts; and (ii) at any time while any Loans or LC Exposure is  outstanding, Lenders having Revolving Credit Exposures and unused Commitments representing  at  least  sixty-six  and  two-thirds  percent  (66-2/3%)  of  the sum  of  the outstanding  aggregate  principal amount of the Loans and participation interests in Letters of Credit (without regard to  any  sale  by a Lender  of  a  participation  in any  Loan under Section 12.04(c)) and  unused  Commitments; provided that the Maximum Credit Amounts and the principal amount of the Loans  and participation interests in Letters of Credit of the Defaulting Lenders (if any) shall be excluded  from the determination of Required Lenders.         “Reserve Report” means a report, in form and substance reasonably satisfactory to the  Administrative Agent, setting forth, as of the dates set forth in Section 8.12(a) (or such other date  in the event of an Interim Redetermination) the Proved Reserves attributable to the Oil and Gas  Properties of the Credit Parties, together with a projection of the rate of production and future net  income, taxes, operating expenses and capital expenditures with respect thereto as of such date,  based upon the pricing assumptions consistent with SEC reporting requirements at the time and  reflecting Swap Agreements in place with respect to such production.  To the extent that any Oil  and Gas Properties included in such report are owned by a Credit Party that is not a Qualified ECP  Counterparty, the Borrower or the Parent will identify such Credit Party and such Oil and Gas  Properties to the Administrative Agent.  The Initial Reserve Report is also a “Reserve Report”  hereunder.         “Responsible Officer” means, as to any Person, the chief executive officer, the president,  and any  Financial  Officer  of  such  Person.   Unless  otherwise  specified,  all  references  to  a  Responsible Officer herein shall mean a Responsible Officer of the Parent or the Borrower, as  applicable.         “Restricted Payment” means any return of capital, dividend or distribution (whether in  cash, securities or other Property) with respect to any Equity Interests in the Parent or any of its  Restricted Subsidiaries, or any payment (whether in cash, securities or other Property), including  any  sinking  fund  or  similar  deposit,  on  account  of  the  purchase,  redemption,  retirement,  acquisition, cancellation or termination of any such Equity Interests in the Parent or any of its  Restricted Subsidiaries.         “Restricted Subsidiary” means any Subsidiary of the Parent that is not an Unrestricted  Subsidiary, including, without limitation (except at such times that the Borrower is the Parent), the  Borrower.         “Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of  the outstanding principal amount of such Lender’s Loans and its LC Exposure at such time.          “Riverstone”  means  Riverstone  Investment  Group  LLC  (the  “Manager”),  Riverstone  Global  Energy  and  Power  Fund  VI,  L.P., Riverstone  Non-ECI  Partners,  L.P.,  and  Riverstone  Energy Limited, together with the parallel investment entities and alternative investment entities  of the foregoing, and any future investment fund or co-investment fund managed by the Manager                                         27  

 

   or any of its Affiliates, and any Affiliates of one or more of the foregoing; provided that in no  event  will  any  portfolio  company  of  any  of  the  foregoing  be  included  in  the  definition  of  “Riverstone”.          “Rolling Period” means any period of four (4) consecutive fiscal quarters ending on the  last day of a fiscal quarter.          “Sanctioned Country” means, at any time, a country or territory which is itself the subject  or target of any Sanctions (including without limitation, at the time of this Agreement, Cuba, Iran,  North Korea and Syria).         “Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related  list of designated Persons maintained by OFAC, the U.S. Department of the Treasury or the U.S.  Department of State, (b) any Person operating, organized or resident in a Sanctioned Country or  (c) any Person owned or controlled by any such Person or Persons described in the foregoing  clauses (a) or (b).         “Sanctions”  means economic  or  financial  sanctions  or  trade  embargoes  imposed,  administered or enforced from time to time by the U.S. government, including without limitation  those administered by OFAC, the U.S. Department of the Treasury or the U.S. Department of  State.         “S&P” means  S&P  Global  Ratings and  any  successor  thereto  that  is  a  nationally  recognized rating agency.          “Scheduled Redetermination” has the meaning assigned such term in Section 2.07(b).         “Scheduled  Redetermination  Date”  means  April  1st  and  October  1st  of  each  year,  commencing October 1, 2018, (or such date promptly thereafter as reasonably practicable).         “Scheduled Redetermination Effective Date” means the date on which a Borrowing Base  that  has been  redetermined  pursuant  to  a  Scheduled  Redetermination  becomes  effective  as  provided in Section 2.07(d).         “SEC” means the Securities and Exchange Commission or any successor Governmental  Authority.         “Secured Parties” means, collectively, the Administrative Agent, the Lenders, the Issuing  Bank, the Bank Products Providers and Secured Swap Providers, and “Secured Party” means any  of them individually.         “Secured Swap Agreement” means any Swap Agreement between the Borrower or any  Subsidiary and any Secured Swap Provider.         “Secured Swap Provider” means any Person (other than the Borrower or any Subsidiary)  that (a) is a Lender or an Affiliate of a Lender on the Effective Date and is a party to a Swap  Agreement with the Borrower or any Restricted Subsidiary on the Effective Date, (b) hereafter  enters into a Swap Agreement with the Borrower or any Restricted Subsidiary while such Person                                         28  

 

   is a Lender or an Affiliate of a Lender, or (c) is a Lender or an Affiliate of a Lender at the time any  such  Swap  Agreement  is  assigned  or  transferred  to  it  (by  novation  or  otherwise)  by  another  Secured Swap Provider.  Any Person that at any time is a Secured Swap Provider with respect to  a particular Secured Swap Agreement shall not thereafter cease to be a Secured Swap Provider  with respect to such Secured Swap Agreement because such Person ceases to be a Lender or an  Affiliate of a Lender, provided that (x) any such Person that ceases to be a Lender or an Affiliate  of a Lender shall not be a Secured Swap Provider with respect to any Swap Agreement that it  thereafter enters into while it is not a Lender or an Affiliate of a Lender, and (y) any Person that  assigns or transfers a Secured Swap Agreement as contemplated in clause (c) of this definition  shall cease to be a Secured Swap Provider with respect to such Secured Swap Agreement to the  extent of such assignment or transfer.         “Securities  Act” means  the  Securities  Act  of  1933,  as  amended,  and  the  rules  and  regulations promulgated thereunder.         “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, and  the rules and regulations promulgated thereunder.         “Security Agreement” means a  Second  Amended  and  Restated Pledge and  Security  Agreement among the Credit Parties and the Administrative Agent in substantially the form of  Error!  Reference  source  not  found. (or  otherwise  in  form  and  substance  acceptable  to  the  Administrative  Agent)  granting  Liens  and  a security  interest on  the  Credit  Parties’  personal  property constituting Collateral (as defined therein) in favor of the Administrative Agent for the  benefit of the Secured Parties to secure the Indebtedness, as the same may be amended, modified,  supplemented or restated from time to time.         “Security Instruments” means the Guaranty Agreement, the Security Agreement, each of  the mortgages, deeds of trust and other agreements or instruments described in Error! Reference  source  not  found.,  and  any  and  all  other guaranties,  mortgages,  deeds  of  trust,  security  agreements, pledge agreements, or other agreements or instruments now or hereafter executed and  delivered by the Borrower or any other Person (other than Notes, Swap Agreements  with any  Lenders or any Affiliate of a Lender, or participation or similar agreements between any Lender  and  any participant  or  similar  party with  respect  to  any  Indebtedness) as  security  for,  or  as  a  guaranty of, the payment or performance of the Indebtedness, in each case as such agreement or  instrument may be amended, modified, supplemented or restated from time to time.          “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of  which is the number one and the denominator of which is the number one minus the aggregate of  the maximum reserve percentages (including any marginal, special, emergency or supplemental  reserves) expressed as a decimal established by the Board to which the Administrative Agent is  subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as  “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include  those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to constitute  eurocurrency funding and to be subject to such reserve requirements without benefit of or credit  for proration, exemptions or offsets that may be available from time to time to any Lender under  such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted  automatically on and as of the effective date of any change in any reserve percentage.                                         29  

 

         “subsidiary” means,  with  respect  to  any  Person  (the “parent”)  at  any  date,  any  other  Person  the  accounts  of  which would  be  consolidated  with  those  of  the  parent  in  the  parent’s  consolidated financial statements if such financial statements were prepared in accordance with  GAAP as of such date, as well as any other Person of which Equity Interests representing more  than 50% of the equity or more than 50% of the ordinary voting power (irrespective of whether or  not at the time Equity Interests of any other class or classes of such Person shall have or might  have voting power by reason of the happening of any contingency) are, as of such date, owned,  controlled or held by the parent or one or more subsidiaries of the parent or by the parent and one  or more subsidiaries of the parent.         “Subsidiary” means any subsidiary of the Parent, including, without limitation (except at  such times that the Borrower is the Parent), the Borrower.         “Swap Agreement” means any agreement with respect to any swap, forward, future or  derivative  transaction  or  similar  agreement,  whether  exchange  traded, “over-the-counter” or  otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity  or  debt  instruments  or  securities,  or  economic,  financial  or  pricing  indices  or  measures  of  economic,  financial  or  pricing  risk  or  value  or  any other similar derivative transaction  or  any  combination  of  these  transactions (including any option  to  enter  into  any  of  the  foregoing);  provided that (a) no phantom stock or similar plan providing for payments only on account of  services provided by current or former directors, officers, employees or consultants of the Parent  or  its  Subsidiaries  shall  be  a  Swap  Agreement and (b) no  transaction  that  is  intended  to  be  physically settled (including any sale of a commodity for a deferred shipment or delivery that is  intended to be physically settled) shall be a Swap Agreement.  If multiple transactions are entered  into under a master agreement, each such transaction that constitutes a Swap Agreement shall be  a  separate  Swap  Agreement  for  the  purposes  of  this  Agreement.  For  the  sole  purpose  of  Section 9.17, the term “Swap Agreement” shall be deemed to exclude all purchased put options or  floors  for Hydrocarbons that are not  related to  corresponding  calls,  collars or swaps  and with  respect to which neither the Parent nor any Restricted Subsidiary has any payment obligation other  than  premiums  and  charges  the  total  amount  of  which  are  fixed  and  known  at  the  time  such  transaction is entered into.         “Swap Termination Value” means, in respect of any one or more Swap Agreements, after  taking into account the effect of any legally enforceable netting agreement relating to such Swap  Agreements, (a) for any date on or after the date such Swap Agreements have been closed out and  termination value(s) determined in accordance therewith, such termination value(s) and (b) for any  date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market  value(s)  for  such  Swap  Agreements,  as  determined  by  the  counterparties  to  such  Swap  Agreements.         “Synthetic Leases” means, in respect of any Person, all leases which shall have been, or  should have been, in accordance with GAAP, treated as operating leases on the financial statements  of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and  which were properly treated as indebtedness for borrowed money for purposes of United States  federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount  in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of  the Property subject to such operating lease upon expiration or early termination of such lease.                                         30  

 

         “Taxes” means  any  and all present  or future taxes,  levies,  imposts,  duties,  deductions,  charges or withholdings imposed by any Governmental Authority.         “Termination Date” means the earlier of the Maturity Date and the date of termination of  the Commitments.         “Threshold Amount” means the greater of (i) $32,000,000 and (ii) 4% of the Borrowing  Base then in effect.          “Total  Funded  Debt” means,  at  any  date,  all Funded Debt  of  the Parent and  the  Consolidated Restricted Subsidiaries on a consolidated basis and, so long as there are no Loans  outstanding on such date, calculated net of unrestricted cash and cash equivalents, in each case,  held by the Borrower and its Restricted Subsidiaries.         “Transactions” means,  with  respect  to (a) the  Borrower,  the  execution,  delivery  and  performance by the Borrower of this Agreement and each other Loan Document to which it is a  party, the borrowing of Loans, the issuance of Letters of Credit hereunder, the grant of Liens by  the  Borrower  on  Mortgaged  Properties  pursuant  to  the  Security  Instruments,  and (b) each  Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to  which  it  is  a  party,  the  guaranteeing  of  the  Indebtedness  and  the  other  obligations  under  the  Guaranty  Agreement  by  such  Guarantor  and  such  Guarantor’s  grant  of  Liens  on  Mortgaged  Properties pursuant to the Security Instruments.         “Transfer” has the meaning assigned to such term in Section 9.12.         “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of  interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to  the Alternate Base Rate or the Adjusted LIBO Rate.         “Unrestricted  Subsidiary” means  any  Subsidiary  of  the Parent designated  as  such  on  Schedule 7.14 or which the Parent or the Borrower has designated in writing to the Administrative  Agent to be an Unrestricted Subsidiary pursuant to Section 9.06; provided that in no event may  the Borrower be designated as an Unrestricted Subsidiary.         “Unrestricted Subsidiary Distribution” means any cash dividend or distribution received  by the Parent or any Restricted Subsidiary from any Unrestricted Subsidiary.         “U.S. Tax Compliance Certificate” has the meaning set forth in Section 5.03(f).         “Wholly-Owned  Subsidiary” means  any  Restricted  Subsidiary  of  which  all  of  the  outstanding Equity Interests (other than any directors’ qualifying shares mandated by applicable  law), on a fully-diluted basis, are owned by the Parent, the Borrower or one or more of the Wholly- Owned Subsidiaries or are owned by the Parent, the Borrower and one or more of the Wholly- Owned Subsidiaries, or any combination thereof.         “Withholding Agent” means any Credit Party or the Administrative Agent.                                          31  

 

         “Write-Down  and  Conversion  Powers”  means,  with  respect  to  any  EEA  Resolution  Authority, the write-down and conversion powers of such EEA Resolution Authority from time to  time under the Bail-In Legislation for the applicable EEA Member Country, which write-down  and conversion powers are described in the EU Bail-In Legislation Schedule.         Section 1.03 Types of Loans and Borrowings.  For purposes of this Agreement, Loans  and Borrowings,  respectively, may  be classified  and referred to by Type (e.g.,  a “Eurodollar  Loan” or a “Eurodollar Borrowing”).         Section 1.04 Terms Generally; Rules of Construction.  The definitions of terms herein  shall apply equally to the singular and plural forms of the terms defined.  Whenever the context  may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.   The words “include”, “includes” and “including” as used in this Agreement shall be deemed to be  followed  by  the  phrase “without  limitation”.   The  words “will” and  “shall”  as  used  in  this  Agreement shall  be  construed  to  have  the  same  meaning  and  effect.  The  word  “or”  is  not  exclusive.  Unless  the  context  requires  otherwise (a) any  definition  of  or  reference  to  any  agreement, instrument or other document herein shall be construed as referring to such agreement,  instrument or other document as from time to time amended, supplemented, restated or otherwise  modified (subject to any restrictions on such amendments, supplements or modifications set forth  in the Loan Documents), (b) except as otherwise provided herein, any reference herein to any law  shall be construed as referring to such law as amended, modified, codified or reenacted, in whole  or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed  to include such Person’s successors and assigns (subject to the restrictions contained in the Loan  Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import as  used in this Agreement, shall be construed to refer to this Agreement in its entirety and not to any  particular provision  hereof, (e) with  respect  to the  determination of any time period, the word  “from” as used in this Agreement means “from and including” and the word “to” means “to and  including” and (f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules  shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,  this Agreement.  No provision of this Agreement or any other Loan Document shall be interpreted  or construed against any Person solely because such Person or its legal representative drafted such  provision.         Section 1.05 Accounting Terms and Determinations; GAAP.  Unless otherwise specified  herein, all accounting terms used herein shall be interpreted, all determinations with respect to  accounting  matters  hereunder  shall  be  made,  and all  financial  statements  and  certificates  and  reports as to financial matters required to be furnished to the Administrative Agent or the Lenders  hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the  Financial  Statements  except  for  changes  in  which  Borrower’s  independent  certified  public  accountants concur and which are disclosed to Administrative Agent on or before the next date on  which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a);  provided that, unless the Borrower and the Majority Lenders shall otherwise agree in writing, no  such change shall modify or affect the manner in which compliance with the covenants contained  herein is  computed  such  that  all  such  computations  shall  be  conducted  utilizing  financial  information presented consistently with prior periods.  Notwithstanding anything herein to the  contrary,  for  the  purposes  of  calculating  any  of  the  ratios  tested  under Section 9.01,  and  the  components of each of such ratios, all Unrestricted Subsidiaries, and their subsidiaries (including                                         32  

 

   their assets, liabilities, income, losses, cash flows, and the elements thereof) shall be excluded,  except  for  any Unrestricted  Subsidiary  Distributions (other  than  Unrestricted  Subsidiary  Distributions that have been used or will be used by the Parent to make distributions under Section  9.04(a)(v)), which shall be deemed to be income to the Parent or such Restricted Subsidiary when  actually received by it.                                    ARTICLE II                                  THE CREDITS         Section 2.01  Commitment.  Subject to the terms and conditions set forth herein, each  Lender agrees  to  make Loans  to  the  Borrower  during  the  Availability  Period  in  an  aggregate  principal amount that will not result in (a) such Lender’s Revolving Credit Exposure exceeding  such  Lender’s  Commitment or (b) the  total Revolving  Credit  Exposures  exceeding  the  total  Commitments.  Within the foregoing limits and subject to the terms and conditions set forth herein,  the Borrower may borrow, repay and reborrow the Loans.         Section 2.02 Loans and Borrowings.                 (a)   Borrowings; Several Obligations.  Each Loan shall be made as part of a  Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective  Commitments.  The failure of any Lender to make any Loan required to be made by it shall not  relieve any other Lender of its obligations hereunder; provided that the Commitments are several  and no Lender shall be responsible for any other Lender’s failure to make Loans as required.               (b)   Types  of  Loans.   Subject  to Section 3.03,  each  Borrowing  shall  be  comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance  herewith.  Each Lender at its option may make any Eurodollar Loan by causing any domestic or  foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such  option shall not affect the obligation of the Borrower to repay such Loan in accordance with the  terms of this Agreement.               (c)   Minimum  Amounts;  Limitation  on  Number  of  Borrowings.   At  the  commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in  an aggregate amount that is an integral multiple of $250,000 and not less than $500,000.  At the  time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is  an integral multiple of $100,000 and not less than $200,000; provided that an ABR Borrowing  may be in an aggregate amount that is equal to the entire unused balance of the total Commitments  or  that  is  required  to  finance  the  reimbursement  of  an  LC  Disbursement  as  contemplated  by  Section 2.08(e).  Borrowings of more than one Type may be outstanding at the same time, provided  that there shall not at any time be more than a total of ten (10) Eurodollar Borrowings outstanding.   Notwithstanding  any  other  provision  of this  Agreement,  the  Borrower  shall  not  be  entitled  to  request, or to elect to convert or continue, a Loan if the Interest Period requested with respect  thereto would end after the Maturity Date.               (d)    Notes. If requested by a Lender, the Loans made by such Lender shall be  evidenced by a Note, of the Borrower in substantially the form of Error! Reference source not  found., dated, (i) in the case of any Lender party hereto as of the date of this Agreement, as of the                                         33  

 

   date of this Agreement, (ii) in the case of any Lender that becomes a party hereto pursuant to an  Assignment and Assumption, as of the effective date of the Assignment and Assumption, or (iii) in  the case of any Lender that becomes a party hereto in connection with an increase in the Aggregate  Elected  Commitment  Amounts  pursuant  to Section  2.06(c),  as  of  the  effective  date  of  such  increase, in each case, payable to such Lender in a principal amount equal to its Maximum Credit  Amount, as in effect on such date, and otherwise duly completed. In the event that any Lender’s  Maximum Credit Amount increases or decreases for any reason (whether pursuant to Section 2.06,  Section 12.04(b) or otherwise), the Borrower shall, upon request of such Lender, deliver or cause  to be delivered, to the extent such Lender is then holding a Note, on the effective date of such  increase  or  decrease,  a new Note,  payable  to such Lender  in  a  principal  amount  equal  to  its  Maximum Credit Amount after giving effect to  such increase or decrease, and otherwise duly  completed, whereupon such Lender will promptly return to the Borrower the Notes so replaced.   The date, amount, Type, interest rate and, if applicable, Interest Period of each Loan made by each  Lender, and all payments made on account of the principal thereof, shall be recorded by such  Lender on its books for its Note.  Failure to make any such recordation shall not affect any Lender’s  or the Borrower’s rights or obligations in respect of such Loans or affect the validity of any transfer  by any Lender of its Note.         Section 2.03 Requests  for  Borrowings.   To  request  a  Borrowing,  the  Borrower  shall  notify  the  Administrative  Agent  of  such  request  by  telephone (a) in  the  case  of  a  Eurodollar  Borrowing, not later than 11:00 a.m., Denver, Colorado time, three Business Days before the date  of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 10:00 a.m.,  Denver, Colorado time, on the date of the proposed Borrowing; provided that no such notice shall  be required for any deemed request of an ABR Borrowing to finance the reimbursement of an LC  Disbursement as provided in Section 2.08(e).  Each such telephonic Borrowing Request shall be  irrevocable and shall be confirmed promptly by hand delivery or facsimile or other electronic  transmission to the Administrative Agent (or other communication in writing acceptable to the  Administrative  Agent)  of  a  written  Borrowing  Request  in  substantially  the  form  of Error!  Reference source not found. (or such other form as may be agreed to by the Administrative Agent  and the Borrower) and signed by the Borrower.  Each such telephonic and written Borrowing  Request shall specify the following information in compliance with Section 2.02:                     (i)   the aggregate amount of the requested Borrowing;                     (ii)  the date of such Borrowing, which shall be a Business Day;                     (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar  Borrowing;                     (iv)  in the case of a Eurodollar Borrowing, the initial Interest Period to  be applicable thereto, which shall be a period contemplated by the definition of the term “Interest  Period”;                     (v)   the amount of the then effective Borrowing Base, the amount of the  then  effective  Aggregate  Elected  Commitment  Amounts,  the  current  total  Revolving  Credit  Exposures (without regard to the requested Borrowing) and the pro forma total Revolving Credit  Exposures (giving effect to the requested Borrowing); and                                         34  

 

                     (vi)  the location and number of the Borrower’s account to which funds  are to be disbursed, which shall comply with the requirements of Section 2.05.   If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an  ABR  Borrowing.   If  no  Interest  Period  is  specified  with  respect  to  any  requested  Eurodollar  Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s  duration.   Each  Borrowing  Request  shall constitute  a  representation  by  the  Borrower  that  the  amount of the requested Borrowing shall not cause the total Revolving Credit Exposures to exceed  the total Commitments (i.e., the least of (A) the Aggregate Maximum Credit Amounts, (B) the  then  effective  Borrowing  Base  and (C) the  then  effective  Aggregate  Elected  Commitment  Amounts).    Promptly  following  receipt  of  a  Borrowing  Request  in  accordance  with  this Section 2.03, the  Administrative Agent shall advise each Lender of the details thereof and of the amount of such  Lender’s Loans to be made as part of the requested Borrowing.         Section 2.04 Interest Elections.                 (a)   Conversion and Continuance.  Each Borrowing initially shall be of the Type  specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall  have an initial Interest Period as specified in such Borrowing Request.  Thereafter, the Borrower  may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the  case  of  a  Eurodollar  Borrowing,  may  elect  Interest  Periods  therefor,  all  as  provided  in  this  Section 2.04.  The Borrower may elect different options with respect to different portions of the  affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders  holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall  be considered a separate Borrowing.               (b)   Interest  Election  Requests.   To  make  an  election  pursuant  to  this  Section 2.04, the Borrower shall notify the Administrative Agent of such election by telephone by  the time that a Borrowing Request would be required under Section 2.03 if the Borrower were  requesting a Borrowing of the Type resulting from such election to be made on the effective date  of such election.  Each such telephonic Interest Election Request shall be irrevocable and shall be  confirmed  promptly  by  hand  delivery  or  facsimile  to  the  Administrative  Agent  (or  other  communication in writing or electronic transmission acceptable to the Administrative Agent) of a  written Interest Election Request in substantially the form of Error! Reference source not found.  (or such other form as may be agreed to by the Administrative Agent and the Borrower) and signed  by the Borrower.               (c)   Information  in  Interest  Election  Requests.   Each  telephonic  and  written  Interest Election Request shall specify the following information in compliance with Section 2.02:                     (i)   the Borrowing to which such Interest Election Request applies and,  if different options are being elected with respect to different portions thereof, the portions thereof  to be allocated to each resulting Borrowing (in which case the information to be specified pursuant  to Section 2.04(c)(iii) and (iv) shall be specified for each resulting Borrowing);                                          35  

 

                     (ii)  the  effective  date  of  the  election  made  pursuant  to  such  Interest  Election Request, which shall be a Business Day;                     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a  Eurodollar Borrowing; and                     (iv)  if the resulting Borrowing is a Eurodollar Borrowing, the Interest  Period  to  be  applicable  thereto  after  giving  effect  to  such  election,  which  shall  be  a  period  contemplated by the definition of the term “Interest Period”.   If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an  Interest  Period, then the Borrower shall be deemed to  have selected an  Interest  Period of one  month’s duration.               (d)   Notice to Lenders by the Administrative Agent.  Promptly following receipt  of an Interest Election Request, the Administrative Agent shall advise each Lender of the details  thereof and of such Lender’s portion of each resulting Borrowing.               (e)   Effect of Failure to Deliver Timely Interest Election Request and Events of  Default on Interest Election.  If the Borrower fails to deliver a timely Interest Election Request  with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto,  then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such  Borrowing shall be converted to an ABR Borrowing.  Notwithstanding any contrary provision  hereof, if an Event of Default has occurred and is continuing, then so long as such Event of Default  is continuing:  (i) no outstanding Borrowing may be converted to or continued as a Eurodollar  Borrowing (and any Interest Election Request that requests the conversion of any Borrowing to,  or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless  repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the  Interest Period applicable thereto.         Section 2.05 Funding of Borrowings.               (a)   Funding by Lenders.  Each Lender shall make each Loan to be made by it  hereunder  on  the  proposed  date  thereof  by  wire  transfer  of  immediately  available  funds  by  12:00 p.m.  (noon),  Denver,  Colorado  time,  to  the  account  of  the  Administrative  Agent  most  recently designated by it for such purpose by notice to the Lenders.  The Administrative Agent  will make such Loans available to the Borrower by promptly crediting the amounts so received, in  like funds, to an account of the Borrower maintained with the Administrative Agent or any Lender  designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans made  to  finance  the  reimbursement  of  an  LC  Disbursement  as  provided  in Section 2.08(e) shall  be  remitted by the Administrative Agent to the Issuing Bank.  Nothing herein shall be deemed to  obligate any Lender  to  obtain  the  funds  for  its Loan in  any  particular  place  or  manner  or  to  constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan  in any particular place or manner.               (b)   Presumption of Funding by the Lenders.  Unless the Administrative Agent  shall have received notice from a Lender prior to the proposed date of any Borrowing that such  Lender  will  not  make  available  to  the  Administrative  Agent such Lender’s  share  of  such                                         36  

 

   Borrowing, the Administrative Agent may assume that such Lender has made such share available  on such date in accordance with Section 2.05(a) and may, in reliance upon such assumption, make  available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made  its share of the applicable Borrowing available to the Administrative Agent, then the applicable  Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand  such corresponding amount with interest thereon, for each day from and including the date such  amount  is  made  available  to  the  Borrower  to  but  excluding  the  date  of  payment  to  the  Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective  Rate and a rate determined by the Administrative Agent in accordance with banking industry rules  on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to the  Loans comprising such Borrowing that such Lender failed to fund.  If such Lender pays such  amount  to  the  Administrative  Agent,  then  such  amount  shall  constitute such Lender’s  Loan  included in such Borrowing.  Any payment by the Borrower pursuant to this Section 2.05(b) shall  be without prejudice to any claim the Borrower may have against a Lender that shall have failed  to make such payment to the Administrative Agent.         Section 2.06 Termination  and  Reduction  of Commitments  and Aggregate  Maximum  Credit  Amounts;  Increase,  Reduction  and  Termination  of  Aggregate  Elected  Commitment  Amounts.                 (a)   Scheduled Termination of Commitments.  Unless  previously terminated,  the Commitments shall terminate on the Maturity Date.  If at any time the Aggregate Maximum  Credit  Amounts,  the  Borrowing  Base  or  the  Aggregate  Elected  Commitment  Amounts  is  terminated or reduced to zero, then the Commitments shall terminate on the effective date of such  termination or reduction.               (b)   Optional  Termination  and  Reduction  of Aggregate Maximum  Credit  Amounts.                     (i)   The  Borrower  may  at  any  time  terminate,  or  from  time  to  time  reduce,  the Aggregate  Maximum  Credit  Amounts; provided that (A) each  reduction  of  the  Aggregate Maximum Credit Amounts shall be in an amount that is an integral multiple of $500,000  and  not  less  than  $500,000, (B) the  Borrower  shall  not  terminate  or  reduce  the Aggregate  Maximum Credit Amounts if, (1) after giving effect to any concurrent prepayment of the Loans in  accordance  with Section 3.04(c),  the  total Revolving  Credit  Exposures  would  exceed  the  total  Commitments  or (2) the Aggregate  Maximum  Credit  Amount would  be  less  than  $5,000,000  (unless, with respect to this clause (2), the Aggregate Maximum Credit Amounts are reduced to  $0), and (C) upon any reduction of the Aggregate Maximum Credit Amounts that would otherwise  result  in  the Aggregate  Maximum  Credit  Amounts  being  less  than  the  Aggregate  Elected  Commitment  Amounts,  the  Aggregate  Elected  Commitment  Amounts  shall  be  automatically  reduced (ratably among the Lenders in accordance with each Lender’s Applicable Percentage) so  that they equal the Aggregate Maximum Credit Amounts as so reduced.                     (ii)  The Borrower shall notify the Administrative Agent of any election  to terminate or reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least  three Business Days prior to the effective date of such termination or reduction (or such lesser  period as may be reasonably acceptable to the Administrative Agent), specifying such election and                                         37  

 

   the effective date thereof.  Promptly following receipt of any notice, the Administrative Agent  shall advise the Lenders of the contents thereof.  Each notice delivered by the Borrower pursuant  to  this Section  2.06(b)(ii) shall  be  irrevocable; provided that  a  notice  of  termination  of  the  Aggregate Maximum  Credit Amounts  delivered by the  Borrower, or  a payoff letter or similar  communication accepted by the Administrative Agent, may state that such notice is conditioned  upon the effectiveness of other credit facilities or the closing of a specified transaction, in which  case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or  prior  to  the  specified  effective  date of  such  termination  or  reduction)  if  such  condition  is  not  satisfied.   Any  termination  or  reduction  of  the Aggregate  Maximum  Credit  Amounts  shall  be  permanent and may not be reinstated.  Each reduction of the Aggregate Maximum Credit Amounts  shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.                     (c)   Increases,  Reductions  and  Terminations  of  Aggregate        Elected Commitment Amounts.                      (i)   Subject  to  the  conditions  set  forth  in Section  2.06(c)(ii),  the  Borrower may increase the Aggregate Elected Commitment Amounts then in effect by increasing  the  Elected  Commitment  of a Lender  or  by  causing  a  Person  that  is  acceptable  to  the  Administrative Agent that at such time is not a Lender to become a Lender (any such Person that  is not at such time a Lender and becomes a Lender, an “Additional Lender”).  Notwithstanding  anything to the contrary contained in this Agreement, in no case shall an Additional Lender be a  natural person, an Industry Competitor, the Borrower or any Affiliate of the Borrower.                     (ii)  Any increase in  the  Aggregate  Elected  Commitment        Amounts shall be subject to the following additional conditions:                           (A)   such increase shall not be less than $15,000,000 unless the  Administrative Agent otherwise consents, and no such increase shall be permitted if after giving  effect thereto the Aggregate Elected Commitment Amounts exceed the Borrowing Base then in  effect;                           (B)   following  any  Scheduled  Redetermination  Date,  the  Borrower may not increase the Aggregate Elected Commitment Amounts more than once before  the next Scheduled Redetermination Date (for the sake of clarity, all increases in the Aggregate  Elected Commitment Amount effective on a single date shall be deemed a single increase in the  Aggregate Elected Commitment Amount for purposes of this Section 2.06(c)(ii)(B));                           (C)   no  Default  shall  have  occurred  and  be  continuing  on  the  effective date of such increase;                           (D)   on  the  effective  date  of  such  increase,  no  Eurodollar  Borrowings  shall  be  outstanding  or  if  any  Eurodollar  Borrowings  are  outstanding,  then  the  effective  date  of  such  increase  shall  be  the  last  day  of  the  Interest  Period  in  respect  of  such  Eurodollar Borrowings unless the Borrower pays any compensation required by Section 5.02;                           (E)   no Lender’s Elected Commitment may be increased without  the consent of such Lender;                                          38  

 

                           (F)   if  the  Borrower  elects  to  increase  the  Aggregate  Elected  Commitment Amounts by increasing the Elected Commitment of a Lender, the Borrower and such  Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form  of Error! Reference source not found. (an “Elected Commitment Increase Certificate”); and                           (G)   if  the  Borrower  elects  to  increase  the  Aggregate  Elected  Commitment Amounts by causing an Additional Lender to become a party to this Agreement, then  the Borrower and such Additional Lender shall execute and deliver to the Administrative Agent a  certificate  substantially  in  the  form  of Error!  Reference  source  not  found. (an  “Additional  Lender Certificate”),  together  with  an  Administrative  Questionnaire  and  a  processing  and  recordation fee of $3,500 (provided that the Administrative Agent may, in its discretion, elect to  waive such processing and recordation fee in connection with any such increase), and the Borrower  shall (1) if requested by the Additional Lender, deliver a Note payable to such Additional Lender  in a principal amount equal to its Maximum Credit Amount, and otherwise duly completed and (2)  pay any applicable fees as may have been agreed to between the Borrower and the Additional  Lender, and, to the extent applicable and agreed to by the Borrower, the Administrative Agent.                     (iii) Subject  to  acceptance  and  recording  thereof  pursuant  to        Section 2.06(c)(iv),  from  and  after  the  effective  date  specified  in  the  Elected        Commitment Increase Certificate or the Additional Lender Certificate (or if any        Eurodollar Borrowings are outstanding, then the last day of the Interest Period in        respect  of  such  Eurodollar  Borrowings,  unless  the  Borrower  has  paid  any        compensation required by Section 5.02:  (A) the amount of the Aggregate Elected        Commitment Amounts shall be increased as set forth therein, and (B) in the case of        an Additional Lender Certificate, any Additional Lender party thereto shall be a        party to this Agreement and have the rights and obligations of a Lender under this        Agreement  and  the  other  Loan  Documents.   In  addition, the Lender  or  the        Additional  Lender,  as  applicable,  shall  purchase  a  pro  rata  portion  of  the        outstanding Loans (and participation interests in Letters of Credit) of each of the        other Lenders (and such Lenders hereby agree to sell and to take all such further        action  to  effectuate  such  sale)  such  that  each Lender  (including  any Additional        Lender, if applicable) shall hold its Applicable Percentage of the outstanding Loans        (and  participation  interests)  after  giving  effect  to  the  increase  in  the  Aggregate        Elected Commitment Amounts (and the resulting modifications of each Lender’s        Maximum Credit Amount pursuant to Section 2.06(c)(iv) or Section 2.06(c)(v)).                     (iv)  Upon its receipt of a duly completed Elected Commitment        Increase Certificate or an Additional Lender Certificate, executed by the Borrower        and the Lender or by the Borrower and the Additional  Lender party thereto,  as        applicable, the processing and recording fee referred to in Section 2.06(c)(ii), if        required, the Administrative Questionnaire referred to in Section 2.06(c)(ii) and the        break-funding payments  from  the Borrower, if any, required by Section 5.02, if        applicable,  the  Administrative  Agent  shall accept  such  Elected  Commitment        Increase Certificate or Additional Lender Certificate and record the information        contained therein in the Register required to be maintained by the Administrative        Agent  pursuant  to Section 12.04(b)(iv).   No  increase  in  the  Aggregate  Elected                                          39  

 

                Commitment Amounts shall be effective for purposes of this Agreement unless it  has been recorded in the Register as provided in this Section 2.06(c)(iv).               (v)   Upon any increase in the Aggregate Elected Commitment  Amounts  pursuant  to Section 2.06(c)(iv), (A) each Lender’s Maximum  Credit  Amount shall be automatically deemed amended to the extent necessary so that  each such Lender’s Applicable Percentage equals the percentage of the Aggregate  Elected Commitment Amounts represented by such Lender’s Elected Commitment,  in each case after giving effect to such increase, and (B) Annex I to this Agreement  shall  be  deemed  amended  to  reflect  the  Elected  Commitment  of  each Lender  (including  any Additional  Lender)  as  thereby  increased,  any  changes  in the  Lenders’ Maximum Credit Amounts pursuant to the foregoing clause (A), and any  resulting changes in the Lenders’ Applicable Percentages.               (vi)  The Borrower may from time to time terminate or reduce the  Aggregate Elected Commitment Amounts; provided that (A) each reduction of the  Aggregate Elected Commitment Amounts shall be in an amount that is an integral  multiple of $1,000,000 and not less than $1,000,000 and (B) the Borrower shall not  reduce the Aggregate Elected Commitment Amounts if, after giving effect to any  concurrent prepayment of the Loans in accordance with Section 3.04(c), the total  Revolving  Credit  Exposures  would  exceed  the  Aggregate  Elected  Commitment  Amounts as reduced.               (vii) The Borrower shall notify the Administrative Agent of any  election to terminate or reduce the Aggregate Elected Commitment Amounts under  Section 2.06(c)(vi) at least three Business Days prior to the effective date of such  termination or reduction (or such lesser period as may be reasonably acceptable to  the Administrative Agent), specifying such election and the effective date thereof.   Promptly following receipt of any notice, the Administrative Agent shall advise the  Lenders of the contents thereof.  Each notice delivered by the Borrower pursuant  to  this Section 2.06(c)(vii) shall  be  irrevocable; provided that  a  notice  of  termination  of  the Aggregate  Elected  Commitment  Amounts  delivered  by  the  Borrower may state that such notice is conditioned upon the effectiveness of other  credit facilities or the closing of a specified transaction, in which case such notice  may be revoked by the Borrower (by notice to the Administrative Agent on or prior  to the specified effective date of such termination) if such condition is not satisfied.   Any termination or reduction of the Aggregate Elected Commitment Amounts shall  be  permanent  and  may  not  be  reinstated,  except  pursuant  to Section  2.06(c)(i).   Each  reduction  of the  Aggregate  Elected  Commitment  Amounts  shall  be  made  ratably  among the Lenders  in  accordance  with  each Lender’s Applicable  Percentage.               (viii) Upon  any  redetermination  or  other  adjustment  in  the  Borrowing  Base  pursuant  to  this  Agreement  that  would  otherwise  result  in  the  Borrowing Base becoming less than the Aggregate Elected Commitment Amounts,  the  Aggregate  Elected  Commitment  Amounts  shall  be  automatically  reduced  (ratably  among the Lenders  in  accordance  with  each Lender’s Applicable                                   40  

 

         Percentage) so that they equal such redetermined Borrowing Base (and Annex I        shall be deemed amended to reflect such amendments to each Lender’s  Elected        Commitment and the Aggregate Elected Commitment Amounts).                     (ix)  Contemporaneously  with  any increase  in  the  Borrowing        Base  pursuant  to  this  Agreement,  if (A) the  Borrower  elects  to  increase  the        Aggregate  Elected  Commitment  Amount  and (B) each Lender  has  consented  to        such increase in its Elected Commitment, then the Aggregate Elected Commitment        Amount shall be increased (ratably among the Lenders in accordance with each        Lender’s Applicable Percentage) by the amount requested by the Borrower without        the  requirement  that any Lender  deliver  an  Elected  Commitment  Increase        Certificate or that the Borrower pay any amounts under Section 5.02, and Annex I        shall be deemed amended to reflect such amendments to each Lender’s  Elected        Commitment and the Aggregate Elected Commitment Amount. The Administrative        Agent shall record the information regarding such increases in the Register required        to be maintained by the Administrative Agent pursuant to Section 12.04(b)(iv).                     (x)   If,  after  giving  effect  to  any  reduction  in  the  Aggregate        Elected Commitment Amounts pursuant to this Section 2.06(c), the total Revolving        Credit  Exposures  exceeds  the  total Commitments,  then  the Borrower  shall        (A) prepay  the  Borrowings  on  the  date  of  such  termination  or  reduction  in  an        aggregate principal amount equal to such excess, and (B) if any excess remains        after prepaying all of the Borrowings as a result of an LC Exposure, 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 2.08(j).         Section 2.07 Borrowing Base.                 (a)   Initial Borrowing Base.  For the period from and including the Effective  Date to but excluding the first Redetermination Date, the amount of the Borrowing Base shall be  $800,000,000.   Notwithstanding  the  foregoing,  the  Borrowing  Base  may  be  subject  to  further  adjustments  in  between  Scheduled  Redeterminations  from  time  to  time  pursuant  to  Section 2.07(e), Section 8.13(c) or Section 9.12(e)(v).               (b)   Scheduled  and  Interim  Redeterminations.   The  Borrowing  Base  shall  be  redetermined  periodically  on  each  Scheduled  Redetermination  Date  in  accordance  with  this  Section 2.07 (a  “Scheduled  Redetermination”),  and,  subject  to Section 2.07(d),  such  redetermined  Borrowing  Base  shall  become  effective  and  applicable  to  the  Borrower,  the  Administrative Agent,  the  Issuing  Bank  and the Lenders  on  each  Scheduled  Redetermination  Effective Date. In addition, (i) the Borrower may, by notifying the Administrative Agent thereof,  and the Administrative  Agent  may, at  the direction  of the Required  Lenders, by notifying the  Borrower thereof, one time between any two successive Scheduled Redeterminations, each elect  to  cause  the  Borrowing  Base  to  be  redetermined  between  Scheduled  Redeterminations in  accordance with this Section 2.07 and (ii) the Borrower may elect, in addition to any such elections  permitted to be made by it pursuant to the foregoing clause (i), by notifying the Administrative  Agent  of  any  Material  Acquisition,  to  cause  the  Borrowing  Base  to  be  redetermined  between                                          41  

 

   Scheduled Redeterminations (each such redetermination described in clauses (i) and (ii) being an  “Interim Redetermination”) in accordance with this Section 2.07.                 (c)   Scheduled and Interim Redetermination Procedure.                     (i)   Each Scheduled Redetermination and each Interim Redetermination  shall be effectuated as follows:  Upon receipt by the Administrative Agent of (A) the Reserve  Report and the certificate required to be delivered by the Borrower to the Administrative Agent,  in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in the case  of an Interim Redetermination, pursuant to Section 8.12(b) and (c), and (B) such other reports,  data  and  supplemental  information,  including,  without  limitation,  the  information  provided  pursuant to Section 8.12(c), as may, from time to time, be reasonably requested by the Majority  Lenders  (the  Reserve  Report,  such  certificate  and  such  other  reports,  data  and  supplemental  information  being  the  “Engineering  Reports”),  the  Administrative  Agent  shall  evaluate  the  information  contained  in  the  Engineering  Reports  and  shall,  in  good  faith,  propose  a  new  Borrowing Base (the “Proposed Borrowing Base”) based upon such information and such other  information (including, without limitation, the status of title information with respect to the Oil  and Gas Properties as described in the Engineering Reports and the existence of any other Debt,  the Credit Parties’ other assets, liabilities, fixed charges, cash flow, business, properties, prospects,  management  and ownership,  hedged  and  unhedged  exposure  to  price,  price  and  production  scenarios, interest rate and operating cost changes) as the Administrative Agent deems appropriate  in its sole discretion and consistent with its normal oil and gas lending criteria for revolving lines  of  credit  at  the  particular  time.   In  no  event  shall  the  Proposed  Borrowing  Base  exceed  the  Aggregate Maximum Credit Amounts;                     (ii)  The Administrative Agent shall notify the Borrower and the Lenders  of  the  Proposed  Borrowing  Base  (the  “Proposed  Borrowing  Base  Notice”)  after  the  Administrative Agent has received complete Engineering Reports from the Borrower and has had  a  reasonable  opportunity  to  determine  the  Proposed  Borrowing  Base  in  accordance  with  Section 2.07(c)(i); and                     (iii) Any Proposed Borrowing Base that would increase the Borrowing  Base then in effect must be approved by all of the Lenders (other than any Defaulting Lenders) as  provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or  maintain the Borrowing Base then in effect must be approved or be deemed to have been approved  by the Required Lenders as provided in this Section 2.07(c)(iii).  Upon receipt of the Proposed  Borrowing  Base  Notice,  each Lender  shall  have  fifteen  (15)  days  to  agree  with  the  Proposed  Borrowing  Base  or  disagree  with  the  Proposed  Borrowing  Base  by  proposing  an  alternate  Borrowing Base.  If, in the case of any Proposed Borrowing Base that would decrease or maintain  the  Borrowing  Base  then  in  effect,  at  the  end  of such  fifteen  (15)  days, any Lender  has  not  communicated its approval or disapproval in writing to the Administrative Agent, such silence  shall be deemed to be an approval of the Proposed Borrowing Base.  If, in the case of any Proposed  Borrowing Base that would increase the Borrowing Base then in effect, at the end of such fifteen  (15)  days, any Lender  has  not  communicated  its  approval  or  disapproval  in  writing  to  the  Administrative Agent, such silence shall be deemed to be a disapproval of the Proposed Borrowing  Base.  If, at the end of such 15-day period, all of the Lenders (other than any Defaulting Lenders),  in the case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect,                                         42  

 

   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, in the case of a decrease or reaffirmation,  deemed to have approved, as aforesaid, then the Proposed Borrowing Base shall, subject to Section  12.02(b)(ii), become the new Borrowing Base, effective on the date specified in Section 2.07(d).   If,  however,  at  the  end  of  such  15-day  period,  all  of the Lenders  (other  than  any  Defaulting  Lenders) or the Required Lenders, as applicable, have not approved or, in the case of a decrease  or reaffirmation, deemed to have approved, as aforesaid, then the Administrative Agent shall poll  the Lenders to ascertain the highest Borrowing Base then acceptable to (x) in the case of a decrease  or reaffirmation, a number of Lenders sufficient to constitute the Required Lenders and (y) in the  case of an increase, all of the Lenders (other than any Defaulting Lenders), and such amount shall,  subject to Section 12.02(b)(ii), become the new Borrowing Base, effective on the date specified in  Section 2.07(d).               (d)   Effectiveness of a Redetermined Borrowing Base.  After a redetermined  Borrowing Base is approved or is deemed to have been approved by all of the Lenders or the  Required Lenders, as applicable, pursuant to Section 2.07(c)(iii), the Administrative Agent shall  notify the Borrower and the Lenders of the amount of the redetermined Borrowing Base (the “New  Borrowing Base Notice”), and such amount shall become the new Borrowing Base, effective and  applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders:                     (i)   in  the  case  of  a  Scheduled  Redetermination, (A) if  the  Administrative Agent shall have received the Engineering Reports required to be delivered by the  Borrower  pursuant  to Section 8.12(a) and (c) in  a  timely  and  complete  manner,  then  on  the  applicable Scheduled Redetermination Date following such notice, or (B) if the Administrative  Agent shall not have received the Engineering Reports required to be delivered by the Borrower  pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on the Business Day  next succeeding delivery of such notice; and                     (ii)  in the case of an Interim Redetermination, on the Business Day next  succeeding delivery of such notice.   Such amount shall then become the Borrowing Base until the next Scheduled Redetermination  Effective Date, the next Interim Redetermination Date or the next adjustment to the Borrowing  Base  under Section 2.07(e), Section 8.13(c) or Section 9.12(e)(v),  whichever  occurs  first.   Notwithstanding the foregoing, no Scheduled Redetermination or Interim Redetermination shall  become effective until the New Borrowing Base Notice related thereto is received by the Borrower.               (e)   Automatic Reduction of Borrowing Base – Issuance of Permitted Senior  Unsecured Notes.  Upon any issuance of Permitted Senior Unsecured Notes (other than Permitted  Senior Unsecured Notes that extend, refinance or replace then existing Permitted Senior Unsecured  Notes, up to the sum of (i) the principal amount of such then existing Permitted Senior Unsecured  Notes that are refinanced or replaced plus (ii) an amount equal to the unpaid accrued interest and  premium thereon and fees and expenses incurred in connection with such extension, refinancing  or replacement), the Borrowing Base shall automatically be decreased by an amount equal to 25%  of the aggregate notional amount of such Permitted Senior Unsecured Notes issued at such time.   Such  decrease  in  the  Borrowing  Base  shall  occur  automatically  upon  the  issuance  of  such  Permitted Senior Unsecured Notes on the date of issuance, without any vote of Lenders or action                                         43  

 

   by Administrative Agent.  Upon any such reduction in the Borrowing Base, the Administrative  Agent shall promptly deliver a New Borrowing Base Notice to the Borrower and the Lenders.         Section 2.08 Letters of Credit.                 (a)   General.  Subject to the terms and conditions set forth herein, the Borrower  may request the issuance of dollar denominated Letters of Credit for its own account or for the  account of any of its Restricted Subsidiaries, in a form reasonably acceptable to the Administrative  Agent and the Issuing Bank, at any time and from time to time during the Availability Period in  an amount not to exceed (i) in the aggregate for all Letters of Credit, the LC Commitment, and (ii)  for  any  particular  Issuing  Bank,  such  Issuing  Bank’s  LC  Issuance  Limit; provided that  the  Borrower may not request the issuance, amendment, renewal or extension of Letters of Credit  hereunder if a Borrowing Base Deficiency exists at such time or would exist as a result thereof.  In  the event of any inconsistency between the terms and conditions of this Agreement and the terms  and conditions of any form of letter of credit application or other agreement submitted by the  Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit,  the terms and conditions of this Agreement shall control.               (b)   Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.   The Existing Letters of Credit shall be deemed to have been issued hereunder as of the Effective  Date.  To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an  outstanding  Letter  of  Credit),  the  Borrower  shall  hand  deliver  or  facsimile  (or  transmit  by  electronic communication, if arrangements for doing so have been approved by the Issuing Bank)  to the Issuing Bank and the Administrative Agent (not less than five (5) Business Days in advance  of the requested date of issuance, amendment, renewal or extension (or such lesser advance notice  as is acceptable to both the Issuing Bank and the Administrative Agent)) a notice:                     (i)   requesting the issuance of a Letter of Credit or identifying the Letter  of Credit to be amended, renewed or extended;                     (ii)  specifying the date of issuance, amendment, renewal or extension  (which shall be a Business Day);                     (iii) specifying  the  date  on  which  such  Letter  of  Credit  is  to  expire  (which shall comply with Section 2.08(c));                     (iv)  specifying the amount of such Letter of Credit;                     (v)   specifying the name and address of the beneficiary thereof and such  other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit;  and                     (vi)  specifying the amount of the then effective Borrowing Base and the  then  effective  Aggregate  Elected  Commitment  Amounts  and  whether  a  Borrowing  Base  Deficiency exists at such time, the current total Revolving Credit Exposures (without regard to the  requested Letter of Credit or the requested amendment, renewal or extension of an outstanding  Letter of Credit) and the pro forma total Revolving Credit Exposures (giving effect to the requested                                          44  

 

   Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of  Credit).   Each notice shall constitute a representation and warranty by the Borrower that after giving effect  to the requested issuance, amendment, renewal or extension, as applicable, (x) the LC Exposure  shall not exceed the LC Commitment and (y) the total Revolving Credit Exposures shall not exceed  the total Commitments (i.e., the least of (i) the Aggregate Maximum Credit Amounts, (ii) the then  effective Borrowing Base and (iii) the then effective Aggregate Elected Commitment Amounts).   No letter of credit issued by the Issuing Bank (if the Issuing Bank is not the Administrative Agent)  shall be deemed to be a “Letter of Credit” issued under this Agreement unless the Issuing Bank  has  requested  and received  written  confirmation  from  the  Administrative  Agent  that  the  representations by Borrower contained in the foregoing clauses (x) and (y) are true and correct.   If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on  the Issuing Bank’s standard form in connection with any request for a Letter of Credit; provided  that, in the event of any conflict between such application or any Letter of Credit Agreement and  the terms of this Agreement, the terms of this Agreement shall control.                 (c)   Expiration Date.  Each Letter of Credit shall expire at or prior to the close  of business on the earlier of (i) (A) in the case of Letters of Credit issued to the Texas Railroad  Commission, the date that is 460 days after the date of issuance of such Letter of Credit or (B) in  the case of all other Letters of Credit, the date that is one year after the date of the issuance of such  Letter of Credit (or, with respect to each of the foregoing clauses (A) and (B), in the case of any  renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five  Business Days prior to the Maturity Date.  Each Letter of Credit with a one (1) year term and each  Letter of Credit issued to the Texas Railroad Commission with a term longer than one (1) year but  less than or equal to 460 days may provide for the renewal thereof for additional one (1) year  periods; provided that no such period shall extend beyond the date described in clause (ii) above.                (d)   Participations.  By the issuance of a Letter of Credit (or an amendment to a  Letter of Credit increasing the amount thereof) and without any further action on the part of the  Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender  hereby  acquires  from  the  Issuing  Bank,  a  participation  in  such  Letter  of  Credit  equal  to such  Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter  of Credit.  In consideration and in furtherance of the foregoing, each Lender hereby absolutely and  unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank,  such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not  reimbursed  by  the  Borrower  on  the  date  due  as  provided  in Section 2.08(e),  or  of  any  reimbursement payment required to be refunded to the Borrower for any reason.  Each Lender  acknowledges  and  agrees  that  its  obligation  to  acquire  participations  pursuant  to  this  Section 2.08(d) in  respect  of  Letters  of  Credit  is  absolute  and  unconditional  and  shall  not  be  affected by any circumstance whatsoever, including any amendment, renewal or extension of any  Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base  Deficiency or reduction or termination of the Commitments, and that each such payment shall be  made without any offset, abatement, withholding or reduction whatsoever.                                          45  

 

               (e)   Reimbursement.  If the Issuing Bank shall make any LC Disbursement in  respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the  Administrative Agent an amount equal to such LC Disbursement not later than 11:00 a.m., Denver,  Colorado time, on the date that such LC Disbursement is made, if the Borrower shall have received  notice of such LC Disbursement prior to 10:00 a.m., Denver, Colorado time, on such date, or, if  such notice has not been received by the Borrower prior to such time on such date, then not later  than 11:00 a.m., Denver, Colorado time, on (i) the Business Day that the Borrower receives such  notice, if such notice is received prior to 10:00 a.m., Denver, Colorado time, on the day of receipt,  or (ii) the Business Day immediately following the day that the Borrower receives such notice, if  such  notice  is  not  received  prior  to  such  time  on  the  day  of  receipt; provided that  unless  the  Borrower has notified the Administrative Agent that it intends to reimburse all or part of such LC  Disbursement without using Loan proceeds or has submitted a Borrowing Request with respect  thereto, the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to  have  requested,  and  the  Borrower  does  hereby  request  under  such  circumstances,  that  such  payment  be  financed  with  an  ABR  Borrowing  in  an  equivalent  amount  and,  to  the  extent  so  financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the  resulting  ABR  Borrowing.   If  the  Borrower  fails  to  make  such  payment  when  due,  the  Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment  then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof.   Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its  Applicable Percentage of the payment then due from the Borrower, in the same manner as provided  in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis  mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly  pay to the Issuing Bank the amounts so received by it from the Lenders.  Promptly following  receipt  by  the  Administrative  Agent  of  any  payment  from  the  Borrower  pursuant  to  this  Section 2.08(e), the Administrative Agent shall distribute such payment to the Issuing Bank or, to  the extent that Lenders  have made payments  pursuant  to  this Section 2.08(e) to  reimburse the  Issuing  Bank,  then  to such Lenders  and  the  Issuing  Bank  as  their  interests  may  appear.   Any  payment made by a Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any  LC  Disbursement  (other  than  the  funding  of  ABR  Loans  as  contemplated  above)  shall  not  constitute  a Loan and  shall  not  relieve  the  Borrower  of  its  obligation  to  reimburse  such  LC  Disbursement.               (f)   Obligations  Absolute.  The  Borrower’s  obligation  to  reimburse  LC  Disbursements as provided in Section 2.08(e) shall be absolute, unconditional and irrevocable, and  shall  be  performed  strictly  in  accordance  with  the  terms  of  this  Agreement  under  any  and  all  circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter  of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein,  (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent  or  invalid  in  any  respect  or  any  statement  therein  being  untrue  or  inaccurate  in  any  respect,  (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other  document that does not comply with the terms of such Letter of Credit or any Letter of Credit  Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of  the  foregoing,  that  might,  but  for  the  provisions  of  this Section 2.08(f),  constitute  a  legal  or  equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder.   Neither the  Administrative Agent, the Lenders nor the  Issuing  Bank, nor any of their Related  Parties shall have any liability or responsibility by reason of or in connection with the issuance or                                         46  

 

   transfer  of  any  Letter  of  Credit  or  any  payment  or  failure  to  make  any  payment  thereunder  (irrespective  of  any  of  the  circumstances  referred  to  in  the  preceding  sentence),  or  any  error,  omission,  interruption,  loss  or  delay  in  transmission  or  delivery  of  any  draft,  notice  or  other  communication under or relating to any Letter of Credit (including any document required to make  a drawing thereunder), any error in interpretation of technical terms or any consequence arising  from  causes  beyond  the  control  of  the  Issuing  Bank; provided that  the  foregoing  shall  not  be  construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct  damages (as opposed to consequential damages, claims in respect of which are hereby waived by  the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused  by the  Issuing Bank’s failure to  exercise due 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, bad faith or willful misconduct on the part  of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank  shall be deemed to have exercised all requisite due care in each such determination.  In furtherance  of the foregoing and without limiting the generality thereof, the parties agree that, with respect to  documents presented which appear on their face to be in substantial compliance with the terms of  a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment  upon such documents without responsibility for further investigation, regardless of any notice or  information to the contrary, or refuse to accept and make payment upon such documents if such  documents are not in strict compliance with the terms of such Letter of Credit.               (g)   Disbursement Procedures.  The Issuing Bank shall, promptly following its  receipt thereof, examine all documents  purporting to  represent  a demand for payment under a  Letter  of  Credit.   The  Issuing  Bank  shall  promptly  notify  the  Administrative  Agent  and  the  Borrower by telephone (confirmed by facsimile) of such demand for payment and whether the  Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to  give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the  Issuing Bank and the Lenders with respect to any such LC Disbursement.                 (h)   Interim Interest.  If the Issuing Bank shall make any LC Disbursement, then,  until the Borrower shall have reimbursed the Issuing Bank for such LC Disbursement (either with  its own funds or a Borrowing under Section 2.08(e)), the unpaid amount thereof shall bear interest,  for each day from and including the date such LC Disbursement is made to but excluding the date  that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR  Loans.  Interest accrued pursuant to this Section 2.08(h) shall be for the account of the Issuing  Bank, except that interest accrued on and after the date of payment by any Lender pursuant to  Section 2.08(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent  of such payment.               (i)   Replacement of the Issuing Bank.  The Issuing Bank may be replaced at any  time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing  Bank and the successor Issuing Bank.  The Administrative Agent shall notify the Lenders of any  such replacement of the Issuing Bank.  At the time any such replacement shall become effective,  the  Borrower  shall  pay  all  unpaid  fees  accrued  for  the  account  of  the  replaced  Issuing  Bank  pursuant to Section 3.05(b).  From and after the effective date of any such replacement, (i) the  successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this  Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the                                         47  

 

   term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank,  or  to  such  successor  and  all  previous  Issuing  Banks,  as  the  context  shall  require.   After  the  replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto  and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement  with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to  issue additional Letters of Credit.               (j)   Cash  Collateralization.   If (i) any  Event  of  Default  shall  occur  and  be  continuing  and  the  Borrower  receives  notice  from  the  Administrative  Agent  or  the Majority  Lenders demanding  the  deposit  of  cash  collateral  pursuant  to  this Section 2.08(j),  or (ii) the  Borrower is required to pay to the Administrative Agent the excess attributable to an LC Exposure  in connection with any prepayment pursuant to Section 3.04(c), then the Borrower shall deposit,  in an account with the Administrative Agent, in the name of the Administrative Agent and for the  benefit of the Lenders, an amount in cash equal to (A) in the case of an Event of Default, the LC  Exposure, and (B) in the case of a payment required by Section 3.04(c), the amount of such excess  as  provided  in Section 3.04(c),  as  of  such  date  plus  any  accrued  and  unpaid  interest  thereon;  provided that the obligation to deposit such cash collateral shall become effective immediately,  and 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 the Parent or any Restricted  Subsidiary described in Section 10.01(h) or Section 10.01(i).  The Borrower hereby grants to the  Administrative  Agent,  for  the  benefit  of  the  Issuing  Bank  and the Lenders,  an  exclusive  first  priority and continuing perfected security interest in and Lien on such account and all cash, checks,  drafts, certificates and instruments, if any, from time to time deposited or held in such account, all  deposits or wire transfers made thereto, any and all investments purchased with funds deposited in  such account, all interest, dividends, cash, instruments, financial assets and other Property from  time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all  of  the  foregoing,  and  all  proceeds,  products,  accessions,  rents,  profits,  income  and  benefits  therefrom, and any substitutions and replacements therefor.  The Borrower’s obligation to deposit  amounts pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to  whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion  of  such  amount  under  the  terms  of  a  Letter  of  Credit,  and,  to  the  fullest  extent  permitted  by  applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim  or recoupment which the Parent or any of its Restricted Subsidiaries may now or hereafter have  against any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other  Person for any reason whatsoever.  Such deposit shall be held as collateral securing the payment  and performance of the Indebtedness.  The Administrative Agent shall have exclusive dominion  and control, including the exclusive right of withdrawal, over such account.  Other than any interest  earned on the investment of such deposits, which investments shall be made at the option and sole  discretion of the Administrative Agent (in consultation with the Borrower) and at the Borrower’s  risk  and  expense,  such  deposits  shall  not  bear  interest.   Interest  or  profits,  if  any, on  such  investments shall accumulate in such account.  Moneys in such account shall be applied by the  Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not  been  reimbursed  and,  to  the  extent  not  so  applied,  shall  be  held  for  the  satisfaction  of  the  reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of  the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the  Guarantors under this Agreement or the other Loan Documents.  If the Borrower is required to  provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default,                                         48  

 

   and  the  Borrower  is  not  otherwise  required  to  pay  to  the  Administrative  Agent  the  excess  attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c),  then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within  three Business Days after all Events of Default have been cured or waived.                 (k)   Designation of Additional Issuing Banks. From time to time, the Borrower  may designate as additional Issuing Banks one or more Lenders which are reasonably acceptable  to the Administrative Agent that agree to serve in such capacity as provided herein. The acceptance  by a Lender of any appointment as an Issuing Bank hereunder shall be evidenced by an agreement  (an “Issuing Bank Agreement”), which shall be in a form reasonably satisfactory to the Borrower  and the Administrative Agent, shall set forth the LC Issuance Limit of such Lender and shall be  executed by such Lender, the Borrower and the Administrative Agent  and, from  and after the  effective  date  of  such  Issuing  Bank  Agreement,  (i)  such  Lender  shall  have  all  the  rights  and  obligations of an Issuing Bank under this Agreement and the other Loan Documents, (ii) references  herein and in the other Loan Documents to the term “Issuing Bank” shall be deemed to include  such Lender in its capacity as an Issuing Bank, and (iii) such Issuing Bank shall have the LC  Issuance Limit set forth in such Issuing Bank Agreement and Annex III shall be deemed to be  automatically be amended to reflect such LC Issuance Limit.                (l)   Defaulting Lenders.  Notwithstanding any provision of this Agreement to  the contrary, if any Lender becomes a Defaulting Lender then, until such time as such Lender is  no longer a Defaulting Lender, to the extent permitted by applicable law:                     (i)   Waivers  and  Amendments.   Such  Defaulting  Lender’s  right  to  approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be  restricted as set forth in Section 12.02.                     (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  X or  otherwise)  or  received by the Administrative Agent from a Defaulting Lender pursuant to Section 12.08 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 2.08(j); fourth, as  the Borrower may request (so long as no Default or Event of Default exists), to the funding of any  Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required  by  this  Agreement,  as  determined  by  the  Administrative  Agent; fifth,  if  so  determined  by  the  Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in  order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to  Loans  under  this  Agreement  and  (y)  cash  collateralize  the  Issuing  Banks’  future Fronting  Exposures with respect to such Defaulting Lender with respect to future Letters of Credit issued  under this Agreement, in accordance with Section 2.08(j); 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                                         49  

 

   Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a  result of any judgment of a court of competent jurisdiction obtained by the Borrower against such  Defaulting  Lender  as  a  result  of  such  Defaulting  Lender's  breach  of  its  obligations  under  this  Agreement; and 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 6.02 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 Letters of Credit hereunder are held by the Lenders pro rata in accordance with  the  Commitments  without  giving  effect  to Section  2.08(l)(iii).  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 2.08(l) shall be  deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents  hereto.                     (iii) Reallocation of Participations to Reduce Fronting Exposure.  All or  any  part  of  such  Defaulting  Lender’s participation  in  Letters  of  Credit  hereunder shall  be  reallocated among the Non-Defaulting  Lenders in accordance with  their respective  Applicable  Percentages (calculated without regard to such Defaulting Lender’s Maximum Credit Amount) but  only to the extent that such reallocation does not cause the aggregate Revolving 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.                     (iv)  Cash Collateral.  If the reallocation described in clause (iii) above  cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or  remedy  available  to  it  hereunder  or  under  law, cash collateralize  the  Issuing  Banks’ Fronting  Exposures in accordance with the procedures set forth in Section 2.08(j).                     (v)   Defaulting Lender Cure.  If the Borrower, 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 2.08(l)(iii), whereupon such Lender will cease to be a Defaulting  Lender; provided that no adjustments will be made retroactively with respect to fees accrued or  payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and  provided, further, that except to the extent otherwise expressly agreed by the affected parties, no                                          50  

 

   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.                     (vi)  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.                     (vii) Termination of a Defaulting Lender.  The Borrower may terminate  the unused amount of the Commitment of any Lender that is a Defaulting Lender upon not less  than three  (3) Business  Days’  prior  notice  to  the  Administrative  Agent  (which  shall  promptly  notify the Lenders thereof), and in such event the provisions of Section 2.08(l)(ii) will apply to all  amounts thereafter paid by the Borrower for the account of such Defaulting Lender under this  Agreement (whether on account of principal, interest, fees, indemnity or other amounts); provided  that (i) no Event of Default shall have occurred and be continuing, and (ii) such termination shall  not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, any  Issuing Bank, or any Lender may have against such Defaulting Lender.                                     ARTICLE III        PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES         Section 3.01 Repayment of Loans.  The Borrower hereby unconditionally promises to  pay in full to the Administrative Agent, for the account of each Lender, the then unpaid principal  amount of such Lender’s Loans, together with all accrued interest thereon, on the Termination  Date.         Section 3.02 Interest.                 (a)   ABR  Loans.   The Loans  comprising  each  ABR  Borrowing  shall  bear  interest  at  the Alternate  Base Rate plus  the  Applicable Margin,  but  in no event  to exceed the  Highest Lawful Rate.               (b)   Eurodollar Loans.  The Loans comprising each Eurodollar Borrowing shall  bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus  the Applicable Margin, but in no event to exceed the Highest Lawful Rate.               (c)   Post-Default Rate.  Notwithstanding the foregoing, (i) if any principal of or  interest  on  any Loan or  any  fee  or  other  amount  payable  by  the  Borrower  or  any  Guarantor  hereunder or under any other Loan Document is not paid when due, whether at stated maturity,  upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before  judgment, at a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans as  provided in Section 3.02(a) (including the Applicable Margin but in no event to exceed the Highest  Lawful Rate) and shall be payable on demand by the Administrative Agent, (ii) if any Event of  Default of the type described in Section 10.01(h), Section 10.01(i) or Section 10.01(j) occurs and  is continuing (and only for so long as it continues), then all outstanding principal, fees and other  obligations under any Loan Document shall automatically bear interest at a rate per annum equal  to  two  percent  (2%)  plus  the  rate  applicable  to  ABR  Loans  as  provided  in Section 3.02(a)  (including the Applicable Margin but in no event to exceed the Highest Lawful Rate) and shall be  payable on demand by the Administrative Agent and (iii) if any Event of Default occurs and is                                         51  

 

   continuing (and only for so long as it continues) (other than an Event of Default described in  Section 10.01(a), Section 10.01(b), Section 10.01(h), Section 10.01(i) or Section 10.01(j)), then at  the election of the Majority Lenders (or the Administrative Agent at the direction of Majority  Lenders)  and  after  written  notice  to  the  Borrower,  all  outstanding  principal,  fees  and  other  obligations under any Loan Document shall bear interest at a rate per annum equal to two percent  (2%)  plus  the  rate  applicable  to  ABR  Loans  as  provided  in Section 3.02(a) (including  the  Applicable Margin but in no event to exceed the Highest Lawful Rate) and shall be payable on  demand by the Administrative Agent.                 (d)   Interest Payment Dates.  Accrued interest on each Loan shall be payable in  arrears on each Interest Payment Date for such Loan and on the Termination Date; provided that  (i) interest accrued pursuant to Section 3.02(c) shall be payable on demand, (ii) in the event of any  repayment or prepayment of any Loan (other than an optional prepayment of an ABR Loan prior  to  the  Termination  Date),  accrued  interest  on  the  principal  amount  repaid  or  prepaid  shall  be  payable on the date of such repayment or prepayment, and (iii) in the event of any conversion of  any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on  such Loan shall be payable on the effective date of such conversion.               (e)   Interest Rate Computations.  All interest hereunder shall be computed on  the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate,  in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap  year), except that interest computed by reference to the Alternate Base Rate at times when the  Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365  days (or 366 days in a leap year), and in each case shall be payable for the actual number of days  elapsed (including the first day but excluding the last day).  The applicable Alternate Base Rate,  Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such  determination shall be conclusive absent manifest error, and be binding upon the parties hereto.         Section 3.03 Alternate Rate of Interest.  (a) If prior to the commencement of any Interest  Period for a Eurodollar Borrowing:                     (i)   the Administrative Agent determines (which determination        shall be conclusive absent manifest error) that adequate and reasonable means do        not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable        (including, without limitation, because the LIBO Screen Rate is not available or        published on a current basis), for such Interest Period; or                     (ii)  the Administrative Agent is advised by the Required Lenders        that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest        Period will not adequately and fairly reflect the cost to such Lenders of making or        maintaining their Loans included in such Borrowing for such Interest Period;               then the Administrative Agent shall give notice thereof to the Borrower and        the Lenders by telephone or fax as promptly as practicable thereafter and, until the        Administrative Agent notifies the Borrower and the Lenders that the circumstances        giving rise to such notice no longer exist, (A) any Interest Election Request that        requests the conversion of any Borrowing to, or continuation of any Borrowing as,                                         52  

 

         a  Eurodollar  Borrowing  shall  be  ineffective  and (B) if  any  Borrowing  Request        requests  a  Eurodollar  Borrowing,  such  Borrowing  shall  be  made  as  an        ABR Borrowing.               (b)   If at any time the Administrative Agent determines (which determination  shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(i) have  arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in  clause (a)(i) have not arisen but the supervisor for the administrator of the LIBO Screen Rate or a  Governmental Authority having jurisdiction over the Administrative Agent  has  made a public  statement identifying a specific date after which the LIBO Screen Rate shall no longer be used for  determining  interest  rates  for  loans,  then  the  Administrative  Agent  and  the  Borrower  shall  endeavor to establish an alternate rate of interest to the LIBO Rate that gives due consideration to  the then prevailing market convention for determining a rate of interest for syndicated loans in the  United States at such time, and shall enter into an amendment to this Agreement to reflect such  alternate rate of interest and such other related changes to this Agreement as may be applicable.   Notwithstanding  anything  to  the  contrary  in Section 12.02,  such  amendment  shall  become  effective without any further action or consent of any other party to this Agreement so long as the  Administrative Agent shall not have received, within five Business Days of the date notice of such  alternate rate of interest is provided to the Lenders, a written notice from the Required Lenders  stating that such Required Lenders object to such amendment.  Until an alternate rate of interest  shall  be  determined  in  accordance  with  this clause (b) (but,  in  the  case  of  the  circumstances  described in clause (ii) of the first sentence of this Section 3.03(b), only to the extent the LIBO  Screen Rate for such Interest Period is not available or published at such time on a current basis),  (x) any Interest Election Request that requests the conversion of any Borrowing to, or continuation  of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (y) if any Borrowing Request  requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing; provided  that, if such alternate rate of interest shall be less than zero percent, such rate shall be deemed to  be zero percent for the purposes of this Agreement.          Section 3.04 Prepayments.                 (a)   Optional Prepayments.  The Borrower shall have the right at any time and  from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance  with Section 3.04(b).               (b)   Notice and Terms of Optional Prepayment.  The Borrower shall notify the  Administrative Agent by telephone (confirmed by facsimile) of any prepayment hereunder (i) in  the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Denver, Colorado  time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an  ABR Borrowing, not later than 10:00 a.m., Denver, Colorado time, on the date of prepayment.   Each such notice shall be irrevocable and shall specify the prepayment  date and the principal  amount of each Borrowing or portion thereof to be prepaid; provided that, if a conditional notice  of prepayment is given as contemplated by Section 2.06(b), then such notice of prepayment may  be revoked if such notice of termination is revoked in accordance with Section 2.06(b).  Promptly  following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise  the Lenders of the contents thereof.  Each partial prepayment of any Borrowing shall be in an  amount that would be permitted in the case of an advance of a Borrowing of the same Type as                                         53  

 

   provided in Section 2.02.  Each prepayment of a Borrowing shall be applied ratably to the Loans  included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to the  extent required by Section 3.02.               (c)   Mandatory Prepayments.                     (i)   If,  after  giving  effect  to  any  termination  or  reduction  of  the  Aggregate  Maximum  Credit  Amounts  pursuant  to Section 2.06(b),  the  total  Revolving  Credit  Exposures exceeds the total Commitments, then the Borrower shall (A) prepay the Borrowings on  the date of such termination or reduction in an aggregate principal amount equal to such excess,  and (B) if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure,  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 2.08(j).                     (ii)  Upon  any  redetermination  of  or  adjustment  to  the  amount  of  the  Borrowing Base in accordance with Section 2.07 (other than Section 2.07(e)) or Section 8.13(c),  if there exists  a Borrowing  Base  Deficiency, then the Borrower shall within twenty (20) days  following receipt of the New Borrowing Base Notice in accordance with Section 2.07(d) or the  date the adjustment occurs (or such longer period, not to exceed thirty (30) days, acceptable to the  Administrative Agent), provide written notice (the “Election Notice”) to the Administrative Agent  stating  the  action  which  the  Borrower  proposes  to  take  to  eliminate  such  Borrowing  Base  Deficiency, and the Borrower shall thereafter, at its option, either:                            (A)   within ten (10) days following its delivery of the Election  Notice (or such longer period, not to exceed 180 days, acceptable to the Administrative Agent), by  instruments reasonably satisfactory in form and substance to the Administrative Agent, provide  the Administrative Agent with additional security consisting of Oil and Gas Properties with value  and  quality  satisfactory  to  the  Administrative  Agent  and  the Required  Lenders  in  their  sole  discretion to eliminate such Borrowing Base Deficiency,                            (B)   within ten (10) days following its delivery of the Election  Notice, prepay without premium or penalty, the Borrowings in an amount sufficient to eliminate  such Borrowing Base Deficiency and, if any Borrowing Base Deficiency 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 necessary to eliminate such remaining Borrowing Base Deficiency to be  held as cash collateral as provided in Section 2.08(j),                           (C)   elect  to  prepay  (and  thereafter  pay),  without  premium  or  penalty, the principal amount of Loans necessary to eliminate such Borrowing Base Deficiency in  not more than six (6) equal monthly installments plus accrued interest thereon with the first such  monthly payment being due within ten (10) days following its delivery of the Election Notice (and,  if any Borrowing Base Deficiency 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 necessary to  eliminate such remaining Borrowing Base Deficiency to be held as cash collateral as provided in  Section 2.08(j)), or                                          54  

 

                           (D)   by any combination of prepayment and additional security  as provided in the preceding clauses (A), (B) or (C), eliminate such Borrowing Base Deficiency;  provided that all payments required to be made pursuant to this Section 3.04(c)(ii) must be made  on or prior to the Termination Date.                     (iii) Upon  any reduction of  the  Borrowing  Base  pursuant  to  Section 2.07(e) in connection with issuance of Permitted Senior Unsecured Notes or pursuant to  Section 9.12(e)(v), then if there exists a Borrowing Base Deficiency, the Borrower shall prepay  the Borrowings in an amount sufficient to eliminate such Borrowing Base Deficiency and, if any  Borrowing Base Deficiency 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  necessary  to  eliminate such remaining Borrowing Base Deficiency to be held as cash collateral as provided in  Section 2.08(j).  The Borrower shall be obligated to make such prepayment and/or deposit of cash  collateral on the date of the issuance of such Permitted Senior Unsecured Notes or, with respect to  any Transfer or Swap Monetization pursuant to Section 9.12(e)(v), on the date when it receives  proceeds from such Transfer or Swap Monetization; provided that all payments required to be  made pursuant to this Section 3.04(c)(iii) must be made on or prior to the Termination Date.                     (iv)  Each  prepayment  of  Borrowings  pursuant  to  this Section 3.04(c)  shall be applied first to any ABR Borrowings then outstanding and thereafter to any Eurodollar  Borrowings then outstanding, and if more than one Eurodollar Borrowing is then outstanding, to  each such Eurodollar Borrowing in order of priority beginning with the Eurodollar Borrowing with  the least number of days remaining in the Interest Period applicable thereto and ending with the  Eurodollar Borrowing with the most number of days remaining in the Interest Period applicable  thereto.                     (v)   Each  prepayment  of  Borrowings  pursuant  to  this Section 3.04(c)  shall be applied ratably to the Loans included in the prepaid Borrowings.  Prepayments pursuant  to  this Section 3.04(c) shall  be  accompanied  by  accrued  interest  to  the  extent required  by  Section 3.02.               (d)   No Premium or Penalty.  All prepayments permitted or required under this  Section 3.04 or otherwise under the Loan Documents shall be without premium or penalty, except  as required under Section 5.02.         Section 3.05 Fees.               (a)   Commitment Fees.  Subject to Section 3.05(d) below, the Borrower agrees  to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall  accrue at the applicable Commitment Fee Rate on the average daily amount of the unused amount  of the Commitment of such Lender during the period from and including the date of this Agreement  to but excluding the Termination Date (it being understood that LC Exposure shall constitute usage  of the Commitments for purposes of this Section 3.05(a)).  Accrued commitment fees shall be  payable in arrears on the last day of March, June, September and December of each year and on  the  Termination  Date,  commencing  on  the  first  such  date  to  occur  after  the  date  hereof.   All  commitment fees shall be computed on the basis of a year of 360 days, unless such computation  would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a                                         55  

 

   year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days  elapsed (including the first day but excluding the last day).               (b)   Letter  of  Credit  Fees.  Subject  to Section 3.05(d) below, the  Borrower  agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee  with respect to its participations in Letters of Credit, which shall accrue at the same Applicable  Margin used to determine the interest rate applicable to Eurodollar Loans on the average daily  amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed  LC  Disbursements)  during  the  period  from  and  including  the  date  of  this  Agreement  to  but  excluding the later of the date on which such Lender’s Commitment terminates and the date on  which such Lender ceases to have any LC Exposure, (ii) to the Issuing Bank, for its own account,  a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of  the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements)  during the period from and including the date of this Agreement to but excluding the later of the  date of termination of the Commitments and the date on which there ceases to be any LC Exposure,  provided that in no event shall such fee be less than $500 during any quarter, and (iii) to the Issuing  Bank, for its own account, its standard fees with respect to the issuance, amendment, renewal or  extension of any Letter of Credit or processing of drawings thereunder.  Participation fees and  fronting fees accrued through and including the last day of March, June, September and December  of each year shall be payable on the third Business Day following such last day, commencing on  the first such date to occur after the date of this Agreement; provided that all such fees shall be  payable on the Termination Date and any such fees accruing after the Termination Date shall be  payable on demand.  Any other fees payable to the Issuing Bank pursuant to this Section 3.05(b)  shall be payable within 10 days after demand.  All participation fees and fronting fees shall be  computed on the basis of a year of 360 days, unless such computation would exceed the Highest  Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366  days in a leap year), and shall be payable for the actual number of days elapsed (including the first  day but excluding the last day).               (c)   Administrative  Agent  Fees.   The  Borrower  agrees  to  pay  to  the  Administrative Agent, for its own account, fees payable in the amounts and at the times separately  agreed upon between the Borrower and the Administrative Agent in the Fee Letter.               (d)   Defaulting Lender Fees.  Subject to Section 2.08(l):                     (i)    No Defaulting Lender shall be entitled to receive any Defaulting  Lender’s ratable share of the fees described in Section 3.05(a) for any period during which that  Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that  otherwise would have been required to have been paid to that Defaulting Lender).                     (ii)  Each Defaulting Lender shall be entitled to receive such Defaulting  Lender’s ratable share of the fees described in Section 3.05(b) 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 2.08(j).                     (iii) With respect to any fee not required to be paid to any Defaulting  Lender pursuant to clause (i) or (ii) above, the Borrower shall (x) pay to each Non-Defaulting                                         56  

 

   Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to  such Defaulting Lender’s participation in Letters of Credit hereunder that has been reallocated to  such Non-Defaulting  Lender pursuant  to Section 2.08(l)(iii), (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.               (e)   Borrowing  Base  Increase  Fees.   The  Borrower  agrees  to  pay  to  the  Administrative Agent, for the account of each Lender then party to this Agreement, a Borrowing  Base increase fee in an amount to be set forth in a separate written agreement on the amount of  any increase of the Borrowing Base above the highest previous Borrowing Base in effect during  the term of this Agreement, payable on the effective date of any such increase to the Borrowing  Base.                                    ARTICLE IV           PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS         Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.                 (a)   Payments  by  the  Borrower.   The  Borrower  shall  make  each  payment  required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC  Disbursements,  or  of  amounts  payable  under Section 5.01, Section 5.02, Section 5.03 or  otherwise) prior to  11:00 a.m.,  Denver, Colorado time, on the date  when due, in  immediately  available funds, without defense, deduction, recoupment, set-off or counterclaim.  Fees, once paid,  shall be fully earned and shall not be refundable under any circumstances, absent manifest error.   Any amounts received after such time on any date may, in the discretion of the Administrative  Agent, be deemed to have been received on the next succeeding Business Day for purposes of  calculating interest thereon.  All such payments shall be made to the Administrative Agent at its  offices specified in Section 12.01, except payments to be made directly to the Issuing Bank as  expressly  provided  herein  and  except  that  payments  pursuant  to Section 5.01, Section 5.02,  Section 5.03 and Section 12.03 shall  be  made  directly  to  the  Persons  entitled  thereto.   The  Administrative Agent shall distribute any such payments received by it for the account of any other  Person to the appropriate recipient promptly following receipt thereof.  If any payment hereunder  shall be due on a day that is not a Business Day, the date for payment shall be extended to the next  succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall  be payable for the period of such extension.  All payments hereunder shall be made in dollars.               (b)   Application of Insufficient Payments.  If at any time insufficient funds are  received  by  and  available  to  the  Administrative  Agent  to  pay  fully  all  amounts  of  principal,  unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied  (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled  thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second,  towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably  among the parties entitled thereto in accordance with the amounts of principal and unreimbursed  LC Disbursements then due to such parties.                                          57  

 

               (c)   Sharing of Payments by Lenders.  If any Lender shall, by exercising any  right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or  interest  on  any  of  its Loans  or  participations  in  LC  Disbursements  resulting  in such Lender  receiving payment of a greater proportion of the aggregate amount of its Loans and participations  in  LC  Disbursements  and  accrued  interest  thereon  than  the  proportion  received  by  any  other  Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value)  participations  in  the Loans  and/or  participations  in  LC  Disbursements  of  other Lenders,  as  applicable, to the extent necessary so that the benefit of all such payments shall be shared by the  Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on  their respective Loans and/or participations in LC Disbursements; provided that (i) if any such  participations are purchased and all or any portion of the payment giving rise thereto is recovered,  such  participations  shall  be  rescinded  and  the purchase  price  restored  to  the  extent  of  such  recovery, without interest, and (ii) the provisions of this Section 4.01(c) shall not be construed to  apply to any payment made by the Borrower pursuant to and in accordance with the express terms  of this Agreement or any payment obtained by a Lender as consideration for the assignment of or  sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or  participant, other than to the Parent or any Restricted Subsidiary or Affiliate thereof (as to which  the provisions of this Section 4.01(c) shall apply).  The Borrower consents to the foregoing and  agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a  participation pursuant to the foregoing arrangements may exercise against the Borrower rights of  set-off and counterclaim with respect to such participation as fully as if such Lender were a direct  creditor of the Borrower in the amount of such participation.         Section 4.02 Presumption of Payment by the Borrower.  Unless the Administrative Agent  shall have received notice from the Borrower prior to the date on which any payment is due to the  Administrative Agent for the account of the Lenders or the Issuing Bank that the Borrower will  not make such payment, the Administrative Agent may assume that the Borrower has made such  payment  on  such  date  in  accordance  herewith  and  may,  in  reliance  upon  such  assumption,  distribute to the Lenders or the Issuing Bank, as the case may be, the amount due.  In such event,  if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank,  as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the  amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and  including the date such amount is distributed to it to but excluding the date of payment to the  Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by  the Administrative Agent in accordance with banking industry rules on interbank compensation.         Section 4.03 Certain Deductions by the Administrative Agent.  If any Lender shall fail to  make  any  payment  required  to  be  made  by  it  pursuant  to Section 2.05(a), Section 2.08(d),  Section 2.08(e) or Section 4.02, or otherwise hereunder, then the Administrative Agent may, in its  discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received  by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations  under such Sections until all such unsatisfied obligations are fully paid.  If at any time prior to the  acceleration  or  maturity  of  the Loans,  the  Administrative  Agent  shall  receive  any  payment  in  respect  of principal of a Loan or a reimbursement  of an LC Disbursement  while one or more  Defaulting Lenders shall be party to this Agreement, the Administrative Agent shall apply such  payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its  pro rata share until such time as such Borrowing(s) are paid in full or each Lender (including each                                         58  

 

   Defaulting Lender) is owed its Applicable Percentage of the Loans then outstanding, as applicable.   After  acceleration  or  maturity  of  the Loans,  all  principal  will  be  paid  ratably  as  provided  in  Section 10.02(c).         Section 4.04 Disposition of Proceeds.  The Security Instruments contain assignments by  the Borrower and/or the Guarantors unto and in favor of the Administrative Agent for the benefit  of the Secured Parties of all of the Borrower’s or each Guarantor’s interest in and to production  and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged  Property.  The Security Instruments further provide in general for the application of such proceeds  to the satisfaction of the Indebtedness and other obligations described therein and secured thereby.   Notwithstanding  the  assignments  contained  in  such  Security  Instruments,  unless  an  Event  of  Default has occurred and is continuing, (a) the Administrative Agent and the Lenders 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 Administrative Agent  and the Lenders will instead permit such proceeds to be paid to and used by the Parent and its  Restricted Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to take such  actions as may be necessary or useful to cause such proceeds to be paid to the Parent and/or such  Restricted Subsidiaries.                                    ARTICLE V     INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY         Section 5.01 Increased Costs.                 (a)   Eurodollar Changes in Law.  If any Change in Law shall:                     (i)   impose, modify or deem applicable any reserve, special deposit or  similar requirement against assets of, deposits with or for the account of, or credit extended by,  any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or                     (ii)  subject any Lender or the Administrative Agent to any Taxes (other  than (A) Indemnified Taxes, or (B) Excluded Taxes) on its loans, loan principal, letters of credit,  commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable  thereto; or                     (iii) impose on any Lender or the London interbank market any other  condition affecting this Agreement or Eurodollar Loans made by such Lender;   and the result of any of the foregoing shall be to increase the cost to such Lender of making or  maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to  reduce the amount of any sum received or receivable by such Lender or the Administrative Agent  (whether of  principal,  interest  or  otherwise) with  respect  to  any  Eurodollar  Loan,  then  the  Borrower will pay to such Lender or the Administrative Agent such additional amount or amounts  as will compensate such Lender or the Administrative Agent for such additional costs incurred or  reduction suffered.               (b)   Capital Requirements.  If any Lender or the Issuing Bank determines that  any Change in Law regarding capital or liquidity requirements has or would have the effect of                                         59  

 

   reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such  Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or  the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of  Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or  such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change  in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of  such  Lender’s  or  the  Issuing  Bank’s  holding  company  with  respect  to  capital  adequacy  and  liquidity), then from time to time upon receipt of a certificate described in subsection (c) below,  the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional  amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the  Issuing Bank’s holding company for any such reduction suffered.               (c)   Certificates.  A certificate of a Lender or the Issuing Bank setting forth the  amount  or  amounts  necessary  to  compensate such  Lender or  the  Issuing  Bank  or  its  holding  company,  as  the  case  may  be,  as  specified  in Section 5.01(a) or (b) shall  be  delivered  to  the  Borrower and shall be conclusive absent manifest error.  The Borrower shall pay such Lender or  the Issuing Bank, as the case may be, the amount shown as due on any such certificate within thirty  (30) days after receipt thereof.               (d)   Effect of Failure or Delay in Requesting Compensation.  Failure or delay  on  the  part  of any  Lender or  the  Issuing  Bank  to  demand  compensation  pursuant  to  this  Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand  such compensation; provided that the Borrower shall not be required to compensate a Lender or  the Issuing Bank pursuant to this Section 5.01 for any increased costs or reductions incurred more  than 270 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies  the Borrower of the Change in Law giving rise to such increased costs or reductions and of such  Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if  the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270- day period referred to above shall be extended to include the period of retroactive effect thereof.         Section 5.02 Break Funding Payments.  In the event of (a) the payment of any principal  of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including  as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan  other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert,  continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant  hereto, or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest  Period applicable thereto as a result of a request by the Borrower pursuant to Section 5.04(b), then,  in  any  such  event,  the  Borrower shall compensate each Lender for the  loss, cost  and expense  attributable to such event.  In the case of a Eurodollar Loan, such loss, cost or expense to any  Lender shall be deemed to be the excess, if any, of (i) the amount of interest which would have  accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO  Rate that would have been applicable to such Loan, for the period from the date of such event to  the last day of the then current  Interest Period therefor (or, in the case of a failure to borrow,  convert or continue, for the period that would have been the Interest Period for such Loan), over  (ii) the amount of interest which would accrue on such principal amount for such period at the  interest rate which such Lender would bid were it to bid, at the commencement of such period, for  dollar deposits of a comparable amount and period from other banks in the eurodollar market.                                           60  

 

   A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to  receive pursuant to this Section 5.02 shall be delivered to the Borrower and shall be conclusive  absent manifest error.  The Borrower shall pay such Lender the amount shown as due on any such  certificate within thirty (30) days after receipt thereof.         Section 5.03 Taxes.                 (a)   Payments Free of Taxes.  Any and all payments by or on account of any  obligation of the Borrower or any Guarantor under any Loan Document shall be made free and  clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the  applicable Withholding Agent shall be required to deduct any Indemnified Taxes or Other Taxes  from such payments, then (i) the sum payable shall be increased by the Borrower or any Guarantor  as  necessary  so  that  after  making  all  required  deductions  (including  deductions  applicable  to  additional sums payable under this Section 5.03(a)), the Administrative Agent, Lender or Issuing  Bank (as the case may be) receives an amount equal to the sum it would have received had no such  deductions  been  made, (ii) the applicable  Withholding  Agent shall  make  such  deductions  and  (iii) the applicable  Withholding  Agent shall  pay  the  full  amount  deducted  to  the  relevant  Governmental Authority in accordance with applicable law.               (b)   Payment of Other Taxes  by the Borrower.  The  Borrower shall pay any  Other Taxes to the relevant Governmental Authority in accordance with applicable law.               (c)   Indemnification  by  the  Borrower.   The  Borrower  shall  indemnify  the  Administrative  Agent,  each Lender  and  the  Issuing  Bank,  within ten  (10)  days  after  written  demand therefor, for the full amount of any Indemnified Taxes or Other Taxes payable or paid by  the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect  to  any  payment  by  or  on  account  of  any  obligation  of  the  Borrower  hereunder  (including  Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under  this Section 5.03) and any penalties, interest and reasonable expenses arising therefrom or with  respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally  imposed or asserted by the relevant Governmental Authority.  A certificate of the Administrative  Agent, a Lender or the Issuing Bank as to the amount of such payment or liability under this  Section 5.03 shall be delivered to the Borrower and shall be conclusive absent manifest error.               (d)   Indemnification by the Lenders.  Each Lender shall severally indemnify the  Administrative Agent, within thirty (30) days after demand therefor, for (i) any Indemnified Taxes  attributable to such Lender (but only to the extent that Borrower has not already indemnified the  Administrative  Agent  for  such  Indemnified  Taxes  and  without  limiting  the  obligation  of  the  Borrower  to  do  so), (ii) any  Taxes  attributable  to such Lender’s  failure  to  comply  with  the  provisions of Section 12.04(c) 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                                         61  

 

   otherwise payable by the Administrative Agent to the Lender from any other source against any  amount due to the Administrative Agent under this paragraph (d).               (e)   Evidence  of  Payments.   As  soon  as  practicable  after  any  payment  of  Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a Governmental Authority,  the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt  issued by such Governmental Authority evidencing such payment, a copy of the return reporting  such payment or other evidence of such payment reasonably satisfactory to the Administrative  Agent.               (f)   Status of Lenders.  (i) 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 Withholding Agent, at the time or times reasonably requested by the Withholding  Agent,  such  properly  completed  and  executed  documentation  reasonably  requested  by  the  Withholding 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 Withholding Agent,  shall deliver such other documentation prescribed by applicable law or reasonably requested by  the Withholding Agent as will enable the Withholding Agent to determine whether or not such  Lender is subject to backup withholding or information reporting requirements.  Notwithstanding  anything to the contrary in the preceding two sentences, the completion, execution and submission  of  such  documentation  (other  than  such  documentation  set  forth  in Section 5.03(f)(ii)(A) and  (ii)(B) and Section 5.03(g) 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.                     (ii)  Without limiting the generality of the foregoing, in the event that the  Borrower is a “United States person” as defined in Section 7701(a)(30) of the Code,                           (A)   any Lender that  is  a “United States  person” as  defined in  Section 7701(a)(3) of the Code shall deliver to the Withholding 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 Withholding 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 Withholding 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  Withholding  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)                                         62  

 

   establishing  an  exemption  from,  or  reduction  of,  U.S.  federal  withholding  tax  pursuant  to  the  “business profits” or “other income” article of such tax treaty;                                 (2)   executed copies of IRS Form W-8ECI;                                 (3)   in the case of a Foreign Lender claiming the benefits  of  the  exemption  for  portfolio  interest  under  Section  881(c)  of  the  Code,  (x) a  certificate  substantially in the form of Error! Reference source not found. to the effect that such Foreign  Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent  shareholder”  of  the  Borrower  within  the  meaning  of  Section  871(h)(3)(B)  of  the  Code,  or  a  “controlled  foreign  corporation”  described  in  Section  881(c)(3)(C)  of  the  Code  (a  “U.S.  Tax  Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN (or IRS Form W-8BEN- E, as applicable); or                                 (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 (or IRS Form W-8BEN-E, as applicable), a U.S. Tax Compliance Certificate substantially  in the form of Error! Reference source not found. or Error! Reference source not found., 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 Error! Reference source  not found. 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 Withholding 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  Withholding  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 Withholding  Agent to determine the withholding or deduction required to be made.                           Each Lender agrees that if any form or certification it previously  delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or  certification or promptly notify the Withholding Agent in writing of its legal inability to do so.               (g)   FATCA.  If a payment made to a Lender under this Agreement would be  subject to United States federal withholding tax imposed by FATCA if such Lender fails to comply  with  the  applicable  reporting  requirements  of  FATCA  (including  those  contained  in  Section  1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Withholding Agent,  at  the time or times prescribed by law and at  such time or times  reasonably  requested by the  Withholding Agent, such documentation prescribed by applicable law (including as prescribed by  Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by  the  Withholding  Agent  as  may  be  necessary  for  the  Withholding  Agent  to  comply  with  its  obligations  under  FATCA,  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.                                          63  

 

   Solely for purposes of this Section 5.03(g), “FATCA” shall include any amendments made to  FATCA after the date of this Agreement.               (h)   Treatment of Certain Refunds.  If the Administrative Agent, a Lender or the  Issuing Bank determines, in its sole discretion exercised in good faith, that it has received a refund  of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or  with respect to which the Borrower has paid additional amounts pursuant to this Section 5.03, it  shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity  payments made, or additional amounts paid, by the Borrower under this Section 5.03 with respect  to  the  Indemnified  Taxes  or  Other  Taxes  giving  rise  to  such  refund),  net  of  all out-of-pocket  expenses of the Administrative Agent, such Lender or the Issuing Bank, as the case may be, and  without interest (other than any interest paid by the relevant Governmental Authority with respect  to such refund).  The Borrower, upon the request of such indemnified party, shall repay to such  indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest  or  other  charges  imposed  by  the  relevant  Governmental  Authority)  in  the  event  that  such  indemnified  party  is  required  to  repay  such  refund  to  such  Governmental  Authority.   Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified  party be required to pay any amount to the Borrower pursuant to this paragraph (h) to the extent  such payment would place the indemnified party in a less favorable net after-Tax position than the  indemnified party would have been in if the Tax subject to indemnification and giving rise to such  refund had not been deducted, withheld or otherwise imposed and the indemnification payments  or additional amounts with respect to such Tax had never been paid.  This paragraph shall not be  construed  to  require  any  indemnified  party  to  make  available  its  Tax  returns  (or  any  other  information relating to its Taxes that it deems confidential) to the Borrower or any other Person.         Section 5.04 Mitigation Obligations; Replacement of Lenders.                 (a)   Designation  of  Different  Lending  Office.   If any Lender  requests  compensation under Section 5.01, or if the Borrower is required to pay any additional amount to  any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03,  then such Lender shall use reasonable efforts to designate a different lending office for funding or  booking its Loans hereunder or to assign its rights and obligations hereunder to another of its  offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment  (i) would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, 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.  The Borrower hereby agrees  to pay all reasonable costs and expenses incurred by any Lender in connection with  any such  designation or assignment.               (b)   Replacement of Lenders.  If (i) any Lender requests compensation under  Section 5.01, (ii) the Borrower is  required to pay any additional amount to any Lender or any  Governmental Authority for the account of any Lender pursuant to Section 5.03, (iii) any Lender  becomes a Defaulting Lender hereunder, (iv) Lenders holding 80% or more of the Commitments  have provided their consent to any proposed increase in the Borrowing Base in accordance with  the terms of this Agreement but any Lender has not provided such consent, (v) any Lender has  given  notice  that  it  is  unable  to  make or  maintain  Eurodollar  Loans  but  Lenders  constituting  Majority  Lenders  have  not  given  such  notice  or (vi) Lenders  whose  aggregate Applicable                                         64  

 

   Percentages are 80% or more have provided their consent to any proposed amendment or waiver  of any term or provision of this Agreement or any Loan Document but any Lender has not provided  such consent, then the Borrower 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 Section 12.04(b)), all its  interests,  rights  and obligations  under this  Agreement to  an assignee that  shall assume such obligations  (which assignee may be another Lender, if a Lender accepts such assignment); provided that(A) if  such assignee is not already a Lender, the Borrower shall have received the prior written consent  of the Administrative Agent, which consent shall not unreasonably be withheld,(B) such Lender  shall have received payment of an amount equal to the outstanding principal of its Loans and  participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts  payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued  interest and fees) or the Borrower (in the case of all other amounts) and(C) in the case of any such  assignment resulting from a claim for compensation under Section 5.01 or payments required to  be made pursuant to Section 5.03, such assignment will result in a reduction in such compensation  or payments.  A Lender shall not be required to make any such assignment and delegation if, prior  thereto,  as  a  result  of  a  waiver  by such  Lender or  otherwise,  the  circumstances  entitling  the  Borrower to require such assignment and delegation cease to apply.         Section 5.05 Illegality.  Notwithstanding any other provision of this Agreement, in the  event  that  it  becomes  unlawful  for any  Lender or  its  applicable  lending  office  to  honor  its  obligation to make or maintain Eurodollar Loans either generally or having a particular Interest  Period hereunder, then (a) such Lender shall promptly notify the Borrower and the Administrative  Agent thereof and such Lender’s obligation to make such Eurodollar Loans shall be suspended  (the “Affected  Loans”)  until  such  time  as such  Lender may  again  make  and  maintain  such  Eurodollar Loans and (b) all Affected Loans which would otherwise be made by such Lender shall  be made instead as ABR Loans (and, if such Lender so requests by notice to the Borrower and the  Administrative Agent, all Affected Loans of such Lender then outstanding shall be automatically  converted into ABR Loans on the date specified by such Lender in such notice) and, to the extent  that Affected Loans are so made as (or converted into) ABR Loans, all payments of principal  which would otherwise be applied to such Lender’s Affected Loans shall be applied instead to its  ABR Loans.                                    ARTICLE VI                            CONDITIONS PRECEDENT         Section 6.01 Effective Date.  This Agreement, including the obligations of the Lenders  to make Loans and of the Issuing Bank to issue Letters of Credit (other than the Existing Letters  of Credit) hereunder, shall not become effective until the date on which each of the following  conditions and each of the conditions under Section 6.02 is satisfied (or waived in accordance with  Section 12.02):               (a)   The  Administrative  Agent,  the  Arranger and the Lenders  shall  have  received all commitment, facility and agency fees and all other fees and amounts due and payable  on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of  all  out-of-pocket  expenses  required  to  be  reimbursed  or  paid  by  the  Borrower  hereunder                                          65  

 

   (including, without limitation, the fees and expenses of Vinson & Elkins L.L.P., counsel to the  Administrative Agent, that have then been invoiced).               (b)   The Administrative Agent shall have received one or more certificates of a  Responsible Officer of the Borrower and each Guarantor setting forth (i) resolutions of its board  of directors (or comparable governing body) with respect to the authorization of the Borrower or  such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into  the  transactions  contemplated  in  those  documents, (ii) the  officers  of  the  Borrower  or such  Guarantor (y) who are authorized to sign the Loan Documents to which the Borrower or such  Guarantor is a party and (z) who will, until replaced by another officer or officers duly authorized  for that purpose, act as its representative for the purposes of signing documents and giving notices  and other communications in connection with this Agreement and the transactions contemplated  hereby, (iii) specimen signatures of such authorized officers, and (iv) the articles or certificate of  incorporation and bylaws (or comparable organizational documents for any Credit Parties that are  not corporations) of the Borrower and such Guarantor, certified as being true and complete.  The  Administrative  Agent  and the Lenders  may  conclusively  rely  on  such  certificates  until  the  Administrative Agent receives notice in writing from the Borrower to the contrary.               (c)   The Administrative Agent shall have received certificates of the appropriate  State agencies with respect to the existence, qualification and good standing of the Borrower and  each Guarantor from their respective states of formation.               (d)   The  Administrative  Agent  shall  have  received  from  each  party  hereto  counterparts (in such number as may be requested by the Administrative Agent) of this Agreement  signed on behalf of such party.               (e)   The Administrative Agent shall have received duly executed Notes payable  to each Lender requesting a Note in principal amounts equal to its Maximum Credit Amount, dated  as of the date hereof.               (f)   The Administrative Agent shall have received from each signatory thereto  duly executed counterparts (in such number as may be requested by the Administrative Agent) of  the Security Instruments described on Error! Reference source not found..  In connection with  the execution and delivery of the Security Instruments, the Administrative Agent shall:                     (i)   be reasonably satisfied that the Security Instruments (A) create first  priority,  perfected  Liens  (subject  to  Liens  permitted  under Section 9.03 and  any  limitations  expressly set out in such Security Instruments) on all Property purported to be pledged as collateral  pursuant to the Security Instruments and not described in clause (B) below (including, without  limitation, all Equity Interests owned by any Credit Party in the Restricted Subsidiaries), and (B)  create first priority, perfected Liens (subject only to Excepted Liens) on at least 85% of the total  value of the Proved Oil and Gas Properties evaluated in the Initial Reserve Report; and                     (ii)  have received certificates, if any, together with undated, blank stock  powers for each such certificate, representing all of the issued and outstanding Equity Interests  owned by any Credit Party in each of the other Credit Parties.                                          66  

 

               (g)   The  Administrative  Agent  shall  have  received  an  opinion  of  Latham  &  Watkins LLP and local counsel in any jurisdictions reasonably requested by the Administrative  Agent, in each case, in form and substance acceptable to the Administrative Agent and its counsel.               (h)   The  Administrative  Agent  shall  have  received  a  certificate  of  insurance  coverage  of  the  Credit  Parties  evidencing  that  the  Credit  Parties  are  carrying  insurance  in  accordance with Section 7.12.               (i)   The  Administrative  Agent  shall  have  received  title  information  as  the  Administrative  Agent  may  reasonably  require  satisfactory  to  the  Administrative  Agent  setting  forth the status of title to at least 80% of the total value of the Proved Oil and Gas Properties  evaluated in the Initial Reserve Report.                (j)   The  Administrative  Agent  shall  be  reasonably  satisfied  with  the  environmental condition of the Oil and Gas Properties of the Parent and its Restricted Subsidiaries.               (k)   The Administrative Agent shall have received a certificate of a Responsible  Officer  of  the  Borrower  certifying  that  the  Borrower  has  received  all  consents  and  approvals  required by Section 7.03.               (l)   The Administrative Agent shall have received (i) the financial statements  referred  to  in Section 7.04(a) and (ii) the  Initial  Reserve  Report  accompanied  by  a  certificate  covering the matters described in Section 8.12(c).               (m)   The  Administrative  Agent  shall  have  received  appropriate  UCC  search  certificates  and  county-level  real  property  record  search  results  reflecting  no  prior  Liens  encumbering  the  Properties  of  the  Parent  and  its  Restricted  Subsidiaries  for  each  jurisdiction  requested by the Administrative Agent; other than those being assigned or released on or prior to  the Effective Date or Liens permitted by Section 9.03.               (n)   The Administrative Agent shall have received from the Credit Parties, to  the extent requested by the Lenders or the Administrative Agent,  all documentation and other  information required by regulatory authorities under applicable “know your customer” and anti- money laundering rules and regulations, including the USA Patriot Act.         Without  limiting  the  generality  of  the  provisions  of Section 11.04,  for  purposes  of  determining compliance with the conditions specified in this Section 6.01, each Lender that has  signed  this  Agreement  shall  be  deemed  to  have  consented  to,  approved  or  accepted  or  to  be  satisfied with, each document or other matter required under this Section 6.01 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 Effective Date specifying its objection thereto.   All documents executed or submitted pursuant to this Section 6.01 by and on behalf of the Parent  or  any  of  its  Subsidiaries  shall  be  in  form  and  substance  reasonably  satisfactory  to  the  Administrative Agent and its counsel.  The obligations of the Lenders to make Loans and of the  Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the  foregoing conditions is satisfied (or waived pursuant to Section 12.02) at or prior to 2:00 p.m.,  Denver, Colorado time, on May 15, 2018 (and, in the event such conditions are not so satisfied or  waived, the Commitments shall terminate at such time).  The Administrative Agent shall notify                                         67  

 

   the  Borrower  and the Lenders  of  the  Effective  Date,  and  such  notice  shall  be  conclusive  and  binding.         Section 6.02 Each Credit Event.  The obligation of each Lender to make a Loan on the  occasion  of  any  Borrowing  (including  the  initial  funding but  excluding  any  conversion  or  continuation of a Loan), and of the Issuing Bank to issue, amend, renew or extend any Letter of  Credit, is subject to the satisfaction of the following conditions:               (a)   At the time of and immediately after giving effect to such Borrowing or the  issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or  Borrowing Base Deficiency shall have occurred and be continuing.               (b)   The representations and warranties of the Borrower and the Guarantors set  forth in this Agreement and in the other Loan Documents shall be true and correct in all material  respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or  extension  of  such  Letter  of  Credit,  as  applicable,  except  to  the  extent (i) that any  such  representations and warranties are expressly limited to an earlier date, in which case, on and as of  the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter  of Credit, as applicable, such representations and warranties shall continue to be true and correct  in all material respects as of such specified earlier date, and (ii) that any such representation and  warranty is expressly qualified by materiality or by reference to Material Adverse Effect, in which  case such representation and warranty (as so qualified) shall continue to be true and correct in all  respects.               (c)   The making of such Loan or the issuance, amendment, renewal or extension  of such Letter of Credit, as applicable, would not conflict with, or cause any Lender or the Issuing  Bank to violate or exceed, any applicable Governmental Requirement.               (d)   The  receipt  by  the  Administrative  Agent  of  a  Borrowing  Request  in  accordance with Section 2.03 or a request for a Letter of Credit (or an amendment, extension or  renewal of a Letter of Credit) in accordance with Section 2.08(b), as applicable.   Each request for a Borrowing and each request for the issuance, amendment, renewal or extension  of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower  on the date thereof as to the matters specified in Section 6.02(a) and Section 6.02(b).                                   ARTICLE VII                     REPRESENTATIONS AND WARRANTIES   The Borrower and (to the extent that the Parent is not the Borrower) the Parent jointly and severally  represent and warrant to the Lenders that:         Section 7.01 Organization; Powers.  Each of the Parent and the Restricted 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, and has all material governmental licenses,  authorizations, consents and approvals necessary, to own its assets and to carry on its business as  now conducted, and is qualified to do business in, and is in good standing in, every jurisdiction  where such qualification is required, except where failure to have such power, authority, licenses,                                         68  

 

   authorizations, consents, approvals and qualifications could not reasonably be expected to have a  Material Adverse Effect.           Section 7.02 Authority; Enforceability.  The Transactions are within the Borrower’s and  each Guarantor’s corporate, limited liability company, or partnership powers and have been duly  authorized  by  all  necessary  corporate,  limited  liability  company,  or  partnership  action  and,  if  required, stockholder action (including, without limitation, any action required to be taken by any  class of directors, managers or supervisors of the Borrower or any other Person, whether interested  or  disinterested,  in  order  to  ensure  the  due  authorization  of  the  Transactions).   Each  Loan  Document  to  which  the  Borrower  and  each  Guarantor  is  a  party  has  been  duly  executed  and  delivered by the Borrower and such Guarantor and constitutes a legal, valid and binding obligation  of  the  Borrower  and  such  Guarantor,  as  applicable,  enforceable  in  accordance  with  its  terms,  subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting  creditors’  rights  generally  and  subject  to  general  principles  of  equity,  regardless  of  whether  considered in a proceeding in equity or at law.         Section 7.03 Approvals; No Conflicts.  The Transactions (a) do not require any consent  or approval of, registration or filing with, or any other action by, any Governmental Authority or  any other third Person (including shareholders or any class of directors, managers or supervisors,  as applicable, whether interested or disinterested, of the Parent, the Borrower or any other Person),  nor is any such consent, approval, registration, filing or other action necessary for the validity or  enforceability of any Loan Document or the consummation of the Transactions, except such as  have been obtained or made and are in full force and effect other than (i) the recording and filing  of the Security Instruments as required by this Agreement, and (ii) those third party approvals or  consents  which,  if  not  made  or  obtained,  would  not  cause  a  Default  hereunder, or could  not  reasonably be expected to have a Material Adverse Effect, (b) will not violate (i) any applicable  law or regulation or any order of any Governmental Authority which would not reasonably be  expected  to  have  a  Material  Adverse  Effect or (ii) the limited  liability  company  agreements,  charter,  bylaws  or  other  organizational  documents  of  the Parent or  any  Restricted  Subsidiary,  (c) will not violate or result in a default under any indenture or other agreement pursuant to which  any Material Indebtedness is outstanding or by which the Parent or any Restricted Subsidiary or  any of their Properties is bound, or give rise to a right thereunder to require any payment to be  made  by  the Parent or  such  Restricted  Subsidiary, and (d) will  not  result  in  the  creation  or  imposition of any Lien on any Property of the Parent or any Restricted Subsidiary (other than the  Liens created by the Loan Documents).         Section 7.04 Financial Condition; No Material Adverse Change.                 (a)   The Borrower has  heretofore  furnished or  caused  to  be  furnished to the  Lenders (i) Centennial  Resource  Development’s audited consolidated  balance  sheet  and  statements of operations, shareholders’ equity and cash flows as of and for the fiscal year ended  December  31,  2017  and (ii) the  Borrower’s unaudited consolidated  balance  sheet  and  related  statements of income and cash flows as of the end of and for such year, in each case, certified by  one of its respective Financial Officers.  Such financial statements present fairly, in all material  respects, the consolidated financial position and income and cash flows of Centennial Resource  Development and the Borrower and its Consolidated Subsidiaries, respectively, as of such dates                                          69  

 

   and for such periods in accordance with GAAP, subject to the absence of footnotes in the case of  the unaudited annual financial statements of the Borrower.               (b)   No Material Adverse Effect has occurred since December 31, 2017.               (c)   Neither the Parent nor any Restricted Subsidiary has on the date hereof,  after giving effect to the Transactions, any material Debt (including Disqualified Capital Stock),  any material liabilities for past due taxes, or any material contingent liabilities, off-balance sheet  liabilities or partnership liabilities that, in each case, would be required by GAAP to be reflected  or noted in audited financial statements except as referred to or reflected or provided for in the  Financial Statements, in Schedule 9.02, or in other written information provided by any Credit  Party to Administrative Agent and the Lenders prior to the date hereof.         Section 7.05 Litigation.  Except as set forth in Schedule 7.05, there are no actions, suits,  investigations  or  proceedings  by  or  before  any  arbitrator  or  Governmental  Authority  pending  against or, to the knowledge of the Parent or the Borrower, threatened against or affecting the  Parent or  any  Restricted  Subsidiary (i) not  fully  covered  by  insurance  (except  for  normal  deductibles)  as  to  which  there  is  a  reasonable probability of  an  adverse  determination  that,  if  adversely determined, could reasonably be expected, individually or in the aggregate, to result in  a Material Adverse Effect or (ii) that involve any challenge by any Credit Party to the validity or  enforceability of any material provision of any Loan Document (including, without limitation, any  provision relating to the Credit Parties’ obligations to repay the Indebtedness or any provision  relating to the validity or perfection of any Lien created by any Loan Document).         Section 7.06 Environmental  Matters.   Except  for  such  matters  as  set  forth  on  Schedule 7.06 or that, individually or in the aggregate, could not reasonably be expected to have a  Material Adverse Effect:               (a)   the Parent and  its Restricted Subsidiaries  and  each  of  their  respective  Properties and operations thereon are, and within all applicable statute of limitation periods have  been, in compliance with all applicable Environmental Laws.               (b)   the Parent and its Restricted Subsidiaries have obtained all Environmental  Permits  required  for  their  respective  operations  and  each  of  their  Properties,  with  all  such  Environmental  Permits  being  currently  in  full  force  and  effect,  and  none  of the  Parent or  its  Restricted Subsidiaries has received any written notice or otherwise has knowledge that any such  existing Environmental Permit will be revoked or that any application for any new Environmental  Permit or renewal of any existing Environmental Permit will be protested or denied.               (c)   there  are  no  claims,  demands,  suits,  orders,  inquiries,  or  proceedings  concerning any violation of, or any liability (including as a potentially responsible party) under,  any  applicable  Environmental  Laws  that  is  pending  or,  to the  Parent’s or  the  Borrower’s  knowledge, threatened against the Parent or any Restricted Subsidiary or any of their respective  Properties or as a result of any operations at such Properties.               (d)   none of the Properties of the Parent or any Restricted Subsidiary contain or  have contained any: (i) underground storage tanks; (ii) asbestos-containing materials; (iii) landfills  or  dumps; (iv) hazardous  waste  management  units  as  defined  pursuant  to  RCRA  or  any                                         70  

 

   comparable  state  law;  or (v) sites  on  or  nominated  for  the  National  Priority  List  promulgated  pursuant to CERCLA or any state remedial priority list promulgated or published pursuant to any  comparable state law.               (e)   there has been no Release or, to the Parent’s or the Borrower’s knowledge,  threatened Release, of Hazardous Materials at, on, under or from the Parent’s or any Restricted  Subsidiary’s  Properties,  there  are  no  investigations,  remediations,  abatements,  removals,  or  monitorings  of  Hazardous  Materials  required  under  applicable  Environmental  Laws  at  such  Properties and, to the knowledge of the Parent and the Borrower, none of such Properties are  adversely affected by any Release or threatened Release of a Hazardous Material originating or  emanating from any other real property.               (f)   neither the Parent nor any Restricted Subsidiary has received any written  notice asserting an alleged liability or obligation under any applicable Environmental Laws with  respect to the investigation, remediation, abatement, removal, or monitoring of any Hazardous  Materials at, under, or Released or threatened to be Released from any real properties offsite the  Parent’s  or  any Restricted Subsidiary’s Properties  and,  to the  Parent’s and  the  Borrower’s  knowledge, there are no conditions or circumstances that could reasonably be expected to result in  the receipt of such written notice.               (g)   there has been no exposure of any Person or Property to any Hazardous  Materials as a result of or in connection with the operations and businesses of any of the Parent’s  or its Restricted Subsidiaries’ Properties that could reasonably be expected to form the basis for a  claim for damages or compensation.               (h)   the Parent and  its Restricted Subsidiaries  have made  available to the  Lenders complete and correct copies of all third party environmental site assessment reports and  studies on environmental matters (including matters relating to any alleged non-compliance with  or liability under Environmental Laws) reasonably requested by the Administrative Agent that are  in any of the Parent’s or the Restricted Subsidiaries’ possession or control and relating to their  respective Properties or operations thereon.         Section 7.07 Compliance  with  the  Laws  and Agreements;  No  Defaults or  Borrowing  Base Deficiency.                 (a)   Each of the Parent and the Restricted Subsidiaries is in compliance with all  Governmental  Requirements  applicable  to  it  or  its  Property  and  all  agreements  and  other  instruments  binding  upon  it  or  its  Property,  and  possesses  all  licenses,  permits,  franchises,  exemptions, approvals and other governmental authorizations necessary for the ownership of its  Property and the conduct of its business, except where the failure to do so, individually or in the  aggregate, could not reasonably be expected to result in a Material Adverse Effect.                 (b)   No Default or Borrowing Base Deficiency has occurred and is continuing.         Section 7.08 Investment Company Act.  Neither the Parent nor any Restricted Subsidiary  is an “investment company” or a company “controlled” by an “investment company,” within the  meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.                                          71  

 

         Section 7.09 Taxes.  Each of the Parent and its Restricted Subsidiaries has timely filed or  caused to be filed all federal income Tax returns and reports, and all other material Tax returns  and reports required to have been filed and has paid or caused to be paid all Taxes required to have  been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings  and for which the Parent or such Restricted Subsidiary, as applicable, has set aside on its books  adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not  reasonably be expected to result in a Material Adverse Effect.  The charges, accruals and reserves  on  the  books  of  the Parent and  its Restricted Subsidiaries  in  respect  of  Taxes  and  other  governmental charges are, in the reasonable opinion of the Borrower, adequate.  Other than Tax  Liens permitted by clause (a) of the definition of “Excepted Liens”, no Tax Lien has been filed  and, to the knowledge of the Parent and the Borrower, no claim is being asserted with respect to  any such Tax or other such governmental charge.         Section 7.10 ERISA.  (a)  Except for such matters that, individually or in the aggregate,  could not reasonably be expected to have a Material Adverse Effect:                     (i)   The Parent,  its Restricted Subsidiaries  and  each  ERISA  Affiliate  have complied in all material respects with ERISA and, where applicable, the Code regarding each  Plan and Multiemployer Plan.                     (ii)  Each Plan is, and has been, established and maintained in substantial  compliance with its terms, ERISA and, where applicable, the Code.                     (iii) No ERISA Event has occurred in the six-year period preceding the  date hereof or is reasonably expected to occur.                     (iv)  The present value of all accumulated benefit obligations under each  Plan (based on the assumptions used for purposes of Accounting Standards Codification No. 715:  Compensation-Retirement Benefits, or any applicable successor) did not, as of the date of the most  recent financial statements reflecting such amounts, exceed the fair market value of the assets of  such Plan allocable to such accrued benefits.                     (v)   No act, omission or transaction has occurred which could result in  imposition on the Parent, any Restricted Subsidiary or any ERISA Affiliate (whether directly or  indirectly) of (A) either a civil penalty assessed pursuant to subsections (c), (i), (l) or (m) of section  502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (B) breach of  fiduciary duty liability damages under section 409 of ERISA.                     (vi)  Full payment when due has been made of all amounts which the  Parent, its Restricted Subsidiaries or any ERISA Affiliate is required under the terms of each Plan,  Multiemployer Plan or applicable law to have paid as contributions to such Plan or Multiemployer  Plan.               (b)   None of the Parent or any of its Subsidiaries is an entity deemed to hold  “plan assets” (within the meaning of the Plan Asset Regulations).         Section 7.11 Disclosure;  No  Material  Misstatements.  The  certificates, financial  statements, reports, and other written information, taken as a whole, furnished by or on behalf of                                         72  

 

   the Borrower or any Guarantor to the Administrative Agent and the Lenders in connection with  the negotiation of any Loan Document or included therein or delivered pursuant thereto, do not  contain any material misstatement of fact or omit to state any material fact necessary to make the  statements  therein,  in the  light  of  the  circumstances  under  which  they  were  or  are  made, not  misleading as of the date such information is dated or certified; provided that (a) to the extent any  such  certificate,  statement,  report,  or  information  was  based  upon  or constitutes  a  forecast  or  projection, the Parent and the Borrower jointly and severally represent only that it acted in good  faith  and  utilized  reasonable  assumptions at  the  time  such  information  was  furnished in  the  preparation  of  such  certificate,  statement,  report,  or  information  (it  being  recognized  by the  Lenders, however, that projections as to future events are not to be viewed as facts and that results  during the period(s) covered by such projections may differ from the projected results and that  such differences may be material and that the Parent and the Borrower make no representation that  such projections will be realized), (b) with respect to any financial statements so furnished, the  Parent and the Borrower jointly and severally represent only that (except as noted otherwise therein  or as otherwise customary for non-annual financial statements) such financial statements present  fairly in all material respects the financial condition and results of operations of the described  Persons in accordance with GAAP consistently applied, and (c) as to statements, information and  reports supplied by third parties, the Parent and the Borrower jointly and severally represent only  that it is not aware of any material misstatement or omission therein.  There are no statements or  conclusions  in  any  Reserve  Report  which  are  based  upon  or  include  material  misleading  information or fail to take into account known material information regarding the matters reported  therein, it being understood that projections concerning volumes attributable to the Oil and Gas  Properties of the Parent and its Restricted Subsidiaries and production and cost estimates contained  in each Reserve Report are necessarily based upon professional opinions, estimates and projections  and that the Parent and its Restricted Subsidiaries do not warrant that such opinions, estimates and  projections will ultimately prove to have been accurate.         Section 7.12 Insurance.  The Parent has, and has caused all of its Restricted Subsidiaries  to have, (a) all insurance policies sufficient for the compliance by each of them with all material  Governmental  Requirements  and  all  material  agreements  and (b) insurance  coverage  in such  amounts and against such risk that are usually insured against by companies similarly situated and  engaged  in  the  same  or  a  similar  business  for  the  assets  and  operations  of  the Parent and  its  Restricted Subsidiaries.  The Administrative Agent and the Lenders have been named as additional  insureds  in respect  of  such  liability  insurance  policies  and  the  Administrative  Agent  has  been  named as loss payee with respect to Property loss insurance.          Section 7.13 Restriction  on  Liens.   Neither  the Parent nor  any  of  its  Restricted  Subsidiaries is a party to any material agreement or arrangement (other than agreements governing  Debt permitted by Section 9.02 which create Liens permitted by Section 9.03), or subject to any  order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens  to the Administrative Agent for the benefit of the Secured Parties on or in respect of their Properties  to  secure  the  Indebtedness  and  the  Loan  Documents,  in  each case,  except  as  permitted  by  Section 9.15.         Section 7.14 Subsidiaries.  Except as set forth on Schedule 7.14 or as disclosed in writing  to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which, upon  such disclosure, shall be deemed to be a supplement to Schedule 7.14, neither the Borrower nor                                         73  

 

   the Parent has any Subsidiaries (other than, in the case of the Parent, the Borrower) or has any  Foreign Subsidiaries.  Schedule 7.14 identifies each Subsidiary as either Restricted or Unrestricted  and, unless otherwise disclosed on such schedule, each Restricted Subsidiary on such schedule is  a Wholly-Owned Subsidiary.         Section 7.15 Location  of  Business  and  Offices.  The  Borrower’s  jurisdiction  of  organization is the State of Delaware; the name of the Borrower as listed in the public records of  its jurisdiction of organization is Centennial Resource Production, LLC; and the organizational  identification number of the Borrower in its jurisdiction of organization is 5196860 (or, in each  case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(m) in  accordance with Section 12.01).  The Borrower’s principal place of business and chief executive  offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered  pursuant to Section 8.01(m) and Section 12.01(c)).  Each Restricted Subsidiary of the Borrower’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 chief  executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to Section  8.01(m)).         Section 7.16 Properties; Titles, Etc.                 (a)   Subject  to  Immaterial  Title  Deficiencies,  each  of  the Parent and  the  Restricted 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 material personal Properties, in  each case, free and clear of all Liens except Liens permitted by Section 9.03.  After giving full  effect to the Excepted Liens (including Immaterial Title Deficiencies), the Parent or the Restricted  Subsidiary  specified  as  the  owner  owns  the  net  interests  in  production  attributable  to  the  Hydrocarbon  Interests  as  reflected  in  the  most  recently  delivered  Reserve  Report,  and  the  ownership of such Properties does not in any material respect obligate the Parent or such Restricted  Subsidiary to bear the costs and expenses relating to the maintenance, development and operations  of each such Property in an amount in excess of the working interest of each Property set forth in  the most recently delivered Reserve Report that is not offset by a corresponding proportionate  increase in the Parent’s or such Restricted Subsidiary’s net revenue interest in such Property or in  the revenues therefrom.               (b)   All material leases and agreements necessary for the conduct of the business  of the Parent and its Restricted Subsidiaries are valid and subsisting, in full force and effect, and  there exists no default or event or circumstance which with the giving of notice or the passage of  time or both would give rise to a default under any such lease or leases, which could reasonably  be expected to have a Material Adverse Effect.               (c)   The rights and Properties presently owned, leased or licensed by the Parent  and  its  Restricted  Subsidiaries  including,  without  limitation,  all  easements  and  rights  of  way,  include all rights and Properties necessary to permit the Parent and its Restricted Subsidiaries to  conduct their business in all material respects in substantially the same manner as its business has  been conducted prior to the date hereof, unless the Borrower determines in good faith that the  continued maintenance of such Property is no longer economically desirable, necessary or useful  to the business of the Credit Parties or such Properties are Transferred in accordance Section 9.12.                                         74  

 

               (d)   All of the Properties of the Parent and its Restricted Subsidiaries which are  reasonably necessary for the operation of their businesses are in good working condition and are  maintained in accordance with prudent business standards, ordinary wear and tear excepted.               (e)   The Parent and each Restricted Subsidiary owns, or is licensed to use, all  trademarks, tradenames, copyrights, patents and other intellectual Property material to its business  (including, without limitation, all databases, geological data, geophysical data, engineering data,  seismic data, maps, interpretations and other technical information material to its business), and  the use thereof by the Parent and such Restricted Subsidiary does not infringe upon the rights of  any other Person, except for any such infringements that, individually or in the aggregate, could  not reasonably be expected to result in a Material Adverse Effect.         Section 7.17 Maintenance of Properties.  Except for such acts or failures to act as could  not be reasonably expected to have a Material Adverse Effect, the Oil and Gas Properties (and  Properties unitized therewith) of the Parent and its Restricted Subsidiaries have been maintained,  operated  and  developed  in  a  good  and  workmanlike  manner  and  in  conformity  with  all  Governmental Requirements and in conformity with the provisions of all leases, subleases or other  contracts  comprising  a  part  of  the  Hydrocarbon  Interests  and  other  contracts  and  agreements  forming  a  part  of  the  Oil  and  Gas  Properties  of  the Parent and  its  Restricted  Subsidiaries.   Specifically in connection with the foregoing, except for those as could not be reasonably expected  to have a Material Adverse Effect, (a) no Oil and Gas Property of the Parent or any Restricted  Subsidiary is subject to having allowable production reduced below the full and regular allowable  (including the maximum permissible tolerance) because of any overproduction (whether or not the  same was permissible at the time) and (b) the wells comprising a part of the Oil and Gas Properties  (or Properties unitized therewith) of the Parent or any Restricted Subsidiary are producing only  from the Oil and Gas Properties (or in the case of wells located on Properties pooled or unitized  therewith, such pooled or unitized Properties) of the Parent or such Restricted Subsidiary.  All  pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and  equipment owned in whole or in part by the Parent or any of its Restricted 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 which are operated by the Parent or any of  its Restricted Subsidiaries, in a manner consistent with the Parent’s or its Restricted Subsidiaries’  past  practices  (other  than  those  the  failure  of  which  to  maintain  in  accordance  with  this  Section 7.17 could not reasonably be expected to have a Material Adverse Effect).         Section 7.18 Gas Imbalances, Prepayments.  Except as set forth on Schedule 7.18 or on  the most recent certificate delivered pursuant to Section 8.12(c), on a net basis there are no gas  imbalances,  take  or  pay  or  other  prepayments  which  would  require  the Parent or  any  of  its  Restricted Subsidiaries to deliver Hydrocarbons produced from their Oil and Gas Properties at  some future time without then or thereafter receiving full payment therefor exceeding 2.5% of the  aggregate annual production of gas from the Oil and Gas Properties of the Parent and its Restricted  Subsidiaries during the most recent calendar year (on an mcf equivalent basis).         Section 7.19 Marketing of Production.  Except for contracts listed and in effect on the  date hereof on Schedule 7.19, or hereafter either disclosed in writing to the Administrative Agent  or included in the most recently delivered Reserve Report (with respect to all of which contracts  the Borrower represents that the Parent or its Restricted Subsidiaries are receiving a price for all                                         75  

 

   production sold thereunder which is computed substantially in accordance with the terms of the  relevant contract), no material agreements exist which are not cancelable on 90 days’ notice or less  without  penalty  or  detriment  for  the  sale  of  production  from  the Parent’s  or  its  Restricted  Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other rights to purchase,  production, whether or not the same are currently being exercised) that (a) pertain to the sale of  production at a fixed price and (b) have a maturity or expiry date of longer than six (6) months.         Section 7.20 Swap Agreements and Qualified ECP Counterparty.  Schedule 7.20, as of  the date hereof, and after the date hereof, each report required to be delivered by the Borrower  pursuant to Section 8.01(e), sets forth, a true and complete list of all Swap Agreements of the  Parent and each Restricted Subsidiary, the material terms thereof (including the type, effective  date, termination date and notional amounts or volumes), the estimated net mark to market value  thereof, as  of the end of the most recently  ended fiscal  quarter for which such information is  available, all  credit  support  agreements (other  than  the  Loan  Documents) relating  thereto  (including any margin required or supplied) and the counterparty to each such agreement.  The  Borrower is a Qualified ECP Counterparty.         Section 7.21 Use of Loans and Letters of Credit.  The proceeds of the Loans and the  Letters of Credit shall be used to renew, amend, modify, and extend existing indebtedness of the  Borrower under the Existing A&R Credit Agreement, pay  fees, commissions and expenses in  connection with the foregoing, provide working capital for exploration and production operations,  finance acquisitions  of  Oil  and  Gas  Properties  permitted  hereunder  and  for  general  corporate  purposes.  The Parent and its Restricted Subsidiaries are not engaged principally, or as one of its  or their important activities, in the business of extending credit for the purpose, whether immediate,  incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U  or X of the Board).  No part of the proceeds of any Loan or Letter of Credit will be used for any  purpose which violates the provisions of Regulations T, U or X of the Board.  The Borrower will  not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure  that the Parent and its other Subsidiaries and its or their respective directors, officers, employees  and agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an  offer, payment, promise to pay, or authorization of the payment or giving of money, or anything  else  of  value,  to  any  Person  in  violation  of  any  Anti-Corruption  Laws,  (b)  for  the  purpose  of  funding, financing or facilitating any activities, business or transaction of or with any Sanctioned  Person, or in any Sanctioned Country, or (c) in any manner that would knowingly or negligently  result in the violation of any Sanctions applicable to any party hereto.         Section 7.22 Solvency.   After  giving  effect  to  the  transactions  contemplated  hereby  (including, for the avoidance of doubt, each Borrowing or issuance of Letter of Credit hereunder),  (a) the Borrower and the Guarantors on a consolidated basis are not insolvent as such term is used  and defined in the United States Bankruptcy Code and (b)  the Borrower and the Guarantors, taken  as  a  whole, will  not  have  (and  will  have  no  reason  to  believe  that  it  will  have  thereafter)  unreasonably small capital for the conduct of its business.         Section 7.23 Anti-Corruption Laws and Sanctions.  The Parent and the Borrower have  implemented and maintain in effect such policies and procedures, if any, as they reasonably deem  appropriate, in light of their businesses and international activities (if any), to ensure compliance  by  the Parent,  the  Borrower  and its other Subsidiaries  and  their  respective  directors, officers,                                         76  

 

   employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Parent, the  Borrower  and its other Subsidiaries  and  their  respective  officers  and  employees  and, to  the  knowledge of the Parent and the Borrower, their respective directors and agents, are in compliance  with  Anti-Corruption Laws and applicable Sanctions  in  all material  respects.  None of (a) the  Parent, the Borrower and its other Subsidiaries or any of their respective directors, officers or  employees, or (b) to the knowledge of the Parent and the Borrower, any agent of the Parent, the  Borrower or any other Subsidiary that will act in any capacity in connection with or benefit from  the credit facility established hereby, is a Sanctioned Person.  No Borrowing or Letter of Credit,  use  of  proceeds  or  other  transaction  contemplated  by  this  Agreement  will violate  any  Anti- Corruption Law, applicable Sanctions, the Act, or the Trading with the Enemy Act, as amended.   The Parent, the Borrower and its other Subsidiaries are in compliance in all material respects with  the Act.         Section 7.24 EEA Financial Institutions.  No Credit Party is an EEA Financial Institution.                                     ARTICLE VIII                           AFFIRMATIVE COVENANTS         Until the Commitments have expired or been terminated and the principal of and interest  on  each Loan and  all  fees  payable  hereunder  and  all  other  amounts  payable  under  the  Loan  Documents shall have been paid in full and all Letters of Credit shall have expired or terminated  and all LC Disbursements shall have been reimbursed, each of the Borrower and (to the extent that  the Parent is not the Borrower) the Parent covenants and agrees with the Lenders that:         Section 8.01 Financial Statements; Other Information.  The Borrower will furnish or will  cause the Parent to furnish to the Administrative Agent (which shall promptly make a copy thereof  available to the Lenders):               (a)   Annual  Financial Statements.  As soon  as  available, but  in  any  event  in  accordance with then applicable law and not later than the fifth day after the date on which such  financial statements are required to be filed with the SEC after giving effect to any permitted  extensions  pursuant  to  Rule 12b-25 under the  Securities Exchange Act, commencing with  the  fiscal year ending December 31, 2018, (i) at any time when Centennial Resource Development  (A) owns more than 50% of the Equity Interests of the Borrower with ordinary voting power to  elect or appoint the managers of the Borrower and is not the Parent and (B) owns no other assets  and has no other operations other than those ancillary to its ownership of such Equity Interests, (1)  Centennial Resource Development’s 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  independent public accountants of recognized national standing or that are otherwise reasonably  acceptable  to  the  Administrative  Agent (without  a “going  concern” or  like  qualification  or  exception and without any qualification or exception as to the scope of such audit) to the effect  that  such  consolidated  financial  statements  present  fairly  in  all  material  respects  the  financial  condition  and  results  of  operations  of Centennial  Resource  Development and  its consolidated  subsidiaries on a consolidated basis in accordance with GAAP consistently applied and (2) the  Borrower’s unaudited consolidated balance sheet and related statements of income and cash flows                                         77  

 

   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 certified by one of its Financial Officers as presenting fairly in all  material  respects  the  financial  condition  and  results  of  operations  of  the Borrower and  its  Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied,  subject to the absence of footnotes and (ii) at any other time, as soon as available, but in any event  in accordance with then applicable law and not later than one hundred twenty (120) days after the  end of each fiscal  year of the Parent (or, if the Parent or the Borrower is required to file such  financial statements with the SEC at such time, on or before the fifth day after the date on which  such financial statements are required to be filed with the SEC after giving effect to any permitted  extensions pursuant to Rule 12b-25 under the Securities Exchange Act), commencing with the  fiscal year ending December 31, 2018, the Parent’s 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  independent  public  accountants  of  recognized  national  standing or  that  are  otherwise  reasonably acceptable to the Administrative Agent (without a “going concern” or like qualification  or exception and without any qualification or exception as to the scope of such audit) to the effect  that  such  consolidated financial  statements  present  fairly  in  all  material  respects  the  financial  condition  and  results  of  operations  of  the Parent and  its  Consolidated  Subsidiaries  on  a  consolidated basis in accordance with GAAP consistently applied.                 (b)   Quarterly Financial Statements.  As soon as available, but in any event in  accordance with then applicable law and not later than seventy-five (75) days after the end of each  of the first three fiscal quarters of each fiscal year of the Parent (or, if the Parent or the Borrower  is required to file such financial statements with the SEC at such time, on or before the fifth day  after the date on which such financial statements are required to be filed with the SEC after giving  effect to any permitted extensions pursuant to Rule 12b-25 under the Securities Exchange Act),  commencing with the fiscal quarter ending March 31, 2018, the Parent’s consolidated balance  sheet and related statements of operations and cash flows as of the end of and for such fiscal quarter  and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the  figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the  end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in  all  material  respects  the  financial  condition  and  results  of  operations  of  the Parent and  its  Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied,  subject to normal year-end audit adjustments and the absence of footnotes.                (c)   Certificate  of  Financial  Officer – Compliance.   Concurrently  with  any  delivery  of  financial  statements  under Section 8.01(a) or Section 8.01(b),  a  certificate  of  a  Financial Officer in substantially the form of Error! Reference source not found. hereto (or such  other form agreed to by the Administrative Agent and the Borrower) (i) certifying as to whether a  Default then exists and, if a Default then exists, specifying the details thereof and any action taken  or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations  demonstrating compliance with Section 9.01, and (iii) stating whether any change in GAAP or in  the  application  thereof  has  occurred  since  the  date  of  the  financial  statements  referred  to  in  Section 7.04(a) and, if any such change has occurred, specifying the effect of such change on the  financial statements accompanying such certificate.                                          78  

 

               (d)   Certificate of Financial Officer – Consolidating Information.  If, at any time,  all of the Consolidated Subsidiaries of the Parent are not Consolidated Restricted Subsidiaries,  then  concurrently  with  any  delivery  of  financial  statements  under Section 8.01(a) or  Section 8.01(b), a certificate of a Financial Officer setting forth consolidating spreadsheets that  show all Consolidated Unrestricted Subsidiaries and the eliminating entries, in such form as would  be presentable to the auditors of the Parent.               (e)   Certificate of Financial Officer – Swap Agreements.  Concurrently with the  delivery of each Reserve Report hereunder (other than the Initial Reserve Report), a certificate of  a Financial Officer, in form and substance reasonably satisfactory to the Administrative Agent,  setting forth as of a recent date, a true and complete list of all Swap Agreements of the Parent and  each  Restricted  Subsidiary,  the  material  terms  thereof  (including  the  type,  effective  date,  termination  date  and  notional  amounts  or  volumes),  the estimated net  mark-to-market  value  therefor, as of the end of the most recently ended fiscal quarter for which such information is  available, any new credit support agreements relating thereto (other than the Loan Documents),  any  margin  required  or  supplied under  any  credit  support  document (other  than  the  Loan  Documents), and the counterparty to each such agreement.               (f)   Certificate  of  Insurer – Insurance Coverage.   Concurrently  with  any  delivery  of  financial  statements  under Section 8.01(a), one  or  more  certificates of  insurance  coverage from the Parent’s insurance brokers or insurers with respect to the insurance required by  Section 8.07, in form and substance reasonably satisfactory to the Administrative Agent, and, if  requested by the Administrative Agent, copies of the applicable policies.               (g)   SEC  and  Other  Filings;  Reports  to  Shareholders.  If  the  Parent  or  any  Restricted Subsidiary becomes a publicly traded company, then promptly after the same becomes  publicly available, copies of all periodic and other reports, proxy statements and other materials  filed by the Parent or any Restricted Subsidiary with  the SEC, or with any national  securities  exchange, or distributed by the Parent to its equity holders generally, as the case may be.                 (h)   Notices Under Material Instruments.  Promptly after the furnishing thereof,  copies of any financial statement, report or notice furnished to or by any Person pursuant to the  terms of any preferred stock designation, indenture, loan or credit or other similar agreement with  respect  to  Material  Indebtedness,  other  than  this  Agreement  and  not  otherwise  required  to  be  furnished to the Lenders pursuant to any other provision of this Section 8.01.               (i)   Lists  of  Purchasers.   Promptly  following  the  written  request  of  the  Administrative  Agent,  a  list  of  all  Persons (and  their  addresses  for  notices) purchasing  Hydrocarbons from the Parent or any Restricted Subsidiary on a basis other than spot sales.               (j)   Notice of Sales of Hydrocarbon Interests.  In the event the Parent or any  Restricted Subsidiary intends to Transfer any Proved Oil and Gas Properties with a total value with  respect to any single sale in excess of $10,000,000, or any Equity Interests in any Subsidiary in  accordance with Section 9.12, reasonable prior written notice of such Transfer, the anticipated  price thereof and the anticipated date of closing and any other details thereof requested by the  Administrative Agent.                                          79  

 

               (k)   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.               (l)   Issuance of Permitted Senior Unsecured Notes.  In the event the Parent or  the  Borrower  intends  to  issue  Permitted  Senior Unsecured  Notes,  prior  written  notice  of  such  intended offering of such Permitted Senior Unsecured Notes, the anticipated amount thereof, and  the anticipated date of closing and promptly when available will furnish a copy of the preliminary  offering memorandum (if any) and the final offering memorandum (if any).               (m)   Information Regarding Borrower and Guarantors.  Prompt written notice  (and in any event not less than five (5) days prior thereto (or such lesser time period as may be  reasonably  acceptable  to  the  Administrative  Agent)  in  the  case  of  any  change  of  name  or  jurisdiction of organization) of any change (i) in the Borrower or any Guarantor’s corporate name,  (ii) in the Borrower or any Guarantor’s corporate structure, (iii) in the Borrower or any Guarantor’s  jurisdiction  of  organization  or  such  Person’s  organizational  identification  number  in  such  jurisdiction  of  organization,  and (iv) in  the  Borrower  or  any  Guarantor’s  federal  taxpayer  identification number.               (n)   Production  Report  and  Lease  Operating  Statements.  Concurrently  with  each delivery of a certificate pursuant to Section 8.12(c), a report setting forth, for each calendar  month  during  the  then  current  fiscal  year  to the date of  such  Reserve  Report  (to  the  extent  production, sales, tax and expense data is  then available), 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, and setting forth the operator of record for the  Oil and Gas Properties.               (o)   Notices of Certain Changes.  Promptly after the execution thereof, copies  of any amendment, modification or supplement to the certificate or articles of incorporation or  formation, bylaws, certificate or articles of organization, regulations or limited liability company  agreement, any preferred stock designation or any other organic document of the Parent or any  Restricted Subsidiary if such amendment, modification or supplement is material to the Lenders.               (p)   Notice  of  Investments  in  Unrestricted  Subsidiaries  and  Unrestricted  Subsidiary Distributions.  Promptly following the Parent or any Restricted Subsidiary making any  Investment  in  an  Unrestricted  Subsidiary  after  the  Effective  Date,  the  Borrower  shall  deliver  written  notice  thereof  to  the  Administrative  Agent  specifying  the  name  of  the  Unrestricted  Subsidiary in which such Investment was made, the date of such Investment and the amount of  such Investment.  Promptly following any Credit Party’s receipt of any Unrestricted Subsidiary  Distribution after the Effective Date from an Unrestricted Subsidiary in which a Credit Party has  made an Investment after the Effective Date pursuant to Section 9.05(i), the Borrower shall deliver  written notice thereof specifying the amount of such Unrestricted Subsidiary Distribution, the date  on which such Unrestricted Subsidiary Distribution was received, and whether or not the proceeds  of such Unrestricted Subsidiary Distribution have been or will be used by the Borrower to make  distributions permitted under Section 9.04(a)(v).                                         80  

 

               (q)   Other Requested Information.  Promptly following any reasonable request  therefor, such other information regarding the operations, business affairs and financial condition  of the Parent or any Restricted Subsidiary (including, without limitation, any Plan and any reports  or other information filed with respect thereto under the Code or under ERISA), or compliance  with  the  terms  of  this  Agreement  or  any  other  Loan  Document, or  in  order  to  assist  the  Administrative Agent and the Lenders in maintaining compliance with the Act, in each case as the  Administrative Agent may reasonably request.         Documents  required  to  be  delivered  pursuant  to Section 8.01(a), Section 8.01(b) or  Section 8.01(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 (a) on which the Borrower posts such documents, or provides a link thereto  on the Borrower’s public website; or (b) on which such documents are posted on the Borrower’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  Borrower  shall  deliver  paper  copies  of  such  documents to the Administrative Agent or any Lender upon its request to the Borrower 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 Borrower shall notify the Administrative Agent  and each Lender of the posting of any such documents and provide to the Administrative Agent  by electronic mail electronic versions (i.e., soft copies) of such documents.  The Administrative  Agent  shall  have  no  obligation  to  request  the  delivery  of  or  to  maintain  paper  copies  of  the  documents referred to above, and in any event shall have no responsibility to monitor compliance  by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely  responsible for requesting delivery to it or maintaining its copies of such documents.         Section 8.02 Notices  of  Material  Events.   The  Borrower  will  furnish  to  the  Administrative Agent (which shall promptly make a copy thereof available to the Lenders) prompt  (and in any event within three Business Days) written notice of the following:               (a)   the occurrence of any Default;               (b)   the filing or commencement of, or the threat in writing of, any action, suit,  proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority  against or affecting the Parent or any Restricted Subsidiary not previously disclosed in writing to  the Lenders or any material adverse development in any action, suit, proceeding, investigation or  arbitration  (whether  or  not  previously  disclosed  to the  Lenders)  that,  in  either  case,  could  reasonably be expected to result in a Material Adverse Effect; and               (c)   the occurrence of any condition or event that the senior executive officers  of the Parent have determined to constitute a Material Adverse Effect in their reasonable discretion.   Each  notice  delivered  under  this Section 8.02 shall  be  accompanied  by  a  statement  of  a  Responsible Officer setting forth the details of the event or development requiring such notice and  any action taken or proposed to be taken with respect thereto.                                          81  

 

         Section 8.03 Existence; Conduct of Business.  The Parent and the Borrower will, and will  cause each other Restricted  Subsidiary  to, (a) do  or  cause  to  be  done  all  things  necessary  to  preserve, renew and keep in full force and effect (i) its legal existence and (ii) the rights, licenses,  permits,  privileges  and  franchises  material  to  the  conduct  of  its  business  and (b) maintain,  if  necessary,  its  qualification  to  do  business  in  each  other  jurisdiction  in  which  its  Oil  and  Gas  Properties are located or the ownership of its Properties requires such qualification, except where  the  failure  to  so  qualify  could  not  reasonably  be  expected  to  have  a  Material  Adverse  Effect;  provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution  permitted under Section 9.11.         Section 8.04 Payment of Obligations.  The Parent and the Borrower will, and will cause  each other Restricted Subsidiary to, pay its obligations, including Tax liabilities of the Parent and  all of its Restricted Subsidiaries before the same shall become delinquent or in default, except  where (a) the  validity  or  amount  thereof  is  being  contested  in  good  faith  by  appropriate  proceedings, and  the Parent or such Restricted Subsidiary has set aside on its books adequate  reserves with respect thereto in accordance with GAAP or (b) the failure to make payment could  not reasonably be expected to result in a Material Adverse Effect or result in the seizure or levy of  any material Property of the Parent or any Restricted Subsidiary.         Section 8.05 Performance of Obligations under Loan Documents.  The Borrower will  pay the Loans in accordance with the terms hereof, and the Parent and the Borrower will, and will  cause  each other Restricted  Subsidiary  to,  do  and  perform  every  act  and  discharge  all  of  the  obligations to be performed and discharged by them under the Loan Documents, including, without  limitation,  this  Agreement,  at  the  time  or  times  and  in  the  manner  specified taking  into  consideration any grace periods therein.         Section 8.06 Operation and Maintenance of Properties.  The Parent and the Borrower, at  their own expense, will, and will cause each other Restricted Subsidiary to:               (a)   operate its Oil and Gas Properties and other material Properties or cause  such Oil and Gas Properties and other material Properties to be operated in a careful and efficient  manner in accordance with the practices of the industry and in compliance with all applicable  contracts  and  agreements  and  in  compliance  with  all  Governmental  Requirements,  including,  without limitation, applicable proration 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 do  so could not reasonably be expected to have a Material Adverse Effect.               (b)   keep and maintain all Property material to the conduct of its business in  good working order and condition (ordinary wear and tear excepted), and preserve, maintain and  keep in good repair, working order and efficiency (ordinary wear and tear and depletion excepted)  all of its Oil and Gas Properties except, in each case, where the failure to do so could not reasonably  be expected to have a Material Adverse Effect.               (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                                         82  

 

   under the leases or other agreements affecting or pertaining to its Oil and Gas Properties and will  do all other things necessary to keep unimpaired their rights with respect thereto and prevent any  forfeiture thereof or default thereunder, except where the failure to do so could not reasonably be  expected to result in a Material Adverse Effect.               (d)   promptly perform or make reasonable and customary efforts to cause to be  performed, in accordance with customary industry standards, the obligations required by each and  all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in  its Oil and Gas Properties and other material Properties, except in each case where the failure to  do so could not reasonably be expected to result in a Material Adverse Effect.               (e)   to the extent a Credit Party is not the operator of any Property, the Parent  and the Borrower shall (or shall cause the  applicable Restricted Subsidiary to) use  reasonable  efforts to cause the operator to comply with this Section 8.06, but the failure of the operator so to  comply will not constitute a Default or Event of Default.         Section 8.07 Insurance.  The Parent and the Borrower will, and will cause each other  Restricted  Subsidiary  to,  maintain,  with  financially  sound  and  reputable  insurance  companies,  insurance in such amounts and against such risks as are customarily maintained by companies  engaged  in  the  same  or  similar  businesses  operating  in  the  same or  similar  locations.  The  Administrative Agent on behalf of itself and each of the Lenders shall be named as “additional  insured” in  respect  of  such  liability  insurance  policies,  and  the  Administrative  Agent  shall  be  named as a loss payee with respect to property loss insurance for collateral subject to the Security  Instruments and such policies shall provide that the Administrative Agent shall receive not less  than 30 days’ prior notice of cancellation or non-renewal (or, if less, the maximum advance notice  that the applicable carrier will agree to provide).         Section 8.08 Books and Records; Inspection Rights.  The Parent and the Borrower will,  and will cause each other Restricted Subsidiary to, keep proper books of record and account in  which  full,  true  and  correct  entries  in  conformance  with  GAAP  are  made  of  all  dealings  and  transactions in relation to its business and activities.  The Parent and the Borrower will, and will  cause  each other Restricted  Subsidiary  to,  permit  any  representatives  designated  by  the  Administrative Agent, 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  (so  long  as  a  member of  the  Borrower's  senior  management team is present during all such discussions), all at such reasonable times and as often  as reasonably  requested,  provided  that  so  long  as  no  Event  of  Default  has  occurred  and  is  continuing, such visits and inspections shall not occur more than once in any 12-month period.         Section 8.09 Compliance with Laws.  The Parent and the Borrower will, and will cause  each other Restricted Subsidiary to, comply with all laws, rules, regulations and orders of any  Governmental  Authority  applicable to  it  or  its  Property,  except  where  the  failure  to  do  so,  individually or in the aggregate, could not reasonably be expected to result in a Material Adverse  Effect.  The Parent  and  the Borrower  will  maintain  in  effect  and  enforce such  policies  and  procedures,  if  any,  as  they  reasonably  deem  appropriate,  in  light  of  their  businesses  and  international activities (if any), to ensure compliance by the Parent, the Borrower, the Parent’s                                          83  

 

   other Subsidiaries and each of their respective directors, officers, employees and agents with Anti- Corruption Laws and applicable Sanctions.         Section 8.10 Environmental Matters.               (a)   The Parent and the Borrower shall at their sole expense:  (i) comply, and  cause their Properties  and  operations  and each other Restricted Subsidiary  and  each other  Restricted Subsidiary’s Properties and operations to comply, with all applicable Environmental  Laws, to the extent the breach thereof could be reasonably expected to have a Material Adverse  Effect; (ii) not Release or threaten to Release, and cause each Restricted Subsidiary not to Release  or threaten to Release, any Hazardous Material on, under, about or from any of the Parent’s or its  Restricted Subsidiaries’ Properties or any other property offsite the Property to the extent caused  by  the Parent’s or  any  of  its Restricted Subsidiaries’  operations  except  in  compliance  with  applicable Environmental Laws, to the extent such Release or threatened Release could reasonably  be expected to have a Material Adverse Effect; (iii) timely obtain or file, and cause each other  Restricted Subsidiary to timely obtain or file, all Environmental Permits, if any, required under  applicable Environmental Laws to be obtained or filed in connection with the operation or use of  the Parent’s or its Restricted Subsidiaries’ Properties, to the extent such failure to obtain or file  could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and  diligently  prosecute  to  completion,  and  cause  each other Restricted 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”) to the extent any Remedial Work is required or  reasonably necessary under applicable Environmental Laws because of or in connection with the  actual or suspected past, present or future Release or threatened Release of any Hazardous Material  on, under, about or from any of the Parent’s or its Restricted Subsidiaries’ Properties, to the extent  failure to do so could reasonably be expected to have a Material Adverse Effect; (v) conduct, and  cause each other Restricted Subsidiaries to conduct, their respective operations and businesses in  a manner that will not expose any Property or Person to Hazardous Materials that could reasonably  be expected to cause the Parent or its Restricted Subsidiaries to owe damages or compensation that  could reasonably be expected to cause a Material Adverse Effect; and (vi) establish and implement,  and shall cause each other Restricted Subsidiary to establish and implement, such procedures as  may  be  necessary  to  continuously  determine  and  assure  that  the Parent’s and  its Restricted  Subsidiaries’ obligations under this Section 8.10(a) are timely and fully satisfied, to the extent  failure to do so could reasonably be expected to have a Material Adverse Effect.               (b)   If the Parent or any Restricted Subsidiary receives written notice of any  action,  investigation  or  inquiry  by  any  Governmental  Authority  or  any  threatened  demand  or  lawsuit by any Person against the Parent or its Restricted Subsidiaries or their Properties, in each  case in connection with any Environmental Laws, the Borrower will within fifteen (15) days after  any Responsible Officer learns thereof give written notice of the same to the Administrative Agent  if the Parent or the Borrower could reasonably anticipate that such action will result in liability  (whether individually or in the aggregate) in excess of the Threshold Amount, not fully covered  by insurance, subject to normal deductibles.               (c)   In connection with any acquisition by any Credit Party of any Oil and Gas  Property, other than an acquisition of additional interests in Oil and Gas Properties in which such                                         84  

 

   Credit Party previously held an interest, to the extent any Credit Party obtains or is provided with  same, the Borrower will, and will cause each other Credit Party to, promptly following any Credit  Party’s obtaining or being provided with the same, deliver to the Administrative Agent such final  and non-privileged material environmental reports of such Oil and Gas Properties as are reasonably  requested  by  the  Administrative  Agent,  the  delivery  of  which  will  not  violate  any  applicable  confidentiality agreement entered into in good faith with an unaffiliated third party.         Section 8.11 Further Assurances.                 (a)   The Parent and the Borrower at their sole expense will, and will cause each  other Restricted Subsidiary to, promptly execute and deliver to the Administrative Agent all such  other documents, agreements and instruments reasonably requested by the Administrative Agent  to  comply  with,  cure  any  defects  or  accomplish  the  conditions  precedent,  covenants  and  agreements of the Parent or any Restricted Subsidiary, as the case may be, in the Loan Documents,  including the  Notes,  or  to  further  evidence  and  more  fully  describe  the  collateral  intended  as  security  for  the  Indebtedness,  or  to  correct  any  omissions  in  this  Agreement  or  the  Security  Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve  any Liens created pursuant to this Agreement or any of the Security Instruments or the priority  thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably  necessary or appropriate in connection therewith.               (b)   The Parent and the Borrower hereby authorize the Administrative Agent to  file one or more financing or continuation statements, and amendments thereto, relative to all or  any part of the Mortgaged Property and other collateral under the Security Instruments without the  signature of the Parent, the Borrower or any other Guarantor where permitted by law.  A carbon,  photographic  or  other  reproduction  of  the  Security  Instruments  or  any  financing  statement  covering such Mortgaged Property, collateral or any part thereof shall be sufficient as a financing  statement where permitted by law.  The Parent and the Borrower acknowledge and agree that any  such financing statement may describe the collateral as “all assets” or “all personal property” of  the applicable Credit Party or words of similar effect as may be required by the Administrative  Agent.         Section 8.12 Reserve Reports.                 (a)   On  or  before March 1st  and September 1st  of  each  year,  commencing  September 1, 2018, the Borrower shall furnish to the Administrative Agent and the Lenders a  Reserve Report evaluating the Oil and Gas Properties of the Credit Parties as of the immediately  preceding January 1st and July 1st.  The Reserve Report as of January 1 of each year shall be  prepared by one or more Approved Petroleum Engineers, and each other Reserve Report required  hereunder shall be prepared by or under the supervision of the chief engineer of the Borrower who  shall certify such Reserve Report to have been prepared in accordance with the procedures used in  the immediately preceding January 1 Reserve Report.               (b)   In the event of an Interim Redetermination, the Borrower shall furnish to  the Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision  of the chief engineer of the Borrower who shall certify such Reserve Report to have been prepared  in accordance with the procedures used in the immediately preceding January 1 Reserve Report.                                          85  

 

   For any Interim Redetermination requested by the Administrative Agent or the Borrower pursuant  to Section 2.07(b), the Borrower shall provide such Reserve Report with an “as of” date as required  by the Administrative Agent as soon as possible, but in any event no later than thirty (30) days  following the receipt of such request (or, in the case of an Interim Redetermination requested by  the Borrower, such other date as the Administrative Agent may agree).               (c)   With the delivery of each such Reserve Report, the Borrower shall provide  to the Administrative Agent and the Lenders a certificate of the Borrower confirming that in all  material  respects: (i) the  Parent and  the  Borrower  acted  in  good  faith  and  utilized  reasonable  assumptions at the time such information was furnished in the preparation of such Reserve Report  and that to their knowledge there are no statements or conclusions in such Reserve Report which  are based upon or include material misleading information or fail to take into account material  information known to them regarding the matters reported therein, (ii) the Parent or its Restricted  Subsidiaries own good and defensible title to the Oil and Gas Properties evaluated in such Reserve  Report  as  required  in  this  Agreement  and  such  Properties  are  free  of  all  Liens  except  Liens  permitted by Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis  there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in  Section 7.18 with respect to its Oil and Gas Properties evaluated in such Reserve Report which  would require the Parent or any Restricted 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 the Parent’s or any Restricted Subsidiary’s Proved Oil and Gas  Properties have been sold since the date of the last Borrowing Base determination except as set  forth  on  an  exhibit  to  the  certificate,  which  certificate  shall  list  all  of  its  Proved  Oil  and  Gas  Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached  to the certificate is a list of all marketing agreements entered into subsequent to the later of the  date hereof or the most recently delivered Reserve Report which the Borrower could reasonably  be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on  the date hereof, (vi) attached thereto is a schedule of the Proved Oil and Gas Properties evaluated  by such Reserve Report that are Mortgaged Properties which sets out the percentage of the total  value of the Proved Oil and Gas Properties evaluated in such Reserve Report and demonstrates  that the total value of such Proved Oil and Gas Properties is in compliance with Section 8.14(a),  and (vii) to the extent, if any, that any Oil and Gas Properties included in such report are owned  by a Credit Party that is not a Qualified ECP Counterparty, such Credit Party and such Oil and Gas  Properties are specified in such report.         Section 8.13 Title Information.                 (a)   On or before the delivery to the Administrative Agent and the Lenders of  each Reserve Report required by Section 8.12(a), the Borrower will deliver title information in  form and substance acceptable to the Administrative Agent covering enough of the Oil and Gas  Properties evaluated by such Reserve Report that were not included in the immediately preceding  Reserve  Report,  so  that  the  Administrative  Agent  shall  have  received  together  with  title  information previously delivered to the Administrative Agent, satisfactory title information on at  least 80% of the total value of the Proved Oil and Gas Properties evaluated by such Reserve Report.               (b)   If  the  Borrower  has  provided  title  information  for  additional  Properties  under Section 8.13(a), the Borrower shall, within 60 days after notice from the Administrative                                         86  

 

   Agent  that  title  defects  or  exceptions (excluding  Excepted  Liens) exist  with  respect  to  such  additional  Properties,  either (i) cure  any  such  title  defects  or  exceptions  (including  defects  or  exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii)  substitute acceptable Mortgaged Properties with no title defects or exceptions (excluding Excepted  Liens) having an equivalent value or (iii) deliver title information in form and substance acceptable  to the Administrative Agent so that the Administrative Agent shall have received, together with  title information previously delivered to the Administrative Agent, satisfactory title information  on at least 80% of the total value of the Proved Oil and Gas Properties evaluated by such Reserve  Report.               (c)   If the Borrower fails to cure any title defect (excluding Excepted Liens)  requested by the Administrative Agent to be cured within the 60-day period or the Borrower fails  to comply with the requirements to provide acceptable title information covering 80% of the total  value of the Proved Oil and Gas Properties evaluated in the most recent Reserve Report, such  failure 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.  Such remedy is to have the Administrative  Agent declare  that such  unacceptable  Mortgaged  Property  shall  not  count  towards  the  80%  requirement and for the Administrative Agent to send a notice to the Borrower and the Lenders  that the then outstanding Borrowing Base shall be reduced by an amount as determined by the  Required  Lenders to  cause the Borrower to  be in compliance with  the requirement to  provide  acceptable title information on 80% of the total value of the Proved Oil and Gas Properties.  This  new Borrowing Base shall become effective immediately after receipt of such notice.         Section 8.14 Collateral and Guaranty Agreements.                 (a)   In  connection  with  each  redetermination  of  the  Borrowing  Base,  the  Borrower  shall  review  the  Reserve  Report  and  the  list  of  current  Mortgaged  Properties  (as  described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties represent at least  85%  of  the  total  value  of  the Proved 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  85% of such total value, then the Borrower shall, and shall cause the Parent and its other Restricted  Subsidiaries to, grant, no later than thirty (30) days after delivery of the certificate required under  Section 8.12(c) (or  such  longer  period  acceptable  to  the  Administrative  Agent),  to  the  Administrative Agent as security for the Indebtedness first priority Liens and security interests  (subject only to Liens permitted by Section 9.03) on additional Proved Oil and Gas Properties of  the Credit Parties that are not already subject to a Lien of the Security Instruments such that after  giving effect thereto, the Mortgaged Properties will represent at least 85% of such total value.  All  such Liens will be created and perfected by and in accordance with the provisions of deeds of trust,  security  agreements  and  financing  statements  or  other  Security  Instruments,  all  in  form  and  substance  reasonably  satisfactory  to  the  Administrative  Agent  and  in  sufficient  executed  (and  acknowledged where necessary or appropriate) counterparts for recording purposes.  In order to  comply with the foregoing, if any Restricted Subsidiary places a Lien on its Oil and Gas Properties  and such Restricted Subsidiary is not a Guarantor, then it shall become a Guarantor and comply  with Section 8.14(b).                                         87  

 

               (b)   In the event that (i) the Parent creates or acquires any Restricted Subsidiary  other than an Immaterial Subsidiary (including by designating any Unrestricted Subsidiary as a  Restricted  Subsidiary  pursuant  to  the  terms  hereof)  or  (ii)  any  Domestic  Subsidiary  incurs  or  guarantees any Funded Debt, the Borrower shall, or shall cause the Parent to, promptly cause such  Restricted Subsidiary (if other than the Borrower) to execute and deliver the Guaranty Agreement  and  the  Security  Agreement  (or  supplements  thereto  or  assumption  agreements  thereto,  as  applicable) pursuant to which such Restricted Subsidiary shall guarantee the Indebtedness and  grant liens and security interests in its personal property that constitutes Collateral (as defined in  the Security Agreement). In the event that the Parent creates or acquires any Restricted Subsidiary  other than an Immaterial Subsidiary, the Credit Party that owns the Equity Interests in such new  Restricted Subsidiary shall execute and deliver a supplement to the Security Agreement pursuant  to  which such Credit Party will confirm  the pledge of all of the Equity  Interests of such new  Restricted Subsidiary to secure the  Indebtedness.  In  connection with  the foregoing, the Credit  Parties shall (i) deliver original stock certificates, if any, evidencing the Equity Interests of such  new Restricted Subsidiary, together with an appropriate undated stock power for each certificate  duly executed in blank by the registered owner thereof and (ii) execute and deliver such other  additional closing documents, certificates and legal opinions as shall reasonably be requested by  the  Administrative  Agent.  Parent  and  Borrower  shall  cause  any  Subsidiary  (if  other  than  the  Borrower) that guarantees the obligations with respect to any Permitted Senior Unsecured Notes  to become a Guarantor by executing and delivering to the Administrative Agent an assumption  agreement with respect to the Guaranty Agreement.               (c)   The Parent will at all times cause the other material tangible and intangible  assets  of  the  Parent  and  each  Restricted  Subsidiary  (including,  without  limitation,  all  Swap  Agreements) purported to be pledged as collateral pursuant to the Security Instruments to be or be  made subject to a Lien under the Security Instruments.               (d)   Promptly following the acquisition by any Person of one hundred percent  (100%) of the outstanding Equity Interests in the Borrower, the Borrower will give notice of such  event to the Administrative Agent and the Borrower will cause such Person to become a party to  this Agreement by executing and delivering a Parent Joinder Agreement to the Administrative  Agent.  Pursuant to such Parent Joinder Agreement and the Guaranty Agreement as supplemented  thereby, the Parent will guarantee the Indebtedness.  Pursuant to such Parent Joinder Agreement  and  the  Security  Agreement  as  supplemented  thereby,  the  Parent  will grant  liens  and  security  interests in its personal property that constitutes Collateral (as defined in the Security Agreement),  including all of its Equity Interests in the Borrower to secure the Indebtedness.  In connection with  the foregoing, the Parent will (i) deliver the original stock certificates, if any, evidencing its Equity  Interests in the Borrower, together with an appropriate undated stock power for each certificate  duly  executed  in  blank  by  Parent  and  (ii)  execute  and  deliver  such  other  additional  closing  documents, certificates and legal opinions as shall reasonably be requested by the Administrative  Agent.               (e)   Notwithstanding  any  provision  in any  of  the Loan  Documents to  the  contrary, in no event is any Building (as defined in the applicable Flood Insurance Regulations) or  Manufactured (Mobile) Home (as defined in the applicable Flood Insurance Regulations) owned  by any Credit Party included in the Mortgaged Property and no Building or Manufactured (Mobile)  Home shall be encumbered by any Security Instrument; provided that (i) the applicable Credit                                         88  

 

   Party’s interests in all lands and Hydrocarbons situated under any such Building or Manufactured  (Mobile) Home shall not be excluded from the Mortgaged Property and shall be encumbered by  all applicable Security Instruments and (ii) the Borrower shall not, and shall not permit the Parent  nor  any  of  its  other  Restricted  Subsidiaries  to, permit  to  exist  any  Lien  on  any  Building  or  Manufactured (Mobile) Home except Liens permitted by Section 9.03.         Section 8.15 ERISA  Compliance.  The Parent  and  the Borrower  will (a) promptly  furnish, and will cause each other Restricted Subsidiary to promptly furnish, to the Administrative  Agent after request therefor by the Administrative Agent, copies of the most recent annual report  with respect to each Plan or any trust created thereunder, and (b) promptly upon a Responsible  Officer of Parent's knowledge of (i) the occurrence of any “prohibited transaction,” as described  in section 406 of ERISA or in section 4975 of the Code for which no exception exists or is available  by statute, regulation, administrative exemption, or otherwise, in connection with any Plan or any  trust created thereunder and that is reasonably expected to result in liability to the Parent or any  Restricted Subsidiary that is expected to have a Material Adverse Effect, (ii) the occurrence of an  ERISA Event that is expected to have a Material Adverse Effect or (iii) the present value of all  accumulated benefit obligations under each Plan (based on the assumptions used for purposes of  Accounting  Standards  Codification  No.  715:  Compensation-Retirement  Benefits,  or  any  applicable successor),  as  of  the  date  of  the  most  recent  financial  statements  reflecting  such  amounts, exceeding the fair market value of the assets of such Plan allocable to such accrued  benefits, if such excess is reasonably expected to have a Material Adverse Effect, promptly furnish  to the Administrative Agent a written notice  specifying the nature thereof, what action the Parent,  the Restricted Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto,  and, when known by a Responsible Officer of Parent, any action taken or proposed by the Internal  Revenue Service, the Department of Labor or the PBGC with respect thereto.         Section 8.16 Unrestricted Subsidiaries.  The Parent and the Borrower will:               (a)   cause the management, business and affairs of each of the Parent and its  Restricted Subsidiaries to be conducted in such a manner (including, without limitation, by keeping  separate books of account, furnishing separate financial statements of Unrestricted Subsidiaries to  creditors and potential creditors thereof and by not permitting Properties of the Borrower and the  Parent and its other respective Restricted Subsidiaries to be commingled) so that each Unrestricted  Subsidiary that is a corporation will be treated as a corporate entity separate and distinct from the  Parent and the Restricted Subsidiaries; provided that, notwithstanding the foregoing, the Parent  and  the  Restricted  Subsidiaries  may  enter  into  servicing  arrangements  with  Unrestricted  Subsidiaries so long as such arrangements are permitted under Section 9.13.               (b)   not,  and not  permit  any  of the Restricted Subsidiaries to,  incur, assume,  guarantee or be or become liable for any Funded Debt of any of the Unrestricted Subsidiaries.                (c)   not permit any Unrestricted Subsidiary to hold any Equity Interest in, or any  Funded Debt of, the Parent or any Restricted Subsidiary.         Section 8.17 Commodity  Exchange  Act Keepwell  Provisions.  The  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 Credit  Party that  is  not  an  “eligible  contract                                         89  

 

   participant”  under  the  Commodity  Exchange  Act in  order  for  such  Credit  Party  to  honor  its  obligations under the Guaranty Agreement and any other Loan Documents with respect to Swap  Agreements (provided, however, that the Borrower shall only be liable under this Section 8.17 for  the maximum amount of such liability that can be hereby incurred without rendering its obligations  under this Section 8.17, or otherwise under this Agreement or any Loan Document, as it relates to  such  other  Credit  Parties,  voidable  under  applicable  law  relating  to  fraudulent  conveyance  or  fraudulent transfer, and not for any greater amount). The obligations of the Borrower under this  Section 8.17 shall remain in full force and effect until all Indebtedness is paid in full to the Lenders,  the Administrative Agent, the Issuing Bank and all Secured Swap Providers, and all of the Lenders’  Commitments  are  terminated.  The  Borrower  intends  that  this Section 8.17 constitute,  and  this  Section 8.17 shall  be  deemed  to  constitute,  a “keepwell,  support,  or  other  agreement” for  the  benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity  Exchange Act.         Section 8.18 Post-Closing Delivery of Account Control Agreements.  Notwithstanding  the requirements set forth in Section 4.10 of the Security Agreement, the Credit Parties shall, no  later than thirty (30) days after the Effective Date (or such later date as the Administrative Agent  may agree in its sole discretion), with respect to each Deposit Account, Commodity Account and  Securities Account (each as defined in the Security Agreement) of the Credit Parties in existence  on the Effective Date (other than, in each case, De Minimis Accounts (as defined in the Security  Agreement)), deliver to the Administrative Agent duly executed Control Agreements (as defined  in  the  Security  Agreement) in  accordance  with  and  to  the  extent  required  by  the  Security  Agreement.                                      ARTICLE IX                             NEGATIVE COVENANTS         Until the Commitments have expired or terminated and the principal of and interest on each  Loan and all fees payable hereunder and all other amounts payable under the Loan Documents  have  been  paid  in  full  and  all  Letters  of  Credit  have  expired  or  terminated  and  all  LC  Disbursements shall have been reimbursed, each of the Borrower and (to the extent that the Parent  is not the Borrower) the Parent covenants and agrees with the Lenders that:         Section 9.01 Financial Covenants.                 (a)   Ratio of Total Funded Debt to EBITDAX.  The Parent and the Borrower  will not permit, as of the last day of any Rolling Period commencing with the Rolling Period  ending March 31, 2018, the Parent’s ratio of (i) Total Funded Debt as of such day to (ii) EBITDAX  for the Rolling Period ending on such day to be greater than 4.00 to 1.00.               (b)   Current Ratio.  The Parent and the Borrower will not permit, as of the last  day  of  any Rolling  Period  commencing  with  the  Rolling  Period  ending  March  31,  2018, the  Parent’s ratio  of (i) consolidated  current  assets of  the  Parent  and  its Consolidated  Restricted  Subsidiaries (including the unused amount of the total Commitments (but only to the extent that  the Borrower is permitted to borrow such amount under the terms of this Agreement, including,  without limitation, Section 6.02 hereof), but excluding non-cash assets under ASC 815 and any                                         90  

 

   cash equity proceeds then being held by the Parent or a Restricted Subsidiary for purposes of  making Restricted Payments pursuant to Section 9.04(a)(v)) to (ii) consolidated current liabilities  of the Parent and its Consolidated Restricted Subsidiaries (excluding non-cash obligations under  ASC 815 and current maturities under this Agreement) to be less than 1.00 to 1.00.          Section 9.02 Debt.  The Parent and the Borrower will not, and will not permit any of the  other Restricted Subsidiaries to, incur, create, assume or suffer to exist any Debt, except:               (a)   the Loans or other Indebtedness arising under the Loan Documents or any  guaranty of or suretyship arrangement for the Loans or other Indebtedness arising under the Loan  Documents.               (b)   Debt of the Parent and its Restricted Subsidiaries existing on the date hereof  that is reflected on Schedule 9.02.               (c)   Debt  under  Capital  Leases or  that  constitutes  Purchase  Money  Debt;  provided that the Debt permitted by this clause (c) shall not exceed, at the time any such Debt is  incurred (and after giving effect to such incurrence),  an aggregate principal amount equal to the  greater of (i) $10,000,000 and (ii) 2.5% of the Borrowing Base in effect at such time.               (d)   intercompany Debt  between the Parent and any  Restricted Subsidiary or  between Restricted Subsidiaries, provided that such Debt is subordinated to the Indebtedness as  and to the extent provided in the Guaranty Agreement.               (e)   Debt constituting a guaranty by the Parent or by a Restricted Subsidiary of  other Debt permitted to be incurred under this Section 9.02.               (f)   Debt under the Permitted Senior Unsecured Notes and guarantees thereof  by any Credit Party; provided that after giving effect to the issuance thereof, the application of the  proceeds thereof, and any automatic reduction of the Borrowing Base pursuant to Section 2.07(e)  on account thereof: (A) the Parent shall be in pro forma compliance with Section 9.01 as of the  most recently ended fiscal quarter for which financial statements have been or are required to be  delivered pursuant to Section 8.01(a) or Section 8.01(b) and (B) no Event of Default or Borrowing  Base Deficiency shall exist.               (g)   Debt arising from agreements of the Borrower or any Restricted Subsidiary  providing for indemnification, adjustment of purchase price or similar obligations (including earn- outs), in each case entered into in connection with Investments in or Transfers of any business,  assets or Stock permitted hereunder.               (h)   Debt of the Borrower or any Restricted Subsidiary consisting of obligations  to pay insurance premiums incurred in the ordinary course of business.               (i)   other unsecured Funded Debt; provided that the Funded Debt permitted by  this clause (i) shall not exceed, at the time any such Funded Debt is incurred (and after giving  effect to such incurrence), an aggregate principal amount equal to the greater of (i) $10,000,000  and (ii) 2.5% of the Borrowing Base in effect at such time.                                          91  

 

               (j)   Debt  not  permitted  by  the  foregoing clauses (a) through (i) which  is  approved in writing by the Majority Lenders.         Section 9.03 Liens.  The Parent and the Borrower will not, and will not permit any other  Restricted Subsidiary to, create, incur, assume or permit to exist any Lien on any of its Properties  (now owned or hereafter acquired), except:               (a)   Liens securing the payment of any Indebtedness.               (b)   Excepted Liens.               (c)   Liens  securing  Capital  Leases and  Purchase  Money  Debt permitted  by  Section 9.02(c) but only on the Property under lease or the Property purchased, constructed or  improved with such Purchase Money Debt.               (d)   additional Liens on Property (excluding Proved Oil and Gas Properties and  Equity Interests of the Borrower or its Restricted Subsidiaries pledged as Collateral) so long as the  aggregate  principal  amount  of  the  obligations  secured  thereby  does  not  at  any  time  exceed  $5,000,000.   The  Liens  permitted  by  this Section 9.03 shall  be  construed  to  allow  for  Liens  on  the  improvements, fixtures and/or accessions to Property which are permitted to be subject to such  Liens  and  on  the  proceeds  of  such  Property  (including  any  insurance  for  such  property)  as  determined in accordance with the Uniform Commercial Code.          Section 9.04 Dividends  and  Distributions and  Redemptions  of  Permitted  Senior  Unsecured Notes.                 (a)   Dividends and Distributions.  The Parent and the Borrower will not, and  will not permit any other Subsidiary to, declare or make, or agree to pay or make, directly or  indirectly, any Restricted Payment to its Equity Interest holders, except:  (i) the Parent may declare  and pay dividends with respect to its Equity Interests payable solely in additional shares of its  Equity Interests (other than Disqualified Capital Stock); (ii) Subsidiaries may declare and make  Restricted  Payments ratably  with  respect  to  their  Equity  Interests; (iii) the Parent may  make  Restricted  Payments  pursuant  to  and  in  accordance  with  stock  option  plans  or  other equity  incentive or benefit plans for management or employees of the Parent and its Subsidiaries; (iv) the  Parent  may  make  Permitted  Tax  Distributions  in  accordance  with  the  last  sentence  of  this  Section 9.04; (v) the Parent may, substantially contemporaneously with (and in any event within  three (3) Business Days after) its receipt of (A) any Unrestricted Subsidiary Distribution received  directly from any Unrestricted Subsidiary or indirectly from the Borrower or (B) the proceeds of  any Transfer of any Equity Interests in any Unrestricted Subsidiary, make cash distributions or  dividends to its members in an amount not to exceed the amount of the corresponding Unrestricted  Subsidiary  Distribution  or  such  net  proceeds,  respectively; provided that  prior  to  or  contemporaneously with making such cash distribution or dividend described in this clause (v),  the Borrower shall make a principal payment on the Borrowings in an aggregate amount equal to  (1) the  aggregate  amount  of  cash  Investments  made  by  the Parent and/or  the  Restricted  Subsidiaries in such Unrestricted Subsidiary from and after the Effective Date pursuant to Section  9.05(i) minus (2) the aggregate amount of principal payments previously made pursuant to this                                         92  

 

   proviso that were calculated with reference to Investments made pursuant to Section 9.05(i); (vi)  the Borrower may make Restricted Payments to the Parent; (vii) the declaration and payment of  Restricted  Payments  by  the  Borrower  or  a  Restricted  Subsidiary  to  Centennial  Resource  Development  in  amounts  required  for  Centennial  Resource  Development  to  pay,  in  each  case  without duplication, (A) franchise, excise and similar taxes, and other fees, taxes and expenses  required to maintain Centennial Resource Development’s corporate existence; (B) salary, bonus,  severance, expense reimbursement and other benefits payable to,  and indemnities provided on  behalf of, employees, directors, officers, members of management, consultants and independent  contractors of Centennial Resource Development and any payroll, social security or similar taxes  payable in respect thereof; (C) general corporate or other operating, administrative, compliance  and overhead costs and expenses (including expenses relating to auditing and other accounting  matters) of Centennial Resource Development; (D) reasonable (as determined in good faith by the  Borrower) fees and expenses (other than fees and expenses paid to Affiliates of the Borrower)  related  to  any  equity  or  debt  offering  of  Centennial  Resource  Development  (whether  or  not  successful); provided that all or substantially all of the proceeds of such offering are permanently  contributed to the capital of the Borrower; and (E) payments of interest and/or principal on Debt,  the proceeds of which have been contributed to the Borrower or any Restricted Subsidiary and that  has been guaranteed by, or is otherwise, considered Debt of, the Borrower incurred in accordance  with Section 9.02 to the extent such payments are not otherwise prohibited hereunder, (viii) the  non-cash repurchase of Equity Interests in the Borrower, or the repurchase of Equity Interests in  the  Borrower  using  cash  proceeds  from  a substantially  concurrent  contribution  by  Centennial  Resource Development  of common equity, capital  to  the Borrower, in  either case to  effect  an  redemption  or  exchange  pursuant  to  the  terms  of  the  Borrower's  Limited  Liability  Company  Agreement and (ix) the Parent may make cash distributions; provided that, in the case of the this  clause (ix) (A) no Default or Event of Default exists or results from the making of such Restricted  Payment, (B) after giving effect to such Restricted Payment, Liquidity is not less than twenty  percent (20%) of the Borrowing Base then in effect and (C) after giving effect to such Restricted  Payment, the Parent’s ratio of Total Funded Debt (as of such date) to EBITDAX (for the most  recent  Rolling  Period  for  which  financial  statements  have  been,  or  are  required  to  have  been,  delivered pursuant to Section 8.01(a) or (b)) shall not exceed 3.00 to 1.00 on a pro forma basis.   Permitted Tax Distributions may be made quarterly and annually, based on Centennial Resource  Development’s federal income tax filing obligations.               (b)   Redemption of Permitted Senior Unsecured Notes; Amendment of Terms  of Permitted Senior Unsecured Notes Documents.  The Parent and the Borrower will not, and will  not permit any other Credit Party to, prior to the date that is 180 days after the Maturity Date:                       (i)   call, make or offer to make any optional or voluntary Redemption  of or otherwise optionally or voluntarily Redeem  (whether in  whole or in  part) any Permitted  Senior Unsecured Notes, except that, so long as no Event of Default exists, the Borrower may,  substantially contemporaneously with its receipt of any cash proceeds from (A) any issuance of  Permitted Senior Unsecured Notes or (B) any sale of Equity Interests in the Parent (other than  Disqualified Capital Stock), prepay or otherwise Redeem Permitted Senior Unsecured Notes in an  amount no greater than the amount of the net cash proceeds of such issuance of Permitted Senior  Unsecured Notes or such sale of Equity Interests of the Parent; or                                          93  

 

                     (ii)  amend, modify, waive or otherwise change, consent or agree to any  amendment, modification, waiver or other change to, any of the terms of the Permitted Senior  Unsecured Notes Documents (except to the extent a new issuance of Permitted Senior Unsecured  Notes, the proceeds of which were used to Redeem existing Permitted Senior Unsecured Notes  pursuant  to  the  foregoing clause (i),  would  be  permitted  to  have  such  terms  as  so  amended,  modified, waived or otherwise changed) if the effect thereof would be to (A) shorten its maturity  or average life, (B) increase the amount of any payment of principal thereof, (C) increase the rate  or shorten any period for payment of interest thereon, or (D) modify or amend financial or negative  covenants or events of default such that the resulting financial and negative covenants and events  of default in respect thereof, taken as a whole, are more restrictive with respect to the Credit Parties  than the financial and negative covenants and Events of Default in this Agreement without this  Agreement being contemporaneously amended to add similar provisions (as determined in good  faith by senior management of the Parent).         Section 9.05 Investments, Loans and Advances.  The Parent and the Borrower will not,  and will not permit any other Restricted Subsidiary to, make or permit to remain outstanding any  Investments in or to any Person, except that the foregoing restriction shall not apply to:               (a)   Investments as of the Effective Date which are disclosed to the Lenders in  Schedule 9.05.               (b)   accounts receivable arising in the ordinary course of business.               (c)   direct obligations of the United States or any agency thereof, or obligations  guaranteed by the United States or any agency thereof, in each case maturing within one year from  the date of acquisition thereof.               (d)   commercial paper maturing within one year from the date of acquisition  thereof rated in the highest grade by S&P, Moody’s or Fitch Investor Service.               (e)   demand deposits,  and time  deposits  (including  certificates  of  deposit)  maturing within one year from the date of creation thereof, with (or issued by) any Lender or any  office located in the United States of any other bank or trust company which is organized under  the  laws  of the  United  States  or  any  state  thereof,  has  capital,  surplus  and  undivided  profits  aggregating at least $100,000,000 (as of the date of such bank or trust company’s most recent  financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is  set forth from time to time, by S&P or Moody’s, respectively.               (f)   shares of any SEC registered 2a-7 money market fund that has net assets of  at least $500,000,000 and the highest rating obtainable from either Moody’s or S&P.               (g)   Investments (i) made by the Borrower in or to the Guarantors and (ii) made  by the Parent or any Restricted Subsidiary in or to the Borrower or any Guarantor (in each case  including any Person that becomes a Guarantor at or about the time of such Investment).               (h)   subject to the limits in Section 9.07, Investments of the type described in  clause (c) of the definition of “Investment” in direct ownership interests in additional Oil and Gas  Properties and gas gathering systems related thereto or related to farm-out, farm-in, joint operating,                                         94  

 

   joint venture or area of mutual interest agreements, gathering systems, pipelines or other similar  arrangements which are usual and customary in the oil and gas exploration and production business  located within the geographic boundaries of the United States of America.               (i)   Investments  in  Unrestricted Subsidiaries, provided that, at  the time such  Investment is made, (i) no Default, Event of Default or Borrowing Base Deficiency exists or results  from the making of such Investment, (ii) the aggregate amount of such Investments (after giving  effect  to  such  Investment) made under this Section 9.05(i) does  not  exceed the greater of (A)  $30,000,000 and (B) 2.5% of the Borrowing Base then in effect, and (iii) after giving effect to such  Investment, the Borrower’s Liquidity is not less than fifteen percent (15%) of the Borrowing Base  then in effect.               (j)   loans  or  advances  to  employees,  officers  or  directors (i) in  the  ordinary  course of business of the Parent or any of its Restricted Subsidiaries, in each case only as permitted  by applicable law or (ii) to finance or fund capital commitments to purchase Equity Interests in the  Parent pursuant to agreements among the Parent and its Equity Interest holders; provided that the  Investments made  pursuant  to  this clause (j) do not  exceed $2,000,000  in  aggregate  principal  amount at any time outstanding.               (k)   Guarantee obligations permitted by Section 9.02.               (l)   Investments  in  stock,  obligations  or  securities  received  in  settlement  of  debts  arising  from  Investments  permitted  under  this Section 9.05 or  from  accounts  receivable  arising in the ordinary course of business, which Investments are obtained by the Parent or any  Restricted Subsidiary as a result of a bankruptcy or other insolvency proceeding of, or difficulties  in collecting from, the obligor in respect of such obligations.               (m)   other Investments, provided that at the time such Investment is made (and  after  giving  effect  to  such  Investment),  the  aggregate  amount  of  Investments  made  under  this  Section 9.05(m) does not exceed the greater of (i) $20,000,000 and (ii) 2.5% of the Borrowing  Base in effect at such time.               (n)   loans  or  advances  by  the  Borrower  or  any  Restricted  Subsidiary  to  the  Parent  to  the  extent  that  the  Borrower  or  any  Restricted  Subsidiary  could  make  a  Restricted  Payment pursuant to Section 9.04(a)(vii).         Section 9.06 Designation and Conversion of Restricted and Unrestricted Subsidiaries.                 (a)   Unless designated as an Unrestricted Subsidiary on Schedule 7.14 as of the  date hereof or thereafter, assuming compliance with Section 9.06(b), any Person that becomes a  Subsidiary of the Parent or any of its Restricted Subsidiaries shall be classified as a Restricted  Subsidiary.               (b)   The  Borrower  may  designate  by  written  notification  thereof  to  the  Administrative Agent,  any Restricted Subsidiary (other than the Borrower), including a newly  formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after giving  effect, to such designation, neither an Event of Default nor a Borrowing Base Deficiency would  exist, (ii) such  designation  is  deemed  to  be  an  Investment  in  an  Unrestricted  Subsidiary  in  an                                         95  

 

   amount equal to the fair market value as of the date of such designation of the Parent’s direct and  indirect ownership interest in such Subsidiary and such Investment would be permitted to be made  at the time of such designation under Section 9.05(i), and (iii) such Subsidiary is not a “restricted  subsidiary”  or guarantor  with  respect  to  any  Permitted  Senior  Unsecured  Notes.   Except  as  provided in this Section 9.06(b), no Restricted Subsidiary may be redesignated as an Unrestricted  Subsidiary.               (c)   The Borrower may designate any Unrestricted Subsidiary to be a Restricted  Subsidiary if after giving effect to such designation, (i) the representations and warranties of the  Borrower,  the  Parent and  its other Restricted  Subsidiaries  contained  in  each  of  the  Loan  Documents are true and correct on and as of such date as if made on and as of the date of such  redesignation (or, if stated to have been made expressly as of an earlier date, were true and correct  as of such date), (ii) no Default would exist and (iii) the Borrower complies with the requirements  of Section 8.14, Section 8.16 and Section 9.14.         Section 9.07 Nature  of  Business; No  International  Operations.   The Parent  and  the  Borrower  will  not,  and will  not  permit  any other Restricted  Subsidiary  to,  allow  any  material  change to be made in the character of its business as an independent oil and gas exploration and  production company.  From and after the date hereof, the Parent and its Domestic 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  not  located  within  the geographical  boundaries of the United States or of the offshore federal waters of the United States, and the  Parent and the Borrower will not, and will not permit any of the other Restricted Subsidiaries to,  enter into marketing contracts other than in the normal course of, or ancillary to, the exploration  and production business.  The Borrower shall at all times remain organized under the laws of the  United States of America or any State thereof or the District of Columbia.         Section 9.08 Proceeds  of Notes.   The Parent and  the Borrower  will  not  permit  the  proceeds of the Notes to be used for any  purpose other than those permitted by Section 7.21.   Neither the Parent, the Borrower nor any Person acting on behalf of the Borrower has taken or will  take any action which might cause any of the Loan Documents to violate Regulations T, U or X  or any other regulation of the Board or to violate Section 7 of the Securities Exchange Act or any  rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in  effect.  If requested by the Administrative Agent, the Borrower will furnish to the Administrative  Agent on behalf of any Lender included in such request, a statement to the foregoing effect in  conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U,  Regulation T or Regulation X of the Board, as the case may be.  The Borrower will not request  any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that the Parent  and its other Subsidiaries and its or their respective directors, officers, employees and agents shall  not use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment,  promise to pay, or authorization of the payment or giving of money, or anything else of value, to  any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or  facilitating  any  activities,  business  or  transaction  of  or  with  any  Sanctioned  Person,  or in  any  Sanctioned  Country,  or  (c)  in  any  manner  that  would  knowingly  or  negligently  result  in  the  violation of any Sanctions applicable to any party hereto.                                          96  

 

         Section 9.09 ERISA Compliance.  The Parent and the Borrower will not, and will not  permit any other Restricted Subsidiary to, at any time:               (a)   engage in any transaction in connection with which the Parent, a Restricted  Subsidiary or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to  subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D  of the Code, except where such penalty or tax could not reasonably be expected to have a Material  Adverse Effect.               (b)   fail  to  make full  payment  when  due  of  all  amounts  which,  under  the  provisions  of  any  Plan, Multiemployer  Plan, agreement  relating  thereto  or  applicable  law,  the  Parent, a Restricted Subsidiary or any ERISA Affiliate is required to pay as contributions thereto,  except where such failure could not reasonably be expected to have a Material Adverse Effect.         Section 9.10 Sale or Discount of Receivables.  Except for the sale of defaulted notes or  accounts receivable in connection with the compromise or collection thereof and not in connection  with any financing transaction, the Parent and the Borrower will not, and will not permit any other  Restricted Subsidiary to, sell (with or without recourse) any of its notes receivable or accounts  receivable to any Person other than Borrower or any Guarantor.         Section 9.11 Mergers, Etc.  The Parent and the Borrower will not, and will not permit  any other Restricted Subsidiary to, merge into or with or consolidate with any other Person, or  permit  any  other  Person  to  merge  into  or  consolidate  with  it,  or Transfer (whether  in  one  transaction or in a series of transactions) all or substantially all of its Property to any other Person  (whether now owned or hereafter acquired) (any such transaction, a “consolidation”), or liquidate  or dissolve; provided that (a) any Restricted Subsidiary (other than the Borrower) may participate  in a consolidation with the Borrower or the Parent (provided that the Borrower or the Parent shall  be the continuing or surviving entity), (b) any Restricted Subsidiary (other than the Borrower) that  does  not  own  any Proved Oil  and Gas  Property, commodity Swap Agreements  or  any Equity  Interests  in  a  Subsidiary  that  directly  or  indirectly  owns  any  Proved  Oil  and  Gas  Property  or  commodity Swap Agreements may participate in a liquidation, (c) the Borrower or any Restricted  Subsidiary may participate in a consolidation with another Restricted Subsidiary (provided that  the  Borrower is  the  continuing  or  surviving  entity  if  party  to  such  consolidation)  and  (d)  the  Borrower or any Restricted Subsidiary may participate in a consolidation with another Person that  was first designated a Restricted Subsidiary (and which designation constituted an “Investment”  and was permitted by Section 9.05) at the time of such consolidation); provided that (i) if the  Borrower is party to such consolidation, the Borrower must be the continuing or surviving entity  and (ii) if a Restricted Subsidiary is party to such consolidation, such Restricted Subsidiary must  be the continuing or surviving entity.         Section 9.12 Sale of Properties and Termination of Swap Agreements.  The Parent and  the Borrower will not, and will not permit any other Restricted Subsidiary to, sell, assign, farm- out, convey or otherwise transfer (collectively, a “Transfer”) any Property to any Person other  than a Credit Party or to enter into any Swap Monetization in respect of commodities except for:               (a)   the sale of Hydrocarbons in the ordinary course of business;                                           97  

 

               (b)   farmouts of undeveloped acreage and undeveloped depths and Transfers in  connection with such farmouts;               (c)   Transfers of  equipment and  other  personal  property that  is  no  longer  necessary for the business of the Parent or such Restricted Subsidiary or is replaced by equipment  or other personal property of at least comparable value and use;               (d)   Transfers  of  Oil  and  Gas  Properties  to  which  no  Proved  Reserves  are  attributed, and Transfers of any of the Equity Interests in any Unrestricted Subsidiary;               (e)   Transfers not permitted under the preceding subsections (a) through (d) of  any other Oil and Gas Property or any interest therein or of Equity Interests in any Restricted  Subsidiary that owns Oil and Gas Properties other than the Borrower, and Swap Monetizations;  provided that                     (i)   if a Borrowing Base Deficiency exists at the time of such Transfer  or Swap Monetization, then the cash consideration received by any Credit Party in respect of such  Transfer or Swap Monetization shall be applied first to prepay Loans and/or cash collateralize LC  Exposure until such Borrowing Base Deficiency is eliminated in full;                     (ii)  no Event of Default exists or results from such Transfer or Swap  Monetization;                     (iii) at least 75% of the consideration received in respect of any such  Transfer of Oil and Gas Properties or any interest therein or of any such Restricted Subsidiary shall  be  cash,  rights  with  respect  to  post-closing  settlement  or  indemnification  obligations  of  the  transferee  or  its  Affiliates,  or  (provided  no  Borrowing  Base  Deficiency  will  exist  after  the  application of the cash proceeds of such Transfer) new Oil and Gas Properties acceptable to the  Administrative Agent in its sole discretion acquired, and the total of all such consideration received  in respect of any such Transfer shall be equal to or greater than the fair market value of the Oil and  Gas Properties, interests therein and/or Restricted Subsidiaries that are the subject of such Transfer  as  reasonably  determined  by  the  Parent and/or  the  Borrower (and,  if  requested  by  the  Administrative  Agent,  the  Borrower  shall  deliver  a  certificate  of  a  Responsible  Officer  of  the  Borrower certifying to such determination);                     (iv)  the consideration received in respect of any such Swap Monetization  shall be equal to or greater than the fair market value of the consideration provided by the Credit  Parties in such transaction as reasonably determined by the Parent and/or the Borrower (and, if  requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible  Officer of the Borrower certifying to such determination);                     (v)   if the aggregate value (which, for purposes hereof, shall mean the  value the Administrative Agent attributes to such Oil and Gas Property and/or Swap Agreement  for purposes of the most recent determination of the Borrowing Base (which Borrowing Base was  approved by the requisite Lenders in accordance with Section 2.07)) of such Oil and Gas Properties  Transferred, when aggregated with the Swap Monetization of Swap Agreements pursuant to the  terms of this Agreement, since the later of (A) the last Scheduled Redetermination Date and (B)  the date that the Borrowing Base was last adjusted pursuant to this Section 9.12(e)(v), is in excess                                         98  

 

   of  five  percent  (5%)  of  the  Borrowing  Base,  then  the  Borrowing  Base  will  be  automatically  reduced by an amount determined by the Administrative Agent and approved by the Required  Lenders,  which  redetermined  Borrowing  Base  shall  be  effective  upon  delivery  by  the  Administrative Agent of the related New Borrowing Base Notice under Section 2.07(d), and if a  Borrowing Base Deficiency exists after such reduction in the Borrowing Base, the Borrower shall  prepay Borrowings in accordance with Section 3.04(c)(iii);                      (vi)  if any such Transfer is  of a Restricted Subsidiary (other than the  Borrower) owning Oil and Gas Properties, such Transfer shall include all the Equity Interests of  such Restricted Subsidiary; and                     (vii) for  purposes  of  this Section 9.12(e),  any  Oil  and  Gas  Property  owned by a Restricted Subsidiary that is designated or redesignated as an Unrestricted Subsidiary  pursuant to Section 9.06(b) shall be deemed to be Transferred by such Subsidiary to a Person that  is not a Credit Party at the time of such designation.   For purposes  of this Section 9.12, “Swap Monetization” means  the liquidation, monetization,  unwinding, termination or transfer (by novation or otherwise) of any commodity Swap Agreement  taken  into  account  by  the  Lenders  in  determining  the  most  recent  Borrowing  Base,  or  the  amendment of any such Swap Agreement in any way that could reasonably be expected to reduce  the Borrowing Base value thereof, provided that none of the following shall constitute a Swap  Monetization: (w) the novation of such Swap Agreement from one Credit Party to another Credit  Party, with an Approved Counterparty being the “remaining party” for purposes of such novation,  (x)  the  novation  of  such  Swap  Agreement  from  the  existing  counterparty  to  an  Approved  Counterparty, with the Borrower or the applicable Credit Party being the “remaining party” for  purposes of such novation, (y) the termination of such Swap Agreement at the end of its stated  term,  or  (z)  the  early  termination  of  a  Swap  Agreement  if,  upon  such  early  termination,  it  is  replaced, in  a substantially contemporaneous  transaction, with  one or more Swap Agreements  covering Hydrocarbons of the type that were hedged pursuant to such replaced Swap Agreements  with notional volumes, prices and tenors not less favorable to the Borrower or such Credit Party  as those set forth in such replaced Swap Agreements and without cash payments to any Credit  Party in connection therewith.         Section 9.13 Transactions with Affiliates.  The Parent and the Borrower will not, and will  not  permit  any  other  Restricted  Subsidiary  to,  enter  into  any  transaction,  including,  without  limitation, any Transfer of Property or the rendering of any service, with any Affiliate involving  aggregate  consideration  in  excess  of  $5,000,000 (other  than  the  Credit  Parties)  unless  such  transactions are otherwise not prohibited under this Agreement and are upon fair and reasonable  terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a  Person not an Affiliate, provided that the restrictions set forth in this Section 9.13 shall not apply  to (a) Investments  permitted  by Section 9.05,  (b)  the  execution  and  delivery  of  any  Loan  Document, (c) transactions listed on Schedule 9.13, (d) payments made pursuant to Section 9.04(a)  or otherwise expressly permitted under this Agreement, (e) the issuance and sale of Equity Interests  in  the  Parent  and  any  amendments  to  the  terms  of  any  Equity  Interests  issued  by  the  Parent  (excluding in each case any such Equity Interests that would be, or any amendments that would  cause any such Equity  Interests to become, Disqualified Capital Stock, (f) the performance of  employment, equity award, equity option or equity appreciation agreements, plans or other similar                                         99  

 

   compensation or benefit plans or arrangements entered into by any Credit Party in the ordinary  course of its business with its employees, officers and directors and (g) reasonable and customary  fees and compensation to, and indemnity provided on behalf of, officers, directors, and employees  of any Credit Party in their capacity as such).         Section 9.14 Subsidiaries.  The Parent and the Borrower will not, and will not permit any  other Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary or redesignate  an Unrestricted Subsidiary as a Restricted Subsidiary unless the Borrower gives prompt written  notice  to  the  Administrative  Agent  of  such  creation  or  acquisition  and  complies  with  Section 8.14(b).  The Borrower shall not, and shall not permit the Parent or any other Restricted  Subsidiary to, Transfer any Equity Interests in any Restricted Subsidiary except in compliance  with Section 9.12.   Neither  the Parent nor  any  Restricted  Subsidiary  shall  have  any  Foreign  Subsidiaries.  The Parent will not permit any Person other than the Parent or another Credit Party  to own any Equity Interests in any Guarantor.         Section 9.15 Negative Pledge Agreements; Dividend Restrictions.  The Parent and the  Borrower will not, and will not permit any other Restricted Subsidiary to, create, incur, assume or  suffer to exist any contract, agreement or understanding (other than (a) this Agreement and the  Security  Instruments,  (b)  agreements  with  respect  to  Purchase  Money  Debt or  Capital  Leases  secured by Liens permitted by Section 9.03(c), but then only with respect to Property which is the  subject of such Capital Lease or Purchase Money Debt, (c) customary restrictions and conditions  with respect to the sale or disposition of Property or Equity Interests permitted under Section 9.12  pending the  consummation  of  such  sale  or  disposition, (d) any  leases  or  licenses  or  similar  contracts as they affect any Property or Lien subject to a lease or license and (e) agreements and  understandings contained in joint venture agreements or other similar agreements entered into in  the ordinary course of business in respect to the disposition or distribution of assets of such joint  venture), which in any way prohibits or restricts the granting, conveying, creation or imposition of  any Lien on any of its Property in favor of the Administrative Agent for the benefit of itself and  the  Secured  Parties, or  restricts  any  Restricted  Subsidiary  from  paying  dividends  or  making  distributions to the Borrower or any Guarantor.         Section 9.16 Gas Imbalances, Take-or-Pay or Other Prepayments.  Except as set forth on  Schedule 7.18 or on the most recent certificate delivered pursuant to Section 8.12(c), the Parent  and  the Borrower  will  not,  and  will  not  permit  any other Restricted  Subsidiary  to,  allow  gas  imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the  Parent or any Restricted Subsidiary that would require the Parent or such Restricted Subsidiary to  deliver  Hydrocarbons  at  some  future  time  without  then  or  thereafter  receiving  full  payment  therefor to exceed 2.5% of the aggregate annual production of gas from the Oil and Gas Properties  of  the  Parent  and  its  Restricted  Subsidiaries  during  the  most  recent  calendar  year  (on  an  mcf  equivalent basis).         Section 9.17 Swap Agreements.                 (a)   The  Parent  and  the  Borrower  will  not,  and  will  not  permit  any  other        Restricted Subsidiary to, enter into any Swap Agreements for speculative purposes.  The        Parent and the Borrower will not, and will not permit any other Restricted Subsidiary to,        enter into any Swap Agreements with any Person other than:                                        100  

 

                     (i)   Subject to clause (b) of this Section 9.17, Swap Agreements with an  Approved  Counterparty  in  respect  of  commodities the  notional  volumes of which  (when  aggregated with other commodity Swap Agreements then in effect) do not exceed, as of the date  such Swap Agreement is entered into (and for each month during the period during which such  Swap Agreement is in effect), 85% of the reasonably anticipated production of crude oil, natural  gas  and  natural gas  liquids  and  condensate,  calculated  separately  and,  in  each  case,  as  such  production is forecast from the Parent’s and its Restricted Subsidiaries’ Oil and Gas Properties  constituting Proved Reserves as set forth on the most recent Reserve Report delivered pursuant to  the terms of this Agreement; provided, however, that such Swap Agreements shall not, in any case,  have a tenor of greater than five (5) years.  It is understood that Swap Agreements in respect of  commodities which may, from time to time, “hedge” the same volumes, but different elements of  commodity risk thereof (such as, for example, basis risk and price risk), shall not be aggregated  together when calculating the foregoing limitations on notional volumes or for any other purpose  of this Section.                             (ii)  Upon the signing of a binding purchase and sale agreement for Oil  and  Gas  Properties  (such  Oil  and  Gas  Properties,  the  “Proposed  Acquisition  Properties”)  between such Credit Party and a third party seller, Swap Agreements in respect of commodities  (a) with an Approved Counterparty, (b) with a tenor not to exceed three years commencing with  the first full month after such Swap Agreement is executed, and (c) the notional volumes for which  do  not  exceed 85%  of the  reasonably  anticipated production  from the Proposed  Acquisition  Properties constituting Proved Reserves for each month from each of crude oil, natural gas and  natural  gas  liquids  and  condensate,  calculated  separately and as  set  forth  in  a reserve  report  delivered  to  the  Administrative  Agent  (in  form  and  detail  reasonably  acceptable  to  the  Administrative Agent) covering such Proposed Acquisition Properties; provided that, (x) upon the  earlier to occur of (1) the 10th day after such purchase and sale agreement is terminated or any  Credit Party otherwise knows that such purchase and sale agreement shall not be consummated  and (2) the 90th day after the date upon which the applicable purchase and sale agreement was  entered into in each case with such extensions as agreed to by the Administrative Agent in its sole  discretion,  all  Swap  Agreements entered  into  under  this Section  9.17(a)(ii) that  would  not  otherwise have been permitted to be entered into under Section 9.17(a)(i) above (at the time entered  into) will be unwound or otherwise terminated, (y) notwithstanding anything to the contrary herein,  the  notional  volumes  for Swap  Agreements  entered  into  under  this Section  9.17(a)(ii) (when  aggregated with other commodity Swap Agreements then in effect pursuant to Section 9.17(a)(i)  other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements)  shall not exceed, as of the date such Swap Agreement is executed, 100% of reasonably anticipated  production from the Credit Party’s Oil and Gas Properties constituting Proved Reserves (as set  forth in the most recent Reserve Report delivered pursuant to the terms of this Agreement and  excluding,  for  the  avoidance  of  doubt,  anticipated  production  from  the  Proposed  Acquisition  Properties) for each month of each of crude oil, natural gas, and natural gas liquids and condensate,  calculated separately and (z) at all times prior to the closing of the applicable acquisition, when  Swap Agreements are outstanding under this Section 9.17(a)(ii), Liquidity shall be no less than  15% of the Borrowing Base then in effect.                     (iii) Swap  Agreements  in  respect  of  interest  rates  with  an  Approved  Counterparty, as follows:                                          101  

 

                           (A)   Swap Agreements effectively converting interest rates from  fixed to floating, the notional amounts of which (when aggregated with all other Swap Agreements  of the Parent and its Restricted Subsidiaries then in effect effectively converting interest rates from  fixed to floating) do not exceed 50% of the then outstanding principal amount of the Credit Parties'  Debt for borrowed money which bears interest at a fixed rate, and which Swap Agreements shall  not, in any case, have a tenor beyond the maturity date of such Debt, and                            (B)   Swap Agreements effectively converting interest rates from  floating to fixed, the notional amounts of which (when aggregated with all other Swap Agreements  of the Parent and its Restricted Subsidiaries then in effect effectively converting interest rates from  floating to fixed) do not exceed 75% of the then outstanding principal amount of the Credit Parties'  Debt for borrowed money which bears interest at a floating rate, and which Swap Agreements  shall not, in any case, have a tenor beyond the maturity date of such Debt.               (b)   Except as otherwise permitted by clause (a)(ii) above, if, after the end of  any  calendar  quarter,  commencing  with  calendar  quarter  ending June  30,  2018,  the  Borrower  determines that the volume of all Swap Agreements in respect of commodities for which settlement  payments were calculated in such calendar quarter (other than Swap Agreements that “hedge” the  same volumes but different elements of commodity risk) exceeded 100% of actual production of  Hydrocarbons  in  such  calendar  quarter,  then  the  Borrower (i) shall  promptly  notify  the  Administrative  Agent  of  such  determination  and (ii) shall, no  later  than 30  days after such  determination (or such longer period acceptable to the Administrative Agent), terminate (only to  the extent such terminations are permitted pursuant to Section 9.12), create off-setting positions,  or otherwise unwind or monetize (only to the extent such unwinds or monetizations are permitted  pursuant  to Section 9.12)  existing  Swap  Agreements  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 quarters.               (c)   In no event shall any Swap Agreement contain any requirement, agreement  or covenant for the Parent or any Restricted Subsidiary to post collateral, credit support (including  in the form of letters of credit) or margin (other than pursuant to the Security Instruments) to secure  their obligations under such Swap Agreement.               (d)   The  Parent  and  the Borrower  will  not,  and  will  not  permit  any other  Restricted Subsidiary to, terminate or monetize any Swap Agreement in respect of commodities  without the prior written consent of the Required Lenders except to the extent such terminations  are permitted pursuant to Section 9.12.               (e)   For  purposes  of  entering  into  or  maintaining  Swap  Agreement  trades  or  transactions  under Section  9.17(a)(i) and Section 9.17(b),  respectively,  forecasts  of  reasonably  anticipated production from the Parent's and its Restricted Subsidiaries' Proved Reserves as set  forth on the most recent Reserve Report delivered pursuant to the terms of this Agreement shall  be deemed to be updated to account for any increase or decrease therein anticipated because of  information  obtained  by  the Parent or  any  of  its Restricted Subsidiaries and  delivered  to  the  Administrative Agent subsequent to the publication of such Reserve Report including, without  limitation, (i) the Parent’s or any of its Restricted Subsidiaries’ internal forecasts of production  decline rates for existing wells, (ii) additions to or deletions from anticipated future production                                        102  

 

   from new wells, (iii) completed dispositions, and (iv) completed acquisitions coming on stream or  failing  to  come  on  stream; provided that  (A)  any  such  supplemental  information  shall  be  reasonably satisfactory to the Administrative Agent and (B) if any such supplemental information  is delivered, such information shall be presented on a net basis (i.e., it shall take into account both  increases and decreases  in anticipated production subsequent to publication of the most recent  Reserve Report).                                    ARTICLE X                        EVENTS OF DEFAULT; REMEDIES         Section 10.01 Events of Default.  One or more of the following events shall constitute an  “Event of Default”:               (a)   the  Borrower  shall  fail  to  pay  any  principal  of any  Loan or  any  reimbursement obligation in respect of any LC Disbursement when and as the same shall become  due and payable, whether at the due date thereof or at a date fixed for prepayment thereof, by  acceleration or otherwise.               (b)   the Borrower shall fail to pay any interest on any Loan or any fee or any  other  amount  (other  than  an  amount  referred  to  in Section 10.01(a))  payable  under  any  Loan  Document, when and as the same shall become due and payable, and such failure shall continue  unremedied for a period of five (5) Business Days.               (c)   any representation or warranty made or deemed made by or on behalf of the  Parent, the  Borrower or  any other Restricted  Subsidiary  in  or  in  connection  with  any  Loan  Document or any amendment or modification of any Loan Document or waiver under such Loan  Document, or in any report, certificate, financial statement or other document furnished pursuant  to or in connection with any Loan Document or any amendment or modification thereof or waiver  thereunder, shall prove to have been incorrect in any material respect when made or deemed made  (or,  to  the  extent  that  any  such  representation  and  warranty  is  qualified  by  materiality,  such  representation and warranty shall prove to have been incorrect when made or deemed made).               (d)   the  Borrower  shall  fail  to  give  notice  of  any  Default  as  required  under  Section 8.02(a), the Parent, the Borrower or any other Restricted Subsidiary shall fail to observe  or perform any covenant, condition or agreement contained in Section 8.01(l), Section 8.02(b),  Section 8.02(c), Section 8.03(a)(i) (with  respect  to  the Parent  and the Borrower), Section 8.14,  Section 8.18 or in Article IX.               (e)   the  Parent, the  Borrower  or  any other Restricted  Subsidiary  shall  fail  to  observe or perform any covenant, condition or agreement contained in this Agreement (other than  those  specified  in Section 10.01(a), Section 10.01(b) or Section 10.01(d))  or  any  other  Loan  Document, and such failure shall continue unremedied for a period of thirty (30) days after the  earlier to occur of (i) a Responsible Officer of the Parent, the Borrower or any other Restricted  Subsidiary having knowledge of such default, or (ii) receipt of notice thereof by the Borrower from  the Administrative Agent.               (f)   the Parent,  the Borrower  or  any other Restricted  Subsidiary  shall  fail  to  make any payment (whether of principal or interest and regardless of amount) in respect of any                                        103  

 

   Material Indebtedness, when and as the same shall become due and payable, and such failure to  pay shall extend beyond any applicable grace period.               (g)   any  event  or  condition  occurs  that  results  in  any  Material  Indebtedness  becoming due prior to its scheduled maturity or that enables or permits (with or without the giving  of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any  trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to  require the Redemption thereof or any offer to Redeem to be made in respect thereof, prior to its  scheduled maturity or require the Parent, the Borrower or any other Restricted Subsidiary to make  a mandatory Redemption offer in respect thereof.               (h)   an involuntary proceeding shall be commenced or an involuntary petition  shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Parent, the  Borrower or any other Restricted 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 the Parent, the Borrower or any other Restricted 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)   the Parent,  the Borrower  or  any other Restricted  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 10.01(h), (iii) apply for or  consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar  official for the Parent, the Borrower or any other Restricted 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)   the Parent, the Borrower or any other Restricted 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 the Threshold Amount (to the extent not covered by independent third party insurance  as  to which  the  insurer  does  not  dispute  coverage)  shall  be  rendered  against  the Parent, the  Borrower, any other Restricted Subsidiary or any combination thereof and the same shall not be  discharged, vacated or stayed within thirty (30) days after becoming a final judgment.               (l)   the Loan Documents after delivery thereof shall for any reason, except to  the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and  enforceable in accordance with their terms against the Borrower or a Guarantor party thereto or  shall be repudiated by any of them, or cease to create a valid and perfected Lien of the priority  required thereby on any of the collateral purported to be covered thereby (except to the extent  permitted by the terms of this Agreement or such Loan Document), or the Parent, the Borrower or  any other Restricted Subsidiary or any of their Affiliates shall so state in writing.                                        104  

 

               (m)   a Change in Control shall occur.               (n)   an ERISA Event shall have occurred that, when taken together with all other  ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse  Effect.          Section 10.02 Remedies.                 (a)   In  the  case  of  an  Event  of  Default  other  than  one  described  in  Section 10.01(h), Section 10.01(i) or Section 10.01(j),  at  any  time  thereafter  during  the  continuance of such Event of Default, the Administrative Agent may, and at the request of the  Majority Lenders, shall, by notice to the Borrower, take either or both of the following actions, at  the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall  terminate immediately, and (ii) declare the Notes and the Loans then outstanding to be due and  payable in whole (or in part, in which case any principal not so declared to be due and payable  may thereafter be declared to be due and payable), and thereupon the principal of the Loans so  declared  to  be due  and  payable,  together  with  accrued  interest  thereon  and  all  fees  and  other  obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the  other Loan Documents (including, without limitation, the payment of cash collateral to secure the  LC Exposure as provided in Section 2.08(j)), shall become due and payable immediately, without  presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice  of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of  an  Event  of  Default  described  in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the  Commitments shall automatically terminate and the Notes and the principal of the Loans then  outstanding, together with accrued interest thereon and all fees and the other obligations of the  Borrower  and  the  Guarantors  accrued  hereunder  and  under the  Notes  and  the  other  Loan  Documents  (including,  without  limitation,  the  payment  of  cash  collateral  to  secure  the  LC  Exposure as provided in Section 2.08(j)), shall automatically become due and payable, without  presentment, demand, protest or other notice of any kind, all of which are hereby waived by the  Borrower and each Guarantor.               (b)   In the case of the occurrence of an Event of Default, the Administrative  Agent and the Lenders will have all other rights and remedies available at law and equity.               (c)   All proceeds realized from the liquidation or other disposition of collateral  or otherwise received after maturity of the Loans, whether by acceleration or otherwise, shall be  applied:                     (i)   first,  to  payment  or  reimbursement  of  that  portion  of  the  Indebtedness constituting fees, expenses and indemnities payable to the Administrative Agent in  its capacity as such;                     (ii)  second, pro rata to payment or reimbursement of that portion of the  Indebtedness constituting fees, expenses and indemnities payable to the Lenders;                     (iii) third, pro rata to payment of accrued interest on the Loans;                                          105  

 

                     (iv)  fourth, pro rata to payment of principal outstanding on the Loans,  LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time,  and Indebtedness referred to in clause (b) of the definition of Indebtedness owing to Secured Swap  Providers;                     (v)   fifth, pro rata to any other Indebtedness;                     (vi)  sixth, to serve as cash collateral to be held by the Administrative  Agent to secure the remaining LC Exposure; and                     (vii) seventh, any excess, after all of the Indebtedness shall have been  indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise required by any  Governmental Requirement.                 Notwithstanding the foregoing, amounts received from any Credit Party that is not  an “eligible contract participant” under the Commodity Exchange Act shall not be applied to any  obligations that constitute Excluded Swap Obligations with respect to such Credit Party (it being  understood, that in the event that any amount is applied to Indebtedness other than Excluded Swap  Obligations as a result of this clause, the Administrative Agent shall make such adjustments as it  determines are appropriate to distributions pursuant to clause fourth above from amounts received  from “eligible contract participants” under the Commodity Exchange Act to ensure, as nearly as  possible,  that  the  proportional  aggregate  recoveries with  respect  to  Indebtedness  described  in  clause fourth above  by  the  holders  of  any  Excluded  Swap  Obligations  are  the  same  as  the  proportional  aggregate recoveries  with  respect  to other  Indebtedness  pursuant  to  clause fourth  above).                                    ARTICLE XI                                  THE AGENTS         Section 11.01 Appointment; Powers.  Each of the Lenders and the Issuing Bank hereby  irrevocably  appoints  the  Administrative  Agent  as  its  agent  and  authorizes  the  Administrative  Agent  to  take  such  actions  on  its  behalf  and  to  exercise  such  powers  as  are  delegated  to  the  Administrative  Agent  by  the  terms  hereof  and  the  other  Loan  Documents,  together  with  such  actions and powers as are reasonably incidental thereto.         Section 11.02 Duties and Obligations of Administrative Agent.  The Administrative Agent  shall not have any duties or obligations except those expressly set forth in the Loan Documents.   Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject  to  any  fiduciary  or  other  implied  duties,  regardless  of  whether  a  Default  has  occurred  and  is  continuing (the use of the term “agent” herein and in the other Loan Documents with reference to  the Administrative Agent is not intended to connote any fiduciary or other implied (or express)  obligations arising under agency doctrine of any applicable law; rather, such term is used merely  as a matter of market custom, and is intended to create or reflect only an administrative relationship  between independent contracting parties), (b) the Administrative Agent shall have no duty to take  any discretionary action or exercise any discretionary powers, except as provided in Section 11.03,  and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to  disclose, and shall not be liable for the failure to disclose, any information relating to the Parent or                                        106  

 

   any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative  Agent or any of its Affiliates in any capacity.  The Administrative Agent shall be deemed not to  have  knowledge  of  any  Default  unless  and  until  written  notice  thereof  is  given  to  the  Administrative Agent by the Borrower or a Lender, and shall not be responsible for or have any  duty  to  ascertain  or  inquire  into (i) any  statement,  warranty  or  representation  made  in  or  in  connection with this Agreement or any other Loan Document, (ii) the contents of any certificate,  report or other document delivered hereunder or under any other Loan Document or in connection  herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or  other  terms  or  conditions  set  forth  herein  or  in  any  other  Loan  Document, (iv) the  validity,  enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any  other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article  VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered  to the Administrative Agent or as to those conditions precedent expressly required to be to the  Administrative  Agent’s  satisfaction, (vi) the  existence,  value,  perfection or  priority  of  any  collateral security or the financial or other condition of the Parent and its Subsidiaries or any other  obligor or guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to  perform any of its obligations hereunder or under any other Loan Document or the performance  or observance of any covenants, agreements or other terms or conditions set forth herein or therein.   For purposes of determining compliance with the conditions specified in Article VI, each Lender  shall be deemed to have consented to, approved or accepted or to be satisfied with, each document  or other matter required thereunder to be consented to or approved by or acceptable or satisfactory  to a Lender unless the Administrative Agent shall have received written notice from such Lender  prior to the proposed closing date specifying its objection thereto.         Section 11.03 Action by Administrative Agent.  The Administrative Agent shall have no  duty to take any discretionary action or exercise any discretionary powers, except discretionary  rights  and  powers  expressly  contemplated  hereby  or  by  the  other  Loan  Documents  that  the  Administrative Agent is required to exercise in writing as directed by the Majority Lenders (or  such  other  number, percentage or  class of the  Lenders  as  shall  be  necessary  under  the  circumstances as provided in Section 12.02) and in all cases the Administrative Agent shall be  fully justified in failing or refusing to act hereunder or under any other Loan Documents unless it  shall (a) receive written instructions from the Majority Lenders or the Lenders, as applicable, (or  such  other  number, percentage or  class of the  Lenders  as  shall  be necessary  under  the  circumstances  as  provided  in Section 12.02)  specifying  the  action  to  be  taken  and (b) be  indemnified to its satisfaction by the Lenders against any and all liability and expenses which may  be incurred by it by reason of taking or continuing to take any such action.  The instructions as  aforesaid and any action taken or failure to act pursuant thereto by the Administrative Agent shall  be  binding  on  all  of the  Lenders.   If  a  Default  has  occurred  and  is  continuing,  then  the  Administrative Agent shall take such action with respect to such Default as shall be directed by  the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03,  provided that, unless and until the Administrative Agent shall have received such directions, the  Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking  such action, with respect to such Default as it shall deem advisable in the best interests of the  Lenders.  In no event, however, shall the Administrative Agent be required to take any action  which  exposes  the  Administrative  Agent  to  personal  liability  or  which  is  contrary  to  this  Agreement, the Loan Documents or applicable law.  If a Default has occurred and is continuing,  no Agent shall have any obligation to perform any act in respect thereof.  The Administrative                                        107  

 

   Agent shall not be liable for any action taken or not taken by it with the consent or at the request  of the Majority Lenders or the Lenders (or such other number, percentage or class of the Lenders  as shall be necessary under the circumstances as provided in Section 12.02), and otherwise the  Administrative Agent shall not be liable for any action taken or not taken by it hereunder or under  any other Loan Document or under any other document or instrument referred to or provided for  herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY  NEGLIGENCE, except for its own gross negligence, bad faith or willful misconduct.         Section 11.04 Reliance  by  Administrative  Agent.   The  Administrative  Agent  shall  be  entitled  to  rely  upon,  and  shall  not  incur  any  liability  for  relying  upon,  any  notice,  request,  certificate, consent, statement, instrument, document or other writing believed by it to be genuine  and to have been signed or sent by the proper Person.  The Administrative Agent also may rely  upon any statement made to it orally or by telephone and believed by it to be made by the proper  Person, and shall not incur any liability for relying thereon and each of the Borrower, the Lenders  and the Issuing Bank hereby waives the right to dispute the Administrative Agent’s record of such  statement,  except  in  the  case  of  gross  negligence,  bad  faith  or  willful  misconduct  by  the  Administrative Agent.  The Administrative Agent may consult with legal counsel (who may be  counsel for the Borrower), independent accountants and other experts selected by it, and shall not  be liable for any action taken or not taken by it in accordance with the advice of any such counsel,  accountants or experts.  The Administrative Agent may deem and treat the payee of any Note as  the holder thereof for all purposes hereof unless and until a written notice of the assignment or  transfer thereof permitted hereunder shall have been filed with the Administrative Agent.           Section 11.05 Subagents.  The Administrative Agent may perform any and all its duties  and exercise its rights and powers by or through any one or more sub-agents appointed by the  Administrative Agent.  The Administrative Agent and any such sub-agent may perform any and  all  its  duties  and  exercise  its  rights  and  powers  through  their  respective  Related  Parties.   The  exculpatory provisions of the preceding Sections of this Article XI shall apply to any such sub- agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall  apply  to  their  respective  activities  in  connection  with  the  syndication  of  the  credit  facilities  provided for herein as well as activities as Administrative Agent.         Section 11.06 Resignation  of  Administrative  Agent.   Subject  to  the  appointment  and  acceptance  of  a  successor  Administrative  Agent  as  provided  in  this Section 11.06,  the  Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the  Borrower.  Upon any such resignation, the Majority Lenders shall have the right, in consultation  with the Borrower, to appoint a successor.  If no 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, then the retiring Administrative Agent  may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent  which shall be a bank with an office in New York, New York, or an Affiliate of any such bank;  provided that in no event shall any such successor Administrative Agent be a Defaulting Lender.   Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such  successor shall succeed to and become vested with all the rights, powers, privileges and duties of  the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from  its  duties  and  obligations  hereunder.   The  fees  payable  by  the  Borrower  to  a  successor  Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed                                        108  

 

   between  the  Borrower  and  such  successor.   After  the  Administrative  Agent’s  resignation  hereunder,  the  provisions  of  this Article  XI and Section 12.03 shall  continue  in  effect  for  the  benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties  in  respect  of  any  actions  taken  or  omitted  to  be  taken  by  any  of  them  while  it  was  acting  as  Administrative Agent.         Section 11.07 Agents as Lenders.  Each bank serving as an Agent hereunder shall have the  same rights and powers in its capacity as a Lender as any other Lender and may exercise the same  as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend  money to and generally engage in any kind of business with the Parent or any Subsidiary or other  Affiliate thereof as if it were not an Agent hereunder.         Section 11.08 No Reliance.  Each Lender acknowledges  that it has,  independently and  without reliance upon the Administrative Agent, any other Agent or any other Lender and based  on such documents and information as it has deemed appropriate, made its own credit analysis and  decision to enter into this Agreement and each other Loan Document to which it is a party.  Each  Lender also acknowledges that it will, independently and without reliance upon the Administrative  Agent, any other Agent or any other Lender and based on such documents and information as it  shall from time to time deem appropriate, continue to make its own decisions in taking or not  taking  action  under  or  based  upon  this  Agreement,  any  other  Loan  Document,  any  related  agreement or any document furnished hereunder or thereunder.  The Agents shall not be required  to  keep  themselves  informed  as  to  the  performance  or  observance  by  the  Parent  or  any  of  its  Subsidiaries of this Agreement, the Loan Documents or any other document referred to or provided  for herein or to inspect the Properties or books of the Parent or its Subsidiaries.  Except for notices,  reports and other documents and information expressly required to be furnished to the Lenders by  the Administrative Agent hereunder, no Agent or Arranger shall have any duty or responsibility to  provide any Lender with any credit or other information concerning the affairs, financial condition  or business of the Borrower (or any of its Affiliates) which may come into the possession of such  Agent or any of its Affiliates.  In this regard, each Lender acknowledges that Vinson & Elkins  L.L.P. is acting in this transaction as special counsel to the Administrative Agent only, except to  the extent otherwise expressly stated in any legal opinion or any Loan Document.  Each other party  hereto will consult with its own legal counsel to the extent that it deems necessary in connection  with the Loan Documents and the matters contemplated therein.         Section 11.09 Administrative Agent May File Proofs of Claim.  In case of the pendency  of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,  composition  or  other  judicial  proceeding  relative  to  the  Parent  or  any  of  its  Subsidiaries,  the  Administrative Agent (irrespective of whether the principal of any Loan shall then be due and  payable  as  herein  expressed  or  by  declaration  or otherwise  and  irrespective  of  whether  the  Administrative  Agent  shall  have  made  any  demand  on  the  Borrower)  shall  be  entitled  and  empowered, by intervention in such proceeding or otherwise:                (a)   to file and prove a claim for the whole amount of the principal and interest  owing and unpaid in respect of the Loans and all other Indebtedness that are owing and unpaid and  to file such other documents as may be necessary or advisable in order to have the claims of the  Lenders  and  the  Administrative  Agent  (including  any  claim  for  the  reasonable  compensation,  expenses,  disbursements  and  advances  of the Lenders  and  the  Administrative  Agent  and  their                                        109  

 

   respective agents and counsel and all other amounts due the Lenders and the Administrative Agent  under Section 12.03) allowed in such judicial proceeding; and               (b)   to collect and receive any monies or other property payable or deliverable  on any such claims and to distribute the same;   and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in  any such judicial proceeding is hereby authorized by each Lender to make such payments to the  Administrative Agent and, in the event that the Administrative Agent shall consent to the making  of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for  the reasonable compensation, expenses, disbursements and advances of the Administrative Agent  and  its  agents  and  counsel,  and  any  other  amounts  due  the  Administrative  Agent  under  Section 12.03.   Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or  consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,  adjustment or composition affecting the Indebtedness or the rights of any Lender or to authorize  the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.         Section 11.10 Authority  of  Administrative  Agent  to  Release  Collateral,  Liens  and  Guarantors.  By accepting the benefits of the Security Instruments, each Secured Party hereby acts  and agrees as follows:               (a)   each Secured Party hereby authorizes the Administrative Agent to take the  following actions, and the Administrative Agent hereby agrees to take such actions at the request  of the Borrower:                      (i)   to  release  any  Lien  on  any  Property  granted  to  or  held  by  Administrative Agent under any Loan Document:                           (A)   to the extent such Property is, or is to be, sold, released or  otherwise disposed of as permitted pursuant to the terms of the Loan Documents; or                            (B)   to the extent such Property did not belong to any Credit Party  at the time such Lien was granted, or to the extent the Credit Parties hold interests in such Property  only under a lease that has expired or is about to expire and which has not been, and is not intended  by the Credit Parties to be, renewed or extended, or to the extent such Property is not a Proved Oil  and  Gas  Property  and  was  not  required  to  be  mortgaged  pursuant  to  the  terms  of  the  Loan  Documents; or                            (C)   if approved, authorized or ratified in writing by the Majority  Lenders  (or,  if  approval,  authorization  or  ratification  by  all Lenders  is  required  under  Section 12.02(b), then by all Lenders);                            (D)   upon (1) termination of all Commitments, payment in full of  all Indebtedness (other than contingent indemnification obligations for which no claim has been  made)  owing  to  the  Administrative  Agent,  the  Issuing  Bank  and the Lenders  under  the  Loan  Documents and owing to any Secured Swap Provider under any Secured Swap Agreement (other                                        110  

 

   than any Secured Swap Provider that has advised the Administrative Agent that the Indebtedness  owing to it are otherwise adequately provided for or novated), and the expiration or termination of  all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the  Administrative Agent and the applicable Issuing Bank have been made) and (2) termination of all  Secured Swap Agreements with Secured Swap Providers (other than any Secured Swap Provider  that  has  advised  the  Administrative  Agent  that  such  Secured  Swap  Agreements  are  otherwise  adequately provided for or novated); or                           (E)   Upon  redesignation  of  a  Restricted  Subsidiary  as  an  Unrestricted Subsidiary in accordance with Section 9.06(b);                     (ii)  to release any Guarantor from its obligations under any Guaranty  Agreement and any other Loan Document if such Person ceases to be a Restricted Subsidiary of  the Borrower as a result of a transaction permitted under the Loan Documents;                     (iii) to subordinate (or release) any Lien on any Property granted to or  held by the Administrative Agent under any Loan Document to any Lien on such Property that is  permitted by Section 9.03(c); and                     (iv)  to execute and deliver to the Borrower, at the Borrower’s sole cost  and expense, any and all releases of Liens and guaranties, termination statements, assignments or  other documents necessary or useful to accomplish or evidence the foregoing.               (b)   Notwithstanding anything contained in any of the Loan Documents to the  contrary, no Person other than the Administrative Agent has any individual right to realize upon  any of the Mortgaged Property or other collateral under the Security Instruments, to enforce any  Liens on Mortgaged Property or any such other collateral, or to enforce any Guaranty Agreement,  and all powers, rights and remedies under the Security Instruments may be exercised solely by  Administrative Agent on behalf of the Persons secured or otherwise benefitted thereby.                 (c)   By  accepting  the  benefit  of  the  Liens  granted  pursuant  to  the  Security  Instruments, each Person secured by such Liens that is not a party hereto agrees to the terms of  this Section 11.10 and agrees that, notwithstanding anything to the contrary in any Secured Swap  Agreement  or  any  master  agreement  or  other  agreement  relating  thereto,  each  Credit  Party  is  authorized  and  permitted  to  grant  and  assign  to  Administrative  Agent  under  the  Security  Documents security interests in all Secured Swap Agreements and all rights with respect thereto.         Section 11.11 Agents.   No  Agent  other  than  the  Administrative  Agent  shall  have  any  duties, responsibilities or liabilities under this Agreement and the other Loan Documents other  than their duties, responsibilities and liabilities in their capacity as Lenders hereunder.         Section 11.12 Certain ERISA Matters.  (a) Each Lender (x) represents and warrants, as of  the date such Person became a Lender party hereto, to, and (y) covenants, from the date such  Person became a Lender party hereto to the date such Person ceases being a Lender party hereto,  for the benefit of, the Administrative Agent, and each Arranger and their respective Affiliates, and  not, for the avoidance of doubt, to or for the benefit of the Parent, the Borrower or any other Credit  Party, that at least one of the following is and will be true:                                         111  

 

               (i) such Lender is not using “plan assets” (within the meaning of the Plan Asset        Regulations) of one or more Benefit Plans in connection with the Loans, the Letters of        Credit or the Commitments,                (ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a        class exemption for certain transactions determined by independent qualified professional        asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance        company general accounts), PTE 90-1 (a class exemption for certain transactions involving        insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain        transactions involving bank collective investment funds) or PTE 96-23 (a class exemption        for certain transactions determined by in-house asset managers), is applicable with respect        to such Lender’s entrance into, participation in, administration of and performance of the        Loans, the Letters of Credit, the Commitments and this Agreement, and the conditions for        exemptive relief thereunder are and will continue to be satisfied in connection therewith,                (iii) (A) such Lender is an investment fund managed by a “Qualified Professional        Asset  Manager”  (within  the  meaning  of  Part  VI  of  PTE  84-14),  (B)  such  Qualified        Professional Asset Manager made the investment decision on behalf of such Lender to        enter  into,  participate  in,  administer  and  perform  the  Loans,  the  Letters  of  Credit,  the        Commitments and this Agreement, (C) the entrance into, participation in, administration        of  and  performance  of  the  Loans,  the  Letters  of  Credit,  the  Commitments  and  this        Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-       14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part        I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in,        administration of and performance of the Loans, the Letters of Credit, the Commitments        and this Agreement, or               (iv) such other representation, warranty and covenant as may be agreed in writing        between the Administrative Agent, in its sole discretion, and such Lender.               (b)   In addition, unless sub-clause (i) in the immediately preceding clause (a) is  true with respect to a Lender or such Lender has not provided another representation, warranty and  covenant  as  provided  in  sub-clause  (iv)  in  the  immediately  preceding  clause  (a),  such  Lender  further (x) represents and warrants, as of the date such Person became a Lender party hereto, to,  and (y) covenants, from the date such Person became a Lender party hereto to the date such Person  ceases being a Lender party hereto, for the benefit of, the Administrative Agent, and each Arranger  and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the  Parent, the Borrower or any other Credit Party, that:                (i) neither  the  Administrative  Agent,  or the Arranger  or  any  of  their  respective        Affiliates is a fiduciary with respect to the assets of such Lender (including in connection        with  the  reservation  or  exercise  of  any  rights  by  the  Administrative  Agent  under  this        Agreement, any Loan Document or any documents related to hereto or thereto),               (ii)  the  Person  making  the  investment  decision  on  behalf  of  such  Lender  with        respect  to  the  entrance  into,  participation  in,  administration  of  and  performance  of  the        Loans, the Letters of Credit, the Commitments and this Agreement is independent (within                                        112  

 

         the meaning of 29 CFR § 2510.3-21, as amended from time to time) and is a bank, an        insurance carrier, an investment adviser, a broker-dealer or other person that holds, or has        under management or control, total assets of at least $50 million, in each case as described        in 29 CFR § 2510.3-21(c)(1)(i)(A)-(E),               (iii)  the  Person  making  the  investment  decision  on  behalf  of  such  Lender  with        respect  to  the  entrance  into,  participation  in,  administration  of  and  performance  of  the        Loans, the Letters of Credit, the Commitments and this Agreement is capable of evaluating        investment risks independently, both in general and with regard to particular transactions        and investment strategies (including in respect of the obligations),                (iv)  the  Person  making  the  investment  decision  on  behalf  of  such  Lender  with        respect  to  the  entrance  into,  participation  in,  administration  of  and  performance  of  the        Loans, the Letters of Credit, the Commitments and this Agreement is a fiduciary under        ERISA or  the  Code,  or  both,  with  respect  to  the  Loans,  the  Letters  of  Credit,  the        Commitments and this Agreement and is responsible for exercising independent judgment        in evaluating the transactions hereunder, and               (v) no fee or other compensation is being paid directly to the Administrative Agent,        or the Arranger or any of their respective Affiliates for investment advice (as opposed to        other services) in connection with the Loans, the Letters of Credit, the Commitments or        this Agreement.   (c)   The Administrative Agent, and each Arranger hereby informs the Lenders that each such  Person is not undertaking to provide impartial investment advice, or to give advice in a fiduciary  capacity, in  connection with the transactions contemplated hereby, and that such Person has a  financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof  (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the  Commitments and this Agreement, (ii) may recognize a gain if it extended the Loans, the Letters  of Credit or the Commitments for an amount less than the amount being paid for an interest in the  Loans, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other  payments  in  connection  with  the  transactions  contemplated  hereby,  the  Loan  Documents  or  otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront  fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees,  utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate  transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees,  breakage or other early termination fees or fees similar to the foregoing.                                  ARTICLE XII                                MISCELLANEOUS         Section 12.01 Notices.                 (a)   Except in the case of notices and other communications expressly permitted  to be given by telephone (and subject to Section 12.01(b)), all notices and other communications  provided for herein shall be in writing and shall be delivered by hand or overnight courier service,  mailed by certified or registered mail or sent by facsimile, as follows:                                         113  

 

                     (i)   if  to  the  Borrower,  to  it  at 1401  17th Street,  Suite  1000,  Denver,  Colorado 80202, Attention: George Glyphis (gglyphis@centennialresource.com; Facsimile No.  (303) 845-9516);                     (ii)  If to the Administrative Agent or Issuing Bank, to it at JPMorgan  Chase Bank, N.A., 10 South Dearborn, Floor 7, IL1 0010, Chicago, Illinois 60603, Attention of  Loan and Agency Services,  (Facsimile No. (888) 292-9533), with  a  copy  to  JPMorgan Chase  Bank, N.A., 2200 Ross Avenue, Floor 3, Dallas, Texas 75201-2787, Attention of Cathy Johann  (Facsimile No. (214) 965-2884), and for all correspondence other than borrowings, continuation,  conversion  and  Letter of Credit requests, 1125 17th  Street,  Floor 3, Denver, Colorado 80202,  Attention: Ryan Fuessel (Facsimile: (832) 487-1765); and                     (iii) if to any other Lender, to it at its address (or facsimile number) set  forth in its Administrative Questionnaire.    Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall  be deemed to have been given when received; notices sent by facsimile shall be deemed to have  been given when sent (except that, if not given during normal business hours for the recipient,  shall be deemed to have been given at the opening of business on the next business day for the  recipient).  Notices  delivered  through  electronic  communications,  to  the  extent  provided  in  paragraph (b) below, shall be effective as provided in said paragraph (b).               (b)   Notices  and  other  communications  to the Lenders  hereunder  may  be  delivered  or  furnished  by  electronic  communications  pursuant to  procedures  approved  by  the  Administrative Agent and the applicable Lender; provided that the foregoing shall not apply to  notices by the Borrower to the Administrative Agent or the Lenders pursuant to Article II, Article  III, Article  IV and Article  V unless  otherwise  agreed  by  the  Administrative  Agent  and  the  applicable Lender, if any.  The Administrative Agent or the Borrower may, in its discretion, agree  to accept notices and other communications to it hereunder by electronic communications pursuant  to  procedures  approved  by  it; provided that  approval  of  such  procedures  may  be limited  to  particular notices or communications.               (c)   Any party hereto may change its address or facsimile number for notices  and other communications hereunder by notice to the other parties hereto.  All notices and other  communications given to any party hereto in accordance with the provisions of this Agreement  shall be deemed to have been given on the date of receipt.         Section 12.02 Waivers; Amendments.                 (a)   No failure on the part of the Administrative Agent, any other Agent, the  Issuing Bank or any Lender to exercise and no delay in exercising, and no course of dealing with  respect to, any right, power or privilege, or any abandonment or discontinuance of steps to enforce  such right, power or privilege, under any of the Loan Documents shall operate as a waiver thereof,  nor shall any single or partial exercise of any right, power or privilege under any of the Loan  Documents preclude any other or further exercise thereof or the exercise of any other right, power  or privilege.  The rights and remedies of the Administrative Agent, any other Agent, the Issuing  Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not                                        114  

 

   exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision  of  this  Agreement  or  any  other  Loan Document  or  consent  to  any  departure  by  the  Borrower  therefrom shall in any event be effective unless the same shall be permitted by Section 12.02(b),  and then such waiver or consent shall be effective only in the specific instance and for the purpose  for which given.  Without limiting the generality of the foregoing, the making of a Loan or issuance  of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the  Administrative Agent, any other Agent, any Lender or the Issuing Bank may have had notice or  knowledge of such Default at the time.               (b)   Subject to Section 2.08(k) and Section 3.03(b), neither this Agreement nor  any  provision  hereof  nor  any  Security  Instrument  nor  any  provision  thereof  may  be  waived,  amended or modified except pursuant to an agreement or agreements in writing entered into by  the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the  consent of the Majority Lenders; provided that no such agreement (including, for the avoidance of  doubt, any New Borrowing Base Notice) shall (i) increase the Commitments or the Maximum  Credit  Amount of any Lender  without  the  written  consent  of such Lender, (ii) increase  the  Borrowing Base without the written consent of each Lender (other than any Defaulting Lender),  decrease or maintain the Borrowing Base without the consent of the Required Lenders, or modify  Section 2.07(c) in any manner that results in an increase in the Borrowing Base without the consent  of  each Lender  (other  than  any  Defaulting  Lender);  provided  that  a  Borrowing  Base  redetermination  may  be  delayed  by  the  Required  Lenders  (but  in  no  event  shall  any  such  Borrowing Base redetermination be delayed past the next Scheduled Redetermination without the  consent of all Lenders), (iii) reduce the principal amount of any Loan or LC Disbursement or  reduce the rate of interest  thereon, or reduce any  fees  payable hereunder, or reduce any other  Indebtedness hereunder or under any other Loan Document, without the written consent of each  Lender affected thereby provided, however, that only the consent of the Majority Lenders shall be  necessary to waive any obligation of the Borrower to pay interest or fees at the default rate of  interest provided in Section 3.02(c), (iv) postpone the scheduled date of payment or prepayment  of  the  principal  amount  of  any Loan or  LC  Disbursement (excluding  mandatory  prepayments  pursuant to Section 3.04(c)), or any interest thereon, or any fees payable hereunder, or any other  Indebtedness hereunder or under any other Loan Document, or reduce the amount of, waive or  excuse any such payment, or postpone or extend the Maturity Date or the Termination Date without  the written consent of each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c)  in a manner that would alter the pro rata sharing of payments required thereby, without the written  consent of each Lender, (vi) waive or amend Section 3.04(c), Section 6.01, Section 10.02(c) or  Section 12.14 or change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”,  or “Subsidiary”, without the written consent of each Lender (other than any Defaulting Lender),  (vii) release any Guarantor (except as set forth in Section 11.10 or in the Guaranty Agreement),  release all or substantially all of the collateral (other than as provided in Section 11.10), or reduce  the percentage set forth in Section 8.14(a) to less than 85%, without the written consent of each  Lender  (other  than  any  Defaulting  Lender), (viii) change  any  of  the  provisions  of  this  Section 12.02(b) or the definition of “Majority Lenders” or, subject to the following clause (ix),  any  other  provision  hereof  specifying  the  number,  percentage  or  class  of Lenders  required  to  waive, amend or modify any rights hereunder or under any other Loan Documents or make any  determination or grant any consent hereunder or any other Loan Documents, without the written  consent  of  each Lender  (other  than  any  Defaulting  Lender),  or (ix) change  the  definition  of  “Majority Lenders” or “Required Lenders” without the written consent of each Lender (other than                                        115  

 

   any Defaulting Lender); provided further that no such agreement shall amend, modify or otherwise  affect  the  rights  or  duties  of  the  Administrative  Agent,  any  other  Agent,  or  the  Issuing  Bank  hereunder  or  under  any  other  Loan  Document  without  the  prior  written  consent  of  the  Administrative Agent, such other Agent or the Issuing Bank, as the case may be.  Notwithstanding  the foregoing, (w) any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by  delivering to the Administrative Agent a supplemental schedule clearly marked as such and, upon  receipt, the Administrative Agent  will promptly  deliver a copy thereof to the Lenders, (x) the  Borrower and the Administrative Agent may amend this Agreement or any other Loan Document  without  the  consent  of  any  of the Lenders  in  order  to correct,  amend  or  cure  any  ambiguity,  omission, inconsistency, illegality or defect therein, or correct any typographical error or other  manifest error in any Loan Document or otherwise effectuate the intent of the parties hereto, (y)  the Administrative Agent and the Borrower (or other applicable Credit Party) may enter into any  amendment, modification or waiver of this Agreement or any other Loan Document or enter into  any  new  Loan  Document  or  other  agreement  or  instrument  to  effect  the  granting,  perfection,  protection, expansion or enhancement of any Lien to secure, or the guarantee of, the Indebtedness  for the benefit of the Secured Parties or as required by any Governmental Requirement to give  effect to, protect or otherwise enhance the rights or benefits of the Secured Parties under the Loan  Documents, in each case without the consent of any Lender, and (z) the Administrative Agent and  the Borrower (or other applicable Credit Party) may enter into an amendment, modification or  waiver of this Agreement or of any other Loan Document or enter into any agreement or instrument  to join additional Persons as Credit Parties pursuant to the terms thereof.         Section 12.03 Expenses, Indemnity; Damage Waiver.                 (a)   The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred  by the Administrative Agent and its Affiliates, including, without limitation, the reasonable fees,  charges and disbursements of counsel and other outside consultants for the Administrative Agent,  the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the  cost  of  environmental  invasive  and  non-invasive  assessments  and  audits  and  surveys  and  appraisals,  in  connection  with  the  syndication  of  the  credit  facilities  provided  for  herein,  the  preparation,  negotiation,  execution,  delivery  and  administration  (both  before  and  after  the  execution hereof and including advice of counsel to the Administrative Agent as to the rights and  duties of the Administrative Agent and the Lenders with respect thereto) of this Agreement and  the other Loan Documents and any amendments, modifications or waivers of or consents related  to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby  shall be consummated), (ii) all reasonable out-of-pocket costs, expenses, Taxes, assessments and  other charges incurred by the Administrative Agent in connection with any filing, registration,  recording or perfection of any security interest contemplated by this Agreement or any Security  Instrument or any other document referred to therein, (iii) all reasonable out-of-pocket expenses  incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension  of any Letter of Credit or any demand for payment thereunder, (iv) all out-of-pocket expenses  incurred by any Agent or the Issuing Bank, including the fees, charges and disbursements of any  counsel for any Agent or the Issuing Bank, in connection with the enforcement or protection of its  rights in connection with this Agreement or any other Loan Document, including its rights under  this Section 12.03, or in connection with the Loans made or Letters of Credit issued hereunder,  including,  without  limitation,  all such  out-of-pocket  expenses  incurred  during  any  workout,  restructuring or negotiations  in  respect  of such Loans  or  Letters of Credit. The Borrower also                                        116  

 

   agrees to pay, during the continuance of an Event of Default, all reasonable out-of-pocket expenses  of one additional legal counsel representing the Lenders as a group to the extent such legal fees  are incurred by the Lenders in connection with the enforcement or protection of their rights in  connection with this Agreement or any other Loan Document, including their rights under this  Section 12.03.                (b)   THE  BORROWER  SHALL  INDEMNIFY  EACH  AGENT,  EACH  ARRANGER, THE ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY  OF ANY OF THE  FOREGOING PERSONS (EACH SUCH PERSON BEING          CALLED AN  “INDEMNITEE”)  AGAINST,  AND  DEFEND  AND  HOLD  EACH  INDEMNITEE  HARMLESS  FROM,  ANY  AND  ALL  LOSSES,  CLAIMS,  DAMAGES,  PENALTIES,  LIABILITIES  AND  RELATED  EXPENSES,  INCLUDING  THE  REASONABLE  FEES,  CHARGES  AND  DISBURSEMENTS  OF  ANY  COUNSEL  FOR  ANY  INDEMNITEE,  INCURRED  BY  OR  ASSERTED  AGAINST  ANY  INDEMNITEE  ARISING  OUT  OF,  IN  CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS  AGREEMENT  OR  ANY  OTHER  LOAN  DOCUMENT  OR  ANY  AGREEMENT  OR  INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE  PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR  RESPECTIVE    OBLIGATIONS      HEREUNDER      OR    THEREUNDER      OR    THE  CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY  OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE PARENT, THE BORROWER OR  ANY  OTHER  RESTRICTED  SUBSIDIARY  TO  COMPLY  WITH  THE  TERMS  OF  ANY  LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL  REQUIREMENT,    (iii) ANY  INACCURACY  OF  ANY  REPRESENTATION  OR  ANY  BREACH  OF  ANY  WARRANTY      OR  COVENANT  OF  THE  BORROWER  OR  ANY  GUARANTOR  SET  FORTH  IN  ANY  OF  THE  LOAN  DOCUMENTS  OR  ANY  INSTRUMENTS,  DOCUMENTS  OR  CERTIFICATIONS  DELIVERED  IN  CONNECTION  THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS  THEREFROM,  INCLUDING,  WITHOUT  LIMITATION,      (A) ANY  REFUSAL  BY  THE  ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT  IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT  STRICTLY  COMPLY  WITH  THE  TERMS  OF  SUCH  LETTER  OF  CREDIT,  OR (B) THE  PAYMENT OF A DRAWING UNDER ANY  LETTER OF CREDIT NOTWITHSTANDING  THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF  THE  DOCUMENTS  PRESENTED  IN  CONNECTION  THEREWITH,         (v) ANY  OTHER  ASPECT OF THE LOAN DOCUMENTS,       (vi) THE OPERATIONS OF THE BUSINESS OF  THE  PARENT  AND  ITS  RESTRICTED  SUBSIDIARIES  BY  THE  PARENT  AND  ITS  RESTRICTED SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT  ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY  INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE PARENT OR  ANY RESTRICTED SUBSIDIARY OR ANY OF THEIR PROPERTIES OR OPERATIONS,  INCLUDING,  THE  PRESENCE,  GENERATION,  STORAGE,  RELEASE,  THREATENED  RELEASE,  USE,  TRANSPORT,  DISPOSAL,  ARRANGEMENT  OF  DISPOSAL  OR  TREATMENT OF HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES,  (ix) THE  BREACH  OR  NON-COMPLIANCE  BY  THE  PARENT  OR  ANY  RESTRICTED  SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE PARENT OR  ANY RESTRICTED SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE PARENT OR ANY                                        117  

 

   RESTRICTED SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON  ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE  AT  THE  TIME,  COULD  RESULT  IN  PRESENT  LIABILITY, (xi) THE  PRESENCE,  USE,  RELEASE,  STORAGE,  TREATMENT,  DISPOSAL,  GENERATION,  THREATENED  RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR  DISPOSAL  OF  HAZARDOUS  MATERIALS  ON  OR  AT  ANY  OF  THE  PROPERTIES  OWNED OR OPERATED BY THE PARENT OR ANY RESTRICTED SUBSIDIARY OR ANY  ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR  FROM  ANY  PROPERTY  OWNED  OR  OPERATED  BY  THE  PARENT  OR  ANY  OF  ITS  RESTRICTED  SUBSIDIARIES,  (xii) ANY  ENVIRONMENTAL  LIABILITY  RELATED  IN  ANY WAY   TO THE PARENT OR ANY OF ITS RESTRICTED SUBSIDIARIES, OR         (xiii)  ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION  WITH  THE  LOAN  DOCUMENTS,  OR   (xiv) ANY  ACTUAL  OR  PROSPECTIVE  CLAIM,  LITIGATION,  INVESTIGATION  OR  PROCEEDING  RELATING  TO  ANY  OF  THE  FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND  REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH  INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE  OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER,  WHETHER  ACTIVE  OR  PASSIVE,  WHETHER  AN  AFFIRMATIVE  ACT  OR  AN  OMISSION,  INCLUDING  WITHOUT  LIMITATION,  ALL  TYPES  OF  NEGLIGENT  CONDUCT  IDENTIFIED  IN  THE  RESTATEMENT  (SECOND)  OF  TORTS  OF  ONE  OR  MORE  OF  THE  INDEMNITEES  OR  BY  REASON  OF  STRICT  LIABILITY  IMPOSED  WITHOUT  FAULT  ON  ANY  ONE  OR  MORE  OF  THE  INDEMNITEES;   provided THAT  SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE  EXTENT  THAT  SUCH  LOSSES,  CLAIMS,  DAMAGES,  LIABILITIES  OR  RELATED  EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY  FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS  NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR (Y)  RESULT FROM A CLAIM BROUGHT BY THE BORROWER, THE PARENT OR ANY OF  ITS SUBSIDIARIES AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH  INDEMNITEE’S  OBLIGATIONS  HEREUNDER  OR  UNDER  ANY  OTHER  LOAN  DOCUMENT, IF THE BORROWER, THE PARENT OR ANY OF ITS SUBSIDIARIES HAS  OBTAINED  A  FINAL  AND  NONAPPEALABLE  JUDGMENT  IN  ITS  FAVOR  ON  SUCH  CLAIM  AS  DETERMINED  BY  A  COURT  OF  COMPETENT  JURISDICTION.  THIS  SECTION 12.03(B) SHALL NOT APPLY WITH RESPECT TO TAXES OTHER THAN ANY  TAXES THAT REPRESENT LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM ANY  NON-TAX CLAIM.               (c)   To the extent that the Borrower fails to pay any amount required to be paid  by it to any Agent, the Arranger or the Issuing Bank under Section 12.03(a) or (b), each Lender  severally agrees to pay to such Agent, such Arranger or the Issuing Bank, as the case may be, such  Lender’s Applicable  Percentage  (determined  as  of  the  time  that  the  applicable  unreimbursed  expense or indemnity payment is sought), of such unpaid amount; provided that the unreimbursed  expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was  incurred by or asserted against such Agent, such Arranger or the Issuing Bank in its capacity as  such.                                         118  

 

               (d)   All amounts due under this Section 12.03 shall be payable promptly after  written demand therefor.               (e)   No  Indemnitee  shall  be  liable  for  any  damages  arising  from  the  use  by  unintended  recipients  of  any  information  or  other  materials  distributed  by  it  through  telecommunications, electronic or other information transmission systems in connection with this  Agreement or the other Loan Documents or the transactions contemplated hereby or thereby, other  than to the extent that such damages are determined by a court of competent jurisdiction by final  and  nonappealable  judgment  to  have  resulted  from  the  gross  negligence,  bad  faith  or  willful  misconduct of such Indemnitee.         Section 12.04 Successors and Assigns.                 (a)   The provisions of this Agreement shall be binding upon and inure to the  benefit of the parties hereto and their respective successors and assigns permitted hereby (including  any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may  not assign or otherwise transfer any of its rights or obligations hereunder without the prior written  consent of each Lender (and any attempted assignment or transfer by the Borrower without such  consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or  obligations hereunder except in accordance with this Section 12.04.  Nothing in this Agreement,  expressed or implied, shall be construed to confer upon any Person (other than the parties hereto,  their respective successors and assigns permitted hereby (including any Affiliate of the Issuing  Bank that issues any Letter of Credit), Participants (to the extent provided in Section 12.04(c))  and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative  Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or  by  reason  of  this  Agreement,  and  except  for  the  foregoing  Persons  there  are  no  third  party  beneficiaries to this Agreement.               (b)   (i)   Subject  to  the  conditions  set  forth  in Section 12.04(b)(ii), any  Lender may assign to one or more assignees all or a portion of its rights and obligations under this  Agreement (including all or a portion of its Commitment and the Loans at the time owing to it)  with the prior written consent (such consent not to be unreasonably withheld) of:                           (A)   the Borrower, provided that no consent of the Borrower shall  be required if such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund or, if an  Event of Default has occurred and is continuing; and                            (B)   the Administrative Agent, provided that no consent of the  Administrative  Agent  shall  be  required  for  an  assignment  to  an  assignee  that  is a Lender  immediately prior to giving effect to such assignment.                     (ii)  Assignments shall be subject to the following additional conditions:                            (A)   except  in  the  case  of  an  assignment  to a Lender  or  an  Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s  Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject  to each such assignment (determined as of the date the Assignment and Assumption with respect  to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000                                        119  

 

   unless each of the Borrower and the Administrative Agent otherwise consent, provided that no  such  consent  of  the  Borrower  shall  be  required  if  an  Event  of  Default  has  occurred  and  is  continuing;                           (B)   each  total  and  partial  assignment  shall  be  made  as  an  assignment of a proportionate part of all the assigning Lender’s rights and obligations under this  Agreement,  including,  without  limitation,  its Commitment, Maximum  Credit  Amount,  LC  Exposure, participations in Letters of Credit, and outstanding Loans;                           (C)   the parties to each assignment shall execute and deliver to  the  Administrative  Agent  an  Assignment  and  Assumption,  together  with  a  processing  and  recordation fee of $3,500;                           (D)   the assignee, if it shall not be a Lender, shall deliver to the  Administrative Agent an Administrative Questionnaire; and                           (E)   in  no event  may any Lender  assign all or a portion  of its  rights and obligations under this Agreement to a natural person, a Defaulting Lender, an Industry  Competitor or to the Borrower or any Affiliate of the Borrower.                      (iii) Subject  to Section 12.04(b)(iv) and  the  acceptance  and  recording  thereof by the Administrative Agent, from and after the effective date specified in each Assignment  and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest  assigned by such Assignment and Assumption, have the rights and obligations of a Lender under  this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned  by such Assignment and Assumption, be released from its obligations under this Agreement (and,  in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and  obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue  to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03).  Any  assignment or transfer by a Lender of rights or obligations under this Agreement that does not  comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such  Lender of a participation in such rights and obligations in accordance with Section 12.04(c).                     (iv)  The Administrative Agent, acting solely for this purpose as a non- fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and  Assumption delivered to it and a register for the recordation of the names and addresses of the  Lenders, and the Maximum Credit Amount and Elected Commitment of, and principal amount  (and stated interest) of the Loans and LC Disbursements owing to, each Lender pursuant to the  terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive,  and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each  Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder  for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be  available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time  and  from  time  to  time  upon  reasonable  prior  notice.   In  connection  with  any  changes  to  the  Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and forward  a copy of such revised Annex I to the Borrower, the Issuing Bank and each Lender.                                         120  

 

                     (v)   Upon its receipt of a duly completed Assignment and Assumption  executed  by  an  assigning Lender  and  an  assignee,  the  assignee’s  completed  Administrative  Questionnaire  (unless  the  assignee  shall  already  be a Lender  hereunder),  the  processing  and  recordation fee referred to in Section 12.04(b) and any written consent to such assignment required  by Section 12.04(b), the Administrative Agent shall accept such Assignment and Assumption and  record the information contained therein in the Register.  No assignment shall be effective for  purposes  of  this  Agreement  unless  it  has  been  recorded  in  the  Register  as  provided  in  this  Section 12.04(b).               (c)   (i)   Any Lender  may,  without  the  consent  of the  Borrower,  the  Administrative Agent or the Issuing Bank, sell participations to one or more banks or other Persons  (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement  (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such  Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain  solely  responsible  to  the  other  parties  hereto  for  the  performance  of  such  obligations, (C) the  Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal  solely and directly with such Lender in connection with such Lender’s rights and obligations under  this  Agreement  and (D) no  participation  may  be  sold  to  the  Borrower,  any  Affiliate  of  the  Borrower, any natural person or any Industry Competitor.  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 12.02(b) that affects such Participant.  In addition  such agreement must provide that the Participant be bound by the provisions of Section 12.03.   Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the  benefits of Section 5.01, Section 5.02 and Section 5.03 to the same extent as if it were a Lender  and had acquired its interest by assignment pursuant to Section 12.04(b).  To the extent permitted  by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a  Lender,  provided  such  Participant  agrees  to  be  subject  to Section 4.01(c) as  though  it  were a  Lender.   Each Lender  that  sells  a  participation  shall,  acting  solely  for  this  purpose  as  a  non- fiduciary agent of the Borrower, maintain a register on which it enters the name and address of  each Participant and the principal amounts (and stated interest) of each Participant’s interest in the  Loans or other obligations under the Loan Documents (the “Participant Register”); 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.                     (ii)  Each  Participant  agrees  (A)  to  be  subject  to  the  provisions  of  Section 5.03 (subject to the requirements and limitations therein, including the requirements under                                        121  

 

   Section 5.03(f) (it being understood that the documentation required under Section 5.03(f) shall be  delivered to the participating Lender)) as if it were an assignee under paragraph (b) of this Section;  and (B) that it shall not be entitled to receive any greater payment under Sections 5.01 or 5.03,  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.               (d)   Any Lender may at any time pledge or assign a security interest in all or any  portion of its rights under this Agreement to secure obligations of such Lender, including, without  limitation, any pledge or assignment to secure obligations to a Federal  Reserve Bank or other  central bank having jurisdiction over such Lender, and this Section 12.04 shall not apply to any  such pledge or assignment of a security interest; provided that no such pledge or assignment of a  security interest shall release a Lender from any of its obligations hereunder or substitute any such  pledgee or assignee for such Lender as a party hereto.               (e)   Notwithstanding any other provisions of this Section 12.04, no transfer or  assignment of the interests or obligations of any Lender or any grant of participations therein shall  be  permitted  if  such  transfer,  assignment  or  grant  would  require any  Credit  Party to  file  a  registration statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.         Section 12.05 Survival; Revival; Reinstatement.                 (a)   All  covenants,  agreements,  representations  and  warranties  made  by  the  Borrower  herein  and  in  the  certificates  or  other  instruments  delivered  in  connection  with  or  pursuant to this Agreement or any other Loan Document shall be considered to have been relied  upon by the other parties hereto and shall survive the execution and delivery of this Agreement  and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation  made by any such other party or on its behalf and notwithstanding that the Administrative Agent,  any other Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default  or incorrect  representation  or warranty at  the time any credit is  extended hereunder, and shall  continue in full force and effect as long as the principal of or any accrued interest on any Loan or  any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter  of Credit is outstanding and so long as the Commitments have not expired or terminated.  The  provisions  of Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and Article  XI shall  survive and remain in full force and effect regardless of the consummation of the transactions  contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of  Credit and the Commitments or the termination of this Agreement, any other Loan Document or  any provision hereof or thereof.               (b)   To the extent that any payments on the Indebtedness or proceeds of any  collateral  are  subsequently  invalidated,  declared  to  be  fraudulent  or  preferential,  set  aside  or  required  to  be  repaid  to  a  trustee,  debtor  in  possession,  receiver  or  other  Person  under  any  bankruptcy law, common law or equitable cause, then to such extent, the Indebtedness so satisfied  shall  be  revived  and  continue  as  if  such  payment  or  proceeds  had  not  been  received  and  the  Administrative Agent’s and the Lenders’ Liens, security interests, rights, powers and remedies  under this Agreement and each Loan Document shall continue in full force and effect.  In such  event, each Loan Document shall be automatically reinstated and the Borrower shall take such                                        122  

 

   action as may be reasonably requested by the Administrative Agent and the Lenders to effect such  reinstatement.         Section 12.06 Counterparts; Integration; Effectiveness.                 (a)   This Agreement may be executed in counterparts (and by different parties  hereto on different counterparts), each of which shall constitute an original, but all of which when  taken together shall constitute a single contract.               (b)   This  Agreement,  the  other  Loan  Documents  and  any  separate letter  agreements with respect to fees payable to the Administrative Agent constitute the entire contract  among  the  parties  relating  to  the  subject  matter  hereof  and  thereof  and  supersede  any  and  all  previous agreements and understandings, oral or written, relating to the subject matter hereof and  thereof.  THIS  AGREEMENT  AND  THE  OTHER  LOAN  DOCUMENTS  REPRESENT  THE FINAL AGREEMENT      AMONG THE PARTIES HERETO AND THERETO AND  MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS  OR  SUBSEQUENT  ORAL  AGREEMENTS  OF  THE  PARTIES.          THERE  ARE  NO  UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.               (c)   Except as provided in Section 6.01, this Agreement shall become effective  when it shall have been executed by the Administrative Agent and when the Administrative Agent  shall have received counterparts hereof which, when taken together, bear the signatures of each of  the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties  hereto  and  their respective  successors  and  assigns.   Delivery  of  an  executed  counterpart  of  a  signature page of this Agreement by facsimile or other electronic transmission (e.g. .pdf) shall be  effective as delivery of a manually executed counterpart of this Agreement.         Section 12.07 Severability.  Any provision of this Agreement or any other Loan Document  held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be  ineffective  to  the  extent  of  such  invalidity,  illegality  or  unenforceability  without affecting  the  validity,  legality  and  enforceability  of  the  remaining  provisions  hereof  or  thereof;  and  the  invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in  any other jurisdiction.         Section 12.08 Right  of  Setoff.  If  an  Event  of  Default  shall  have  occurred  and  be  continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time  to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or  special, time or demand, provisional or final) at any time held and other obligations (of whatsoever  kind, including, without limitations obligations under Swap Agreements) at any time owing by  such Lender or Affiliate to or for the credit or the account of the Parent or any Restricted Subsidiary  against any of and all the obligations of the Parent or any Restricted Subsidiary owed to such  Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective  of whether or not such Lender shall have made any demand under this Agreement or any other  Loan Document and although such obligations may be unmatured; 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 Sections 2.08(l) and 3.05(d), and, pending such payment, shall be segregated by such                                        123  

 

   Defaulting  Lender  from  its  other  funds  and  deemed  held  in  trust  for  the  benefit  of  the  Administrative Agent 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 under  this Section 12.08 are in addition to other rights and remedies (including other rights of setoff)  which such Lender or its Affiliates may have. Each Lender and Issuing Bank agrees to notify the  Borrower 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.         Section 12.09 GOVERNING  LAW;  JURISDICTION;  CONSENT  TO   SERVICE  OF  PROCESS.               (a)   THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,  AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK  EXCEPT  TO  THE  EXTENT  THAT  UNITED  STATES  FEDERAL  LAW  PERMITS     ANY  LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT  THE  RATE  ALLOWED  BY  THE  LAWS  OF  THE  STATE  WHERE     SUCH  LENDER   IS  LOCATED.                 (b)   ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE  LOAN  DOCUMENTS    MAY   BE  BROUGHT  IN  THE  COURTS  OF  THE  STATE  OF NEW  YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF  NEW  YORK    AND  ANY  APPELLATE  COURT  FROM  ANY  THEREOF,         AND   BY  EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS  FOR  ITSELF  AND  (TO  THE  EXTENT  PERMITTED  BY  LAW)  IN  RESPECT  OF  ITS  PROPERTY,  GENERALLY  AND        UNCONDITIONALLY,  THE       NON-EXCLUSIVE  JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY  WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO  THE  LAYING  OF  VENUE  OR  BASED  ON  THE  GROUNDS  OF  FORUM  NON  CONVENIENS, WHICH IT MAY     NOW OR HEREAFTER HAVE TO THE BRINGING OF  ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THIS  SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A  PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT  OTHERWISE HAVING JURISDICTION.               (c)   EACH  PARTY  IRREVOCABLY  CONSENTS  TO  THE  SERVICE  OF  PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR  PROCEEDING  BY  THE  MAILING  OF  COPIES  THEREOF  BY  REGISTERED  OR  CERTIFIED  MAIL,  POSTAGE  PREPAID,  TO  IT  AT  THE  ADDRESS  SPECIFIED  IN  SECTION 12.01 OR  SUCH  OTHER  ADDRESS  AS  IS  SPECIFIED  PURSUANT  TO  SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION).  NOTHING HEREIN SHALL  AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS  IN  ANY  OTHER  MANNER  PERMITTED  BY  LAW  OR  TO  COMMENCE  LEGAL  PROCEEDINGS  OR  OTHERWISE  PROCEED  AGAINST  ANOTHER  PARTY  IN  ANY  OTHER JURISDICTION.                                         124  

 

               (d)   EACH      PARTY      HEREBY       (i) IRREVOCABLY      AND  UNCONDITIONALLY  WAIVES,  TO  THE  FULLEST  EXTENT  PERMITTED  BY  LAW,  TRIAL  BY  JURY  IN  ANY  LEGAL  ACTION  OR  PROCEEDING  RELATING  TO  THIS  AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM  THEREIN;   (ii) IRREVOCABLY  WAIVES,  TO  THE  MAXIMUM  EXTENT  NOT  PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY  SUCH  LITIGATION  ANY  SPECIAL,  EXEMPLARY,  PUNITIVE  OR  CONSEQUENTIAL  DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES;  PROVIDED THAT NOTHING CONTAINED IN THIS SECTION 12.09(d)(ii) SHALL LIMIT  THE BORROWER’S INDEMNIFICATION OBLIGATIONS TO THE EXTENT SET FORTH  IN SECTION 12.03 TO  THE  EXTENT  SUCH   SPECIAL,  EXEMPLARY,   PUNITIVE  OR  CONSEQUENTIAL  DAMAGES  ARE  INCLUDED  IN  ANY  THIRD  PARTY  CLAIM        IN  CONNECTION  WITH  WHICH  SUCH      INDEMNITEE   IS  OTHERWISE  ENTITLED  TO  INDEMNIFICATION  HEREUNDER;     (iii) CERTIFIES  THAT  NO  PARTY  HERETO  NOR  ANY  REPRESENTATIVE  OR  AGENT  OR  COUNSEL  FOR  ANY  PARTY  HERETO  HAS  REPRESENTED,  EXPRESSLY  OR  OTHERWISE,  OR  IMPLIED  THAT  SUCH  PARTY  WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING  WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO  THIS  AGREEMENT,  THE  LOAN  DOCUMENTS  AND  THE  TRANSACTIONS  CONTEMPLATED  HEREBY  AND  THEREBY  BY,  AMONG  OTHER  THINGS,  THE  MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.         Section 12.10 Headings.  Article and Section headings and the Table of Contents used  herein are for convenience of reference only, are not part of this Agreement and shall not affect  the construction of, or be taken into consideration in interpreting, this Agreement.         Section 12.11 Confidentiality.  Each of the Administrative Agent, the Issuing Bank and  the Lenders agrees to maintain the confidentiality of the Information (as defined below), except  that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and  agents,  including  accountants,  legal  counsel  and  other  advisors  (it  being  understood  that  the  Persons to  whom such  disclosure is  made  will be informed of the  confidential nature of such  Information and instructed to keep such Information confidential), (b) to the extent requested by  any  regulatory  authority having  jurisdiction  over  such  Administrative  Agent,  Issuing  Bank  or  Lender, (c) to the extent required by applicable laws or regulations or by any subpoena or similar  legal  process, (d) to  any  other  party  to  this  Agreement  or  any  other  Loan  Document, (e) in  connection with the exercise of any remedies hereunder or under any other Loan Document or any  suit,  action  or  proceeding  relating  to  this  Agreement  or  any  other Loan  Document  or  the  enforcement of rights hereunder or thereunder, (f) subject to an agreement for the express benefit  of the Borrower containing provisions substantially the same as those of this Section 12.11, to (i)  any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights  or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors)  to any Swap Agreement relating to the Borrower and its obligations, (g) with the consent of the  Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result  of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, the Issuing  Bank or any Lender on a nonconfidential basis from a source other than the Borrower.  For the  purposes of this Section 12.11, “Information” means all information received from the Parent or  any Restricted Subsidiary relating to the Parent or any Restricted Subsidiary and their businesses,                                        125  

 

   other than any such information that is available to the Administrative Agent, the Issuing Bank or  any Lender on a nonconfidential basis prior to disclosure by the Parent or a Restricted Subsidiary;  provided that, in the case of information received from the Parent or any Restricted Subsidiary  after the date hereof, such information is clearly identified at the time of delivery as confidential.   Any  Person  required  to  maintain  the  confidentiality  of  Information  as  provided  in  this  Section 12.11 shall be considered to have complied with its obligation to do so if such Person has  exercised the same degree of  care to  maintain the confidentiality of such  Information  as such  Person would accord to its own confidential information.  Notwithstanding anything herein to the  contrary,  “Information”  shall  not  include,  and  the  Parent,  the  Parent’s  Subsidiaries,  the  Administrative Agent, each Lender and the respective Affiliates of each of the foregoing (and the  respective partners, directors, officers, employees, agents, advisors and other representatives of  the aforementioned Persons), and any other party, may disclose to any and all Persons, without  limitation of any kind (a) any information with respect to the United States federal and state income  tax  treatment  of  the  transactions  contemplated  hereby  and  any  facts  that  may  be  relevant  to  understanding the United States federal or state income tax treatment of such transactions (“tax  structure”), which facts shall not include for this purpose the names of the parties or any other  person named herein, or information that would permit identification of the parties or such other  persons, or any pricing terms or other nonpublic business or financial information that is unrelated  to such tax treatment or tax structure, and (b) all materials of any kind (including opinions or other  tax analyses) that are provided to the Borrower, the Administrative Agent or such Lender relating  to such tax treatment or tax structure.         Section 12.12 Interest Rate Limitation.  It is the intention of the parties hereto that each  Lender shall  conform  strictly  to  usury  laws  applicable  to  it.   Accordingly,  if  the  transactions  contemplated hereby would be usurious as to any Lender under laws applicable to it (including the  laws of the United States of America, any State therein, or any other jurisdiction whose laws may  be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement),  then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any  agreement entered into in connection with or as security for the Notes, it is agreed as follows:  (i)  the aggregate of all consideration which constitutes interest under law applicable to any Lender  that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan  Documents or agreements or otherwise in connection with the Notes shall under no circumstances  exceed the maximum amount allowed by such applicable law, and any excess shall be canceled  automatically and if theretofore paid shall be credited by such Lender on the principal amount of  the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or  would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that  the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting  from any Event of Default under this Agreement or otherwise, or in the event of any required or  permitted prepayment, then such consideration that constitutes interest under law applicable to any  Lender may never include more than the maximum amount allowed by such applicable law, and  excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically  by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be  credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the  principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded  by such Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for the use,  forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to  such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans                                        126  

 

   until payment in full so that the rate or amount of interest on account of any Loans hereunder does  not exceed the maximum amount allowed by such applicable law.  If at any time and from time to  time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest  Lawful Rate applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of any  subsequent interest computation period the amount of interest otherwise payable to such Lender  would be less than the amount of interest payable to such Lender computed at the Highest Lawful  Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of  such subsequent interest computation period shall continue to be computed at the Highest Lawful  Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal  the total amount of interest which would have been payable to such Lender if the total amount of  interest had been computed without giving effect to this Section 12.12.  To the extent that Chapter  303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate  applicable to a Lender, such Lender elects to determine the applicable rate ceiling under such  Chapter by the weekly ceiling from time to time in effect.  Chapter 346 of the Texas Finance Code  does not apply to the Borrower’s obligations hereunder.         Section 12.13 EXCULPATION  PROVISIONS.   EACH  OF  THE  PARTIES  HERETO  SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE  OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND  KNOWLEDGE  OF  THE  TERMS  OF  THIS  AGREEMENT  AND  THE  OTHER  LOAN  DOCUMENTS;  THAT  IT  HAS  IN  FACT  READ  THIS  AGREEMENT  AND  IS  FULLY  INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS  AND  EFFECTS  OF  THIS  AGREEMENT;  THAT  IT  HAS  BEEN  REPRESENTED       BY  INDEPENDENT     LEGAL    COUNSEL     OF   ITS  CHOICE    THROUGHOUT       THE  NEGOTIATIONS  PRECEDING  ITS  EXECUTION  OF  THIS  AGREEMENT  AND  THE  OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN  ENTERING  INTO  THIS  AGREEMENT  AND  THE  OTHER  LOAN  DOCUMENTS;  AND  THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND  THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY  INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER  PARTY  OF  ITS  RESPONSIBILITY  FOR  SUCH  LIABILITY.   EACH  PARTY  HERETO  AGREES  AND  COVENANTS  THAT  IT  WILL  NOT  CONTEST  THE  VALIDITY  OR  ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND  THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE  OR  KNOWLEDGE  OF  SUCH  PROVISION  OR  THAT  THE  PROVISION  IS  NOT  “CONSPICUOUS.”         Section 12.14 Collateral  Matters;  Swap  Agreements.   The  benefit  of  the  Security  Instruments  and  of  the  provisions  of  this  Agreement  relating  to  any  collateral  securing  the  Indebtedness shall also extend to and be available to the Secured Swap Providers, subject to the  limitations in the above definition of “Secured Swap Provider”.  No Lender or Affiliate of a  Lender shall have any voting or consent rights under any  Loan Document in its capacity as a  Secured Swap Provider or as a result of the existence of obligations owed to it under any Swap  Agreements.         Section 12.15 No Third Party Beneficiaries.  This Agreement, the other Loan Documents,  and the agreement of the Lenders to make Loans and the Issuing Bank to issue, amend, renew or                                        127  

 

   extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person  (including,  without  limitation,  any  Subsidiary  of  the  Parent  (other  than  the  Borrower)  or  any  obligor,  contractor,  subcontractor,  supplier  or  materialsman)  shall  have  any  rights,  claims,  remedies or privileges hereunder or under any other Loan Document against the Administrative  Agent, any other Agent, the Issuing Bank or any Lender for any reason whatsoever.  There are no  third party beneficiaries other than as expressly provided herein with respect to Secured Swap  Providers,  Indemnitees  (as  provided  in Section 12.03),  and  Participants  (as  provided  in  Section 12.04).         Section 12.16 USA Patriot Act Notice.  Each Lender hereby notifies the Parent and the  Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56  (signed  into  law  October  26,  2001))  (as  amended  from  time  to  time,  including  any  successor  statute, the “Act”), it is required to obtain, verify and record information that identifies the Parent  and the Borrower, which information includes the name and address of the Parent and the Borrower  and  other  information  that  will  allow such Lender  to  identify  the  Parent  and  the  Borrower  in  accordance with the Act.         Section 12.17 No Advisory or Fiduciary Responsibility.  In connection with all aspects of  each transaction contemplated hereby (including in connection with any amendment, waiver or  other modification hereof or of any other Loan Document), each of the Parent and the Borrower  acknowledges  and  agrees,  and  acknowledges  the  other  Restricted  Subsidiaries’  understanding,  that: (a) (i) no fiduciary, advisory or agency relationship between the Parent and its Restricted  Subsidiaries and the Administrative Agent or any Lender is intended to be or has been created in  respect of the transactions contemplated hereby or by the other Loan Documents, irrespective of  whether the Administrative Agent  or any Lender has  advised or is  advising the Parent  or  any  Restricted Subsidiary  on  other  matters; (ii) the  arranging  and  other  services  regarding  this  Agreement provided by the Administrative Agent and the Lenders are arm’s-length commercial  transactions  between  the  Parent  and  its  Restricted  Subsidiaries,  on  the  one  hand,  and  the  Administrative Agent and the Lenders, on the other hand; (iii) the Borrower has consulted its own  legal, accounting, regulatory and tax advisors to the extent that it has deemed appropriate; and (iv)  the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions  of  the  transactions  contemplated  hereby  and  by  the  other  Loan  Documents;  and (b) (i) the  Administrative Agent and the Lenders each is and has been acting solely as a principal and, except  as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting  as an advisor, agent or fiduciary for the Parent or any of its Restricted Subsidiaries, or any other  Person; (ii) neither the Administrative Agent nor the Lenders has any obligation to the Parent or  any of its Restricted Subsidiaries with respect to the transactions contemplated hereby except those  obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative  Agent and the Lenders and their respective Affiliates may be engaged, for their own accounts or  the accounts of customers, in a broad range of transactions that involve interests that differ from  those of the Parent and its Restricted Subsidiaries, and neither the Administrative Agent nor the  Lenders  has  any  obligation  to  disclose  any  of  such  interests  to  the  Parent  or  its  Restricted  Subsidiaries.  To the fullest extent permitted by Law, the Borrower hereby waives and releases  any claims that it may have against the Administrative Agent and the Lenders with respect to any  breach  or  alleged  breach  of  agency  or  fiduciary  duty  in  connection  with  any  aspect  of  any  transaction contemplated hereby.                                         128  

 

         Section 12.18 Amendment and Restatement.  It is the intention of the parties hereto that  this Agreement amends, restates, supersedes and replaces the Existing A&R Credit Agreement in  its entirety; provided, that, (a) such amendment and restatement shall operate to renew, amend,  modify, and extend all of the rights, duties, liabilities and obligations of the Borrower under the  Existing A&R Credit Agreement and under the Existing Loan Documents, which rights, duties,  liabilities and obligations are hereby renewed, amended, modified and extended, and shall not act  as a novation thereof, and (b) the Liens securing the Indebtedness under and as defined in the  Existing A&R Credit Agreement and the rights, duties, liabilities and obligations of the Borrower  and the Guarantors under the Existing A&R Credit Agreement and the Existing Loan Documents  to which they are a party shall not be extinguished but shall be carried forward and shall secure  such Indebtedness, obligations and liabilities as amended, renewed, extended and restated hereby.   The parties hereto ratify and confirm each of the Existing Loan Documents entered into prior to  the  Effective  Date  (but  excluding  the  Existing  A&R  Credit  Agreement)  and  agree  that  such  Existing Loan Documents continue to be legal, valid, binding and enforceable in accordance with  their  terms  (except  to  the  extent  amended,  restated  and/or  superseded  in  connection  with  the  transactions  contemplated hereby), however, for  all matters  arising prior to  the Effective Date  (including the accrual and payment of interest and fees, and matters relating to indemnification  and compliance with financial covenants), the terms of the Existing A&R Credit Agreement (as  unmodified by this Agreement) shall control and are hereby ratified and confirmed.  The Borrower  represents and warrants that, as of the Effective Date, there are no claims or offsets against, or  defenses  or  counterclaims  to,  its  obligations  (or  the  obligations  of  any  Guarantor)  under  the  Existing A&R Credit Agreement or any of the other Existing Loan Documents.         Section 12.19 True-up Loans.  Upon the effectiveness of this Agreement, (a) each Lender  who holds Loans in an aggregate amount less than its Applicable Percentage (after giving effect  to this amendment and restatement) of all Loans shall advance new Loans which shall be disbursed  to the Administrative Agent and used to repay Loans outstanding to each Lender who holds Loans  in an aggregate amount greater than its Applicable Percentage of all Loans, (b) each Lender’s  participation  in  each  Letter  of  Credit  shall  be  automatically  adjusted  to  equal  its Applicable  Percentage (after giving effect to this amendment and restatement), and (c) such other adjustments  shall be made as the Administrative Agent shall specify so that each Lender’s Revolving Credit  Exposure equals its Applicable Percentage (after giving effect to this amendment and restatement)  of the total Revolving Credit Exposures of all of the Lenders.           Section 12.20 Acknowledgement and Consent to Bail-In of EEA Financial Institutions.   Notwithstanding  anything  to  the  contrary  in  any  Loan  Document  or  in  any  other  agreement,  arrangement or understanding among any such parties, each party hereto acknowledges that any  liability of any EEA Financial Institution arising under any Loan Document, to the extent such  liability  is  unsecured,  may  be  subject  to  the  write-down  and  conversion  powers  of  an  EEA  Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:               (a)   the  application  of  any  Write-Down  and  Conversion  Powers  by  an  EEA  Resolution Authority to any such liabilities arising hereunder which may be payable to it by any  party hereto that is an EEA Financial Institution; and               (b)   the  effects  of  any  Bail-In  Action  on  any  such  liability,  including,  if  applicable:                                        129  

 

                     (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 12.21 Exiting  Lender.  Deutsche  Bank  AG,  New  York  Branch (the “Exiting  Lender”),  hereby  sells,  assigns,  transfers  and  conveys  to  the  Lenders  hereto,  and  each  of  the  Lenders hereto hereby purchases and accepts, so much of the aggregate Commitments under, and  Loans outstanding under, the Existing A&R Credit Agreement such that, after giving effect to this  Agreement (a) such Exiting Lender shall (i) be paid in full in cash for all amounts owing under the  Existing A&R Credit  Agreement  as  agreed  and  calculated  by  such  Exiting  Lender  and  the  Administrative Agent in accordance with the Existing A&R Credit Agreement, (ii) cease to be a  “Lender” under the Existing A&R Credit Agreement and the “Loan Documents” as defined therein  and (iii) relinquish its rights and be released from its obligations under the Existing A&R Credit  Agreement and the other “Loan Documents”  as  defined therein,  and (b)  the Maximum  Credit  Amount and Elected Commitment of each Lender shall be as set forth on Annex  I hereto.  The  foregoing assignments, transfers and conveyances are without recourse to such Exiting Lender and  without any warranties whatsoever by the Administrative Agent or such Exiting Lender as to title,  enforceability, collectability, documentation or freedom from liens or encumbrances, in whole or  in part, other than the warranty of such Exiting Lender that it has not previously sold, transferred,  conveyed or encumbered such interests.  The assignee Lenders and the Administrative Agent shall  make all appropriate adjustments in payments under the Existing Credit Agreement, the “Notes”  and  the  other  “Loan  Documents”  thereunder  for  periods  prior  to  the  adjustment  date  among  themselves.  The Exiting Lender is executing this Agreement for the sole purpose of evidencing  its agreement to this Section 12.21 only and for no other purpose and shall have no obligations  under this Agreement except as set forth in this Section 12.21.                                       [SIGNATURES BEGIN NEXT PAGE]                                         130  

 

         The parties hereto have caused this Agreement to be duly executed as of the day and year  first above written.   BORROWER:                           CENTENNIAL RESOURCE PRODUCTION,                                      LLC, a Delaware limited liability company                                       By:   /s/ George Glyphis                                      Name:  George Glyphis                                      Title:  Vice President, Chief Financial Officer          [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   ADMINISTRATIVE AGENT  AND LENDER:                         JPMORGAN CHASE BANK, N.A.,                                      as Administrative Agent, Issuing Bank and a Lender                                                                                                                  By:   /s/ Garrett Sacco                                      Name:  Garrett Sacco                                      Title:  Authorized Officer                                     [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             WELLS FARGO BANK, N.A., as a Lender                                       By:   /s/ Jonathan Herrick                                      Name:  Jonathan Herrick                                      Title:  Director                                                                      [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             COMERICA BANK, as a Lender                                       By:   /s/ Cassandra M. Lucas                                      Name:  Cassandra M. Lucas                                      Title:  Portfolio Manager                                                                      [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             BMO HARRIS BANK, N.A.                                       By:   /s/ James V. Ducote                                      Name:  James V. Ducote                                      Title:  Managing Director                                  [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

                                         LENDER:                             CANADIAN IMPERIAL BANK OF                                      COMMERCE, NEW YORK BRANCH                                       By:   /s/ Trudy Nelson                                      Name:  Trudy Nelson                                      Title:  Authorized Signatory                                                                                                                                                        By:   /s/ Donovan C. Broussard                                      Name:  Donovan C. Broussard                                      Title:  Authorized Signatory                                                                        [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             U.S. BANK NATIONAL ASSOCIATION                                       By:   /s/ Ben J. Leonard                                      Name:  Ben J. Leonard                                      Title:  Vice President                                  [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             BRANCH BANKING AND TRUST COMPANY                                       By:   /s/ James Giordano                                      Name:  James Giordano                                      Title:  Senior Vice President                                  [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             ROYAL BANK OF CANADA                                       By:   /s/ Emilee Scott                                      Name:  Emilee Scott                                      Title:  Authorized Signatory                                     [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                                            CITIBANK, N.A.                                                      By:      /s/ Jeff Ard                                                     Name:  Jeff Ard                                                     Title:  Vice President         [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                                PRODUCTION, LLC]  

 

   LENDER:                             FIFTH THIRD BANK                                       By:   /s/ Jonathan H Lee                                      Name:  Jonathan H Lee                                      Title:  Director                                     [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             CAPITAL ONE, NATIONAL ASSOCIATION                                       By:   /s/ Cameron Breitenbach                                      Name:  Cameron Breitenbach                                      Title:  Vice President        [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             KEYBANK, N.A., as a Lender                                       By:   /s/ David M. Bornstein                                      Name:  David M. Bornstein                                      Title:  Senior Vice President                                  [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   LENDER:                             PNC BANK, NATIONAL ASSOCIATION                                       By:   /s/ Sandra Salazar                                      Name:  Sandra Salazar                                      Title:  Managing Director                                     [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

   EXITING LENDER:                     DEUTSCHE BANK AG, NEW YORK BRANCH                                       By:   /s/ Maria Guinchard                                             Name:  Maria Guinchard                                      Title:   Vice President                                                                                                                  By:   /s/ Alicia Schug                                       Name:  Alicia Schug                                      Title:   Vice President                                              [SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT – CENTENNIAL RESOURCE                                  PRODUCTION, LLC]  

 

                                                ANNEX I        ALLOCATION OF MAXIMUM CREDIT AMOUNTS AND ELECTED                                COMMITMENTS                             Applicable       Maximum Credit        Elected      Name of Lender                            Percentage           Amount          Commitment   JPMorgan Chase Bank,    10.00000000%          $150,000,000.00 $60,000,000.00  N.A.  Comerica Bank           10.00000000%          $150,000,000.00 $60,000,000.00   Royal Bank of Canada    10.00000000%          $150,000,000.00 $60,000,000.00   Wells Fargo Bank, N.A.  10.00000000%          $150,000,000.00 $60,000,000.00   BMO Harris Bank,        6.66666666%           $100,000,000.00 $40,000,000.00  N.A.  Canadian Imperial       6.66666666%           $100,000,000.00 $40,000,000.00  Bank of Commerce,  New York Branch  Citibank, N.A.          6.66666666%           $100,000,000.00 $40,000,000.00   Fifth Third Bank        6.66666666%           $100,000,000.00 $40,000,000.00   U.S. Bank National      6.66666666%           $100,000,000.00 $40,000,000.00  Association  Branch Banking and      6.66666666%           $100,000,000.00 $40,000,000.00  Trust Company   Capital One, National   6.66666666%           $100,000,000.00 $40,000,000.00  Association  KeyBank, National       6.66666666%           $100,000,000.00 $40,000,000.00  Association  PNC Bank, National      6.66666666%           $100,000,000.00 $40,000,000.00  Association                         100. 00000000%  TOTAL                                       $1,500,000,000.00 $600,000,000.00

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