California Resources Corp - FORM 8-K - EX-10.2 - EXHIBIT 10.2

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EX-99.1 - EXHIBIT 99.1 - California Resources Corp	a160815tenderearlyresultsf.htm
EX-10.1 - EXHIBIT 10.1 - California Resources Corp	exh101creditagr125.htm
8-K - 8-K - California Resources Corp	form8-ktrojanearlysettleme.htm

Execution Version

Exhibit 10.2

FIFTH AMENDMENT AND WAIVER

TO

CREDIT AGREEMENT

DATED AS OF AUGUST 12, 2016

AMONG

CALIFORNIA RESOURCES CORPORATION,
AS THE BORROWER,

JPMORGAN CHASE BANK, N.A.,
AS ADMINISTRATIVE AGENT, SWINGLINE LENDER
AND A LETTER OF CREDIT ISSUER,

BANK OF AMERICA, N.A.,
AS SYNDICATION AGENT, SWINGLINE LENDER
AND A LETTER OF CREDIT ISSUER,

AND

THE LENDERS
PARTY HERETO

19560366.30

FIFTH AMENDMENT TO CREDIT AGREEMENT

This Fifth Amendment and Waiver to the Credit Agreement (this “Amendment”) dated as of August 12, 2016, is among California Resources Corporation, a Delaware corporation (the “Borrower”), each of the undersigned Guarantors, each Lender (as defined below) party hereto, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Administrative Agent”).

RECITALS

A. The Borrower, the Administrative Agent and the banks and other financial institutions from time to time party thereto (together with their respective successors and assigns in such capacity, each a “Lender”) have entered into that certain Credit Agreement dated as of September 24, 2014 (as amended by the First Amendment to the Credit Agreement dated as of February 25, 2015, the Second Amendment to the Credit Agreement dated as of November 2, 2015, the Third Amendment to the Credit Agreement dated as of February 23, 2016, the Fourth Amendment to the Credit Agreement dated as of April 22, 2016 and as further amended, restated, modified or supplemented from time to time, the “Credit Agreement”).

B. As of August 1, 2016, the Borrower has launched a tender offer for its Senior Notes and outstanding Permitted Second Lien Indebtedness for cash at a discount to par (the “Tender Offer”).

C. The Tender Offer has an early participation date of August 12, 2016 (the “Early Participation Date”), an early settlement date within three business days thereafter (the “Early Settlement Date”) a final expiration date of August 26, 2016, and a final settlement date within three business days thereafter (the “Final Settlement Date”), which dates may be extended and the consideration in connection with the Tender Offer adjusted to achieve a successful Tender Offer (subject, in each case, to the limitations set forth in Section 11.7 of the Credit Agreement, as amended by Section 2.16 of this Amendment).

D. The Borrower intends to enter into a credit agreement in respect of the First Lien Second Out Junior Indebtedness (as defined in Section 2 below) (the “First Lien Second Out Credit Agreement”) on August 12, 2016.

E. The proceeds of the First Lien Second Out Junior Indebtedness incurred pursuant to the First Lien Second Out Credit Agreement (the “First Lien Second Out Proceeds”), together with amounts for fees, interest and premium, will initially be funded into an escrow account for the benefit of the Borrower and the lenders under the First Lien Second Out Credit Agreement (the “Escrow Account”). The Escrow Account will expire on September 12, 2016 (the “Escrow Termination Date”), and the period from August 1, 2016 until the earlier of the (a) Final Escrow Termination Date and (b) the Final Settlement Date is the “Waiver Period”.

F. Until the Fifth Amendment Effective Date, security for the First Lien Second Out Junior Indebtedness incurred pursuant to the First Lien Second Out Credit Agreement shall be limited to the Escrow Account.

G. If the Early Settlement Date occurs on or before the expiration of the Waiver Period, the Borrower will use First Lien Second Out Proceeds in the Escrow Account to prepay (a) the Term Loans in an amount equal to the greater of (i) $106,250,000 and (ii) 1/3 of the Tender Offer amount on the Early Settlement Date and (b) the Revolving Loans in an amount equal to the proceeds necessary to fund the settlement of the Tender Offer on the Early Settlement Date. If the Final Settlement Date occurs on or before the expiration of the Waiver Period, the Borrower will use First Lien Second Out Proceeds in the Escrow Account to prepay (a) the Term Loans in an amount equal to 1/3 of the Tender Offer amount on the Final Settlement Date and (b) the Revolving Loans in an amount equal to the proceeds necessary to fund the settlement of the Tender Offer on the Final Settlement Date. After giving effect to the prepayments set forth in the two immediately preceding sentences, the Borrower may, and on or following the Final Settlement Date, the Borrower will use the First Lien Second Out Proceeds remaining on deposit in the Escrow Account, if any, to prepay the First Lien Second Out Junior Indebtedness incurred pursuant to the First Lien Second Out Credit Agreement along with any accrued fees, interest and premiums. Any amounts remaining in the Escrow Account after satisfaction of these obligations will be returned to the Borrower.

H. If the Final Settlement Date does not occur on or before the expiration of the Waiver Period, the Borrower will use the amounts on deposit in the Escrow Account to prepay the First Lien Second Out Junior Indebtedness incurred pursuant to the First Lien Second Out Credit Agreement and to pay fees, interest and premiums thereon. Any amounts remaining in the Escrow Account after satisfaction of these obligations will be returned to the Borrower.

I. If the Early Settlement Date and/or the Final Settlement Date occurs on or before the expiration of the Waiver Period and upon the consummation of the transactions described in Recital G, the Borrower will be permitted to, in each case (a) borrow Revolving Loans in an amount not to exceed the amount of Revolving Loans prepaid pursuant to Recital G and (b) use such proceeds of Revolving Loans as described in the amendment to Section 11.7(a)(ii) pursuant to Section 2.16 of this Amendment (the transactions described in Recitals B through I, the “Second Out Transactions”). The Revolving Loans borrowed in accordance with this paragraph shall be funded to the Borrower no later than the Business Day following the repayment of the Revolving Loans described in Recital G above.

J. The Borrower has requested and the Lenders party hereto have agreed to amend certain provisions of the Credit Agreement on the terms and conditions set forth herein.

K. NOW, THEREFORE, to induce the Administrative Agent and the Lenders to enter into this Amendment and in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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Section 1.Definitions. Unless otherwise defined in this Amendment, each capitalized term used in this Amendment has the meaning assigned to such term in the Credit Agreement. Unless otherwise indicated, all section references in this Amendment refer to sections of the Credit Agreement.

Section 2. Amendments to Credit Agreement.

2.1 Amendments to Section 1.1.

(a) The following defined terms are hereby amended and restated in their entirety or added in their entirety, in each case to read as follows:

“Consolidated First Lien First Out Secured Debt” shall mean, as of any date of determination, the sum of (a) the Total Exposure of all Lenders on such date and (b) without duplication of any amounts included in clause (a), the aggregate principal amount of Consolidated Total Debt of the Borrower and its Subsidiaries on such date that is secured by a first priority Lien on any asset or Property of the Borrower or any Subsidiary (other than First Lien Second Out Junior Indebtedness).

“Consolidated Total Debt” shall mean, as of any date of determination, (a) all Indebtedness of the types described in clauses (a) and (b) (other than intercompany Indebtedness owing to the Borrower or any Subsidiary), clause (d) (but, in the case of clause (d), only to the extent of any unreimbursed drawings under any letter of credit that has not been cash collateralized) and clauses (e) through (i) (but, in the case of clause (i) only to the extent of Guarantee Obligations with respect to Indebtedness otherwise included in this definition) of the definition thereof, in each case actually owing by the Borrower and the Subsidiaries on such date and to the extent appearing on the balance sheet of the Borrower determined on a consolidated basis in accordance with GAAP.

“Development Joint Venture” shall mean an incorporated or unincorporated partnership, or other jointly owned enterprise or entity or a joint venture or contractual relationship (even if not a partnership or joint venture) to which the Borrower or a Subsidiary is a party which has been formed for the purpose of exploring for and/or developing Oil and Gas Properties, where each of the parties thereto have either contributed or agreed to contribute cash, services, Oil and Gas Properties, other assets, or any combination of the foregoing.

“Equity Funded Prepayment” has the meaning given to such term in Section 11.7(b)(iii).

“Existing Intercreditor Agreement” shall mean the Intercreditor Agreement among JPMorgan Chase Bank, N.A., as priority lien agent, The Bank of New York Mellon Trust Company, N.A., as second lien collateral agent, and the other parties from time to time party thereto, dated as of December 15 2015, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Exploration and Development Disposition” has the meaning given to such term in Section 11.4(a).

“farm-in or farm-out” shall have the meaning commonly given to such term in the oil and gas industry, and without limiting the foregoing, shall expressly include transactions involving assignments or other dispositions of all or part of oil, natural gas or mineral interests in which the

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assignor or other disposing party retains an interest in consideration of the assignee or other disposing party assuming or undertaking obligations with respect to such interests, including cost reimbursement and/or agreements to perform services in connection with the development of the relevant assets.

“Fifth Amendment” shall mean that certain Fifth Amendment to Credit Agreement, dated as of August 12, 2016, between the Borrower, the Administrative Agent and the Lenders Party thereto.

“Fifth Amendment Covenant Period” shall mean the period commencing on the Fifth Amendment Effective Date and ending on December 31, 2017.

“Fifth Amendment Effective Date” shall mean the Amendment Effective Date (as defined in the Fifth Amendment).

“First Lien First Out Leverage Ratio” shall mean as of the last day of each fiscal quarter of the Borrower, the ratio of (a) Consolidated First Lien First Out Secured Debt to (b) Consolidated EBITDAX for the Test Period ending on such date (in each case, after giving pro forma effect to transactions contemplated in such period as set forth in the definition of “Consolidated EBITDAX” during the Test Period, as if such transaction or event occurred on the first day of the Test Period).

“First Lien Asset Coverage Ratio” shall mean as of the applicable June 30 or December 31, the ratio of (a) the sum of (i) PV-10 and (ii) the Hedge PV-10, in each case as of such date to (b) the sum of the aggregate principal amount of all Indebtedness for borrowed money that is secured by Liens and provides for collateral recovery in respect of such Liens on an equal priority or greater priority basis to the collateral recovery in respect of the First Lien Second Out Obligations.

“First Lien Intercreditor Agreement” shall mean an intercreditor agreement by and among the Borrower, the Administrative Agent, as agent for the First-Out Secured Parties (as defined therein) and the agent for the First Lien Second Out Secured Parties in the form of Exhibit J or another form otherwise reasonably acceptable to the Majority Lenders.

“First Lien Second Out Credit Documents” shall mean the credit documents evidencing the First Lien Second Out Junior Indebtedness.

“First Lien Second Out Junior Indebtedness” shall have the meaning given to such term in the definition of “Permitted Junior Indebtedness”.

“First Lien Second Out Obligations” shall have the meaning given to such term in the definition of “Obligations”.

“First Lien Second Out Secured Parties” shall have the meaning assigned to the term “Second-Out Secured Parties” in the First Lien Intercreditor Agreement.

“First Out Obligations” shall have the meaning given to such term in the definition of “Obligations”.

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“Hedge PV-10” shall mean, with respect to any commodity Hedge Agreement, the present value, discounted at 10% per annum, of the future receipts expected to be paid to the Borrower or the Subsidiaries under such Hedge Agreement netted against the Strip Price.

“Increase Effective Date” shall have the meaning given to such term in Section 2.16(a)(iv).

“Loan Documents” means the Credit Documents and the First Lien Second Out Credit Documents.

“Maturity Date” shall mean the fifth anniversary of the Funding Date; provided that, following the incurrence of First Lien Second Out Junior Indebtedness, such term shall mean the earlier to occur of (i) the fifth anniversary of the Funding Date, (ii) in the event that $100,000,000 or greater aggregate principal amount of 2020 Notes remain outstanding on the date that is 182 days prior to their stated maturity date (such 182^nd day prior the “2020 Notes Springing Maturity Date”), the 2020 Notes Springing Maturity Date and (iii) in the event that $100,000,000 or greater aggregate principal amount of 2021 Notes remain outstanding on the date that is 182 days prior to their stated maturity date (such 182^nd day prior, the “2021 Notes Springing Maturity Date”), the 2021 Notes Springing Maturity Date.

“Mortgaged Property” shall mean the real property and improvements thereto with respect to which a Mortgage is required to be granted pursuant to Section 10.10.

“New Lenders” shall have the meaning given to such term in Section 2.16(a).

“O&G Expenditure” shall mean (a) any capital expenditures or other expenditures for leasehold, seismic or for maintenance, repair or improvement of existing properties and assets; provided that such expenditures, repairs or improvements are made on assets constituting Collateral and (b) any acquisition of other assets that are used or useful in an oil and gas business, including Oil and Gas Properties.

“Obligations” shall mean all advances to, and debts, liabilities, obligations, covenants and duties of, any Credit Party arising under (a) any Credit Document or otherwise with respect to any Loan or Letter of Credit or under any Secured Cash Management Agreement or Secured Hedge Agreement (the “First Out Obligations”) or (b) the First Lien Second Out Credit Documents (the “First Lien Second Out Obligations”), in each case, entered into with the Borrower or any of its Subsidiaries, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Credit Party or any Affiliate thereof in any proceeding under any bankruptcy or insolvency law naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. Without limiting the generality of the foregoing, the Obligations of the Credit Parties under the Credit Documents and First Lien Second Out Credit Documents (and any of their Subsidiaries to the extent they have obligations under the Credit Documents) include the obligation (including Guarantee Obligations) to pay principal, interest, charges, expenses, fees, attorney costs, indemnities and other amounts payable by any Credit Party under any Credit Document or First Lien Second Out Credit Document. Notwithstanding the foregoing, solely with respect to any Credit Party that is not an “eligible contract

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participant” under the Commodity Exchange Act, Excluded Hedge Obligations of such Credit Party shall in any event be excluded from “Obligations” owing by such Credit Party.

“Permitted Junior Indebtedness” shall mean (a) Permitted Second Lien Indebtedness and (b) Indebtedness of the Borrower and its Subsidiaries (“First Lien Second Out Junior Indebtedness”) that (i) is secured by the Liens on the Collateral that secure the First Out Obligations but provide for collateral recovery in respect of such Liens to be junior to the collateral recovery in respect of the First Out Obligations, (ii) is subject to the Existing Intercreditor Agreement such that the lending parties under such Indebtedness are “Priority Lien Secured Parties” (as defined therein), (iii) is subject to a First Lien Intercreditor Agreement, (iv) has a maturity date (taking into account any adjustable features of the maturity date) that is not earlier than 91 days after the Maturity Date (determined at the time of issuance or incurrence of such First Lien Second Out Junior Indebtedness), (v) is issued at market terms, as certified by an Authorized Officer of the Borrower in good faith, which certification may be made at the time that the documents governing such Indebtedness are entered into and (vi) may not be mandatorily prepaid prior to the repayment of the Term Loans (except regularly scheduled amortization payments not to exceed 1% annually of the original principal amount of such Indebtedness); provided, further, that the terms and documentation of such Indebtedness shall be (A) reasonably satisfactory to the Administrative Agent or (B) either (x) not materially more restrictive, taken as a whole, to the Borrower and its Subsidiaries, than the Credit Documents (or if materially more restrictive, the Lenders receive the benefit of the more restrictive terms which, for the avoidance of doubt, may be provided to the Lenders without consent) or (y) if more restrictive, then such more restrictive terms are only applicable after all of the First Out Obligations then due shall have been indefeasibly paid in full in cash, in each case, as certified by an Authorized Officer of the Borrower in good faith.

“PV 10” shall mean, with respect to any Proved Reserves expected to be produced from any Oil and Gas Properties, the net present value, discounted at 10% per annum, of the future net revenues expected to accrue to the Credit Parties’ collective interests in such reserves during the remaining expected economic lives of such reserves, calculated using the Strip Price; provided that in no event shall the amount of Proved Undeveloped Reserves included in such calculation exceed 30% of PV-10.

“Security Documents” shall mean, during any Borrowing Base Trigger Period, collectively, (a) the Security Agreement, (b) the Pledge Agreement, (c) the Mortgages, (d) the Existing Intercreditor Agreement, (e) the First Lien Intercreditor Agreement and (f) each other security agreement or other instrument or document executed and delivered pursuant to Section 10.10 or 10.12 or pursuant to any other such Security Documents or otherwise to secure or perfect the security interest in any or all of the First Out Obligations.

“Total Debt Leverage Ratio” shall mean, for the most recently ended fiscal quarter of the Borrower, the ratio of (a) Consolidated Total Debt to (b) Consolidated EBITDAX for the Test Period ending on such date (in each case, after giving pro forma effect to transactions contemplated in such period as set forth in the definition of “Consolidated EBITDAX” during such Test Period, as if such transaction or event occurred on the first day of the Test Period).

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(b) The definition of “Applicable Equity Amount” is hereby amended by (a) replacing “Section 11.7(c)(iii)” with “Section 11.7(b)(iii)” in subclause (b)(iii) thereof and (b) replacing “Section 11.7(c)” with “Section 11.7(b)” in the last sentence thereof.

(c) Clause (b) of the definition of “Change Of Control” is hereby amended and restated in its entirety to read as follows:

“(b) occupation at any time of a majority of the seats (other than vacant seats) on the Board of Directors of the Borrower by Persons who were not (i) directors of the Borrower on the date of this Agreement or (ii) nominated or appointed by the Board of Directors of the Borrower; or”

(d) The definition of “Collateral Requirements” is hereby amended by deleting the word “and” preceding the last proviso thereof and adding the following proviso at the end thereof:

“; and provided further that with respect to assets of the Credit Parties that are not subject to an Acceptable Security Interest of the Administrative Agent on behalf of the Secured Parties on or after the Fifth Amendment Effective Date, the Credit Parties shall not be required to execute and cause its Material Subsidiaries to execute any Mortgages necessary to provide such Acceptable Security Interest on such assets until 30 days after the Fifth Amendment Effective Date or, for property acquired after the Fifth Amendment Effective Date, the date first acquired or received by the Borrower or a Subsidiary Guarantor (or Person required to become a Guarantor pursuant to Section 10.10(b)), as applicable (or such longer period as the Administrative Agent may agree in its reasonable discretion; provided that such longer period shall not exceed thirty (30) days without the written consent of the Majority Lenders; and provided further that the Administrative Agent will provide five (5) Business Days advance notice to the Lenders before recording the Mortgages in connection with such grant of such Acceptable Security Interest and, absent an objection from any Lender by notice to the Administrative Agent of additional flood due diligence requirements with respect to the Mortgaged Properties, the Administrative Agent will proceed to record such Mortgages).”

(e) The first proviso at the end of the definition of “Consolidated Interest Charges” is hereby amended by replacing the words “Permitted Second Lien Indebtedness” with “Permitted Junior Indebtedness”.

(f) The end of the definition of “Excluded Property” is hereby amended by replacing “, (e) all real property not constituting Borrowing Base Properties, (f) all Midstream Assets and Power Assets and (g)” with “and (e)”.

(g) Clause (a) of the definition of “Excluded Subsidiary” is hereby amended by inserting the words “(provided that no existing Guarantor shall become an Excluded Subsidiary pursuant to this clause (a) if such Guarantor subsequently becomes a non-wholly owned Subsidiary)” immediately following the first parenthetical contained therein.

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(h) Clause (viii) of the proviso at the end of the definition of “Indebtedness” is hereby amended by (a) deleting the words “the sale of” contained therein and (b) replacing the word “interest” with “interests” at the end thereof.

(i) Clause (g) of the definition of “Oil and Gas Properties” is hereby amended by adding the words “, steam flood facilities” immediately following the second parenthetical thereof.

(j) The first parenthetical of clause (b) of the definition of “Permitted Additional Debt” is hereby amended by replacing “or” with “,” and adding the words “or make-whole” immediately following the word “prepayment”.

(k) The proviso of “Permitted Refinancing Indebtedness” is hereby amended by (a) replacing the word “or” with “,” in the parenthetical of clause (D), (b) adding the words “or make-whole” immediately following the word “prepayment” in the parenthetical of clause (D) and (c) replacing clause (E) with the following clause:

(E) if the Indebtedness being Refinanced is Permitted Junior Indebtedness, the terms and conditions of such Permitted Refinancing Indebtedness meet the requirements of clauses (i)-(iv) of the definition of “Permitted Second Lien Indebtedness” or of clauses (b)(i)-(vi) of the definition of “Permitted Junior Indebtedness”, as applicable, if such Permitted Refinancing Indebtedness is secured by any property of the Borrower or its Subsidiaries.

(l) Clause (i) of the first proviso of “Permitted Second Lien Indebtedness” is hereby amended by replacing the words “an intercreditor agreement in the form of Exhibit J” with “the Existing Intercreditor Agreement”.

(m) The definition of “Revolving Commitment” is hereby amended by replacing the words “Third Amendment Effective Date is $1,600,000,000” with “Fifth Amendment Effective Date is $1,400,000,000” in the last sentence thereof.

(n) The definition of “Subsidiary” is hereby amended by replacing “.” with “;” at the end of the second subclause of such definition and by adding the following proviso immediately following such replacement:

“provided that, Development Joint Ventures shall not be deemed to be Subsidiaries of the Borrower or of any of its Subsidiaries.”

(o) Clause (x) of the definition of “Strip Price” is hereby amended by adding the words “Hedge PV-10 and/or” immediately following the word “determining”.

(p) Each of the following definitions is hereby amended by replacing the term “Obligations” with “First Out Obligations”: Permitted Additional Debt.

(q) Each of the following definitions is hereby amended by replacing all occurrences of the term “Deposit Account” with “deposit account”: Collateral Requirements and Excluded Deposit Account.

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2.2 Amendment to Certain Sections. Each of the following Sections and Articles of the Credit Agreement is hereby amended by replacing all occurrences of the term “Obligations” therein with “First Out Obligations”: Section 5.6, the lead-in paragraph to Article X, Section 10.14, the lead-in paragraph to Article XI, Section 11.1(e), Section 11.2(a), Section 11.2(y), Section 11.8, Section 11.9(i), Section 12.10 (except the last paragraph thereof), Section 13.13, Section 14.7, Section 14.17, Section 14.21, Section 14.22 and Section 14.23.

2.3 Amendment to Article II. Article II of the Credit Agreement is hereby amended by adding the following Section 2.16:

Section 2.16 Increase of Revolving Commitments.

(a) The Borrower shall have the option, without the consent of the Lenders, from time to time to cause one or more increases in the Total Revolving Commitment by adding, subject to the prior written consent (which may not be unreasonably withheld or delayed) of the Administrative Agent and each Letter of Credit Issuer, to this Agreement one or more financial institutions as Lenders (collectively, the “New Lenders”) or by allowing one or more Lenders to increase their respective Revolving Commitments, subject to the satisfaction of the following conditions:

(i) prior to and after giving effect to the increase, no Default or Event of Default shall have occurred hereunder and be continuing;

(ii) all representations and warranties made by any Credit Party contained in the Credit Documents shall be, to the knowledge of an Authorized Officer of the Borrower and its Subsidiaries, true and correct in all material respects (unless such representations and warranties are already qualified by materiality, Material Adverse Effect or a similar qualification, in which case they are true and correct in all respects) with the same effect as though such representations and warranties had been made on and as of the Increase Effective Date (as defined below) (except where such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (unless such representations and warranties are already qualified by materiality, Material Adverse Effect or a similar qualification, in which case they are true and correct in all respects) as of such earlier date).

(iii) no such increase shall cause the aggregate increases in Commitments pursuant to this Section 2.16 to exceed the lesser of (a) $250,000,000 and (b) the positive difference if any between (i) the Borrowing Base and (ii) the sum of the Total Revolving Commitments and the Total Term Loans Commitments;

(iv) no Lender’s Revolving Commitment shall be increased without such Lender’s prior written consent which consent may be given or withheld in such Lender’s sole and absolute discretion; and

(v) such increase shall be evidenced by an incremental commitment agreement in form and substance reasonably acceptable to the Administrative Agent and executed by the Borrower, the Administrative Agent, New Lenders, if any, and Lenders increasing their

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Revolving Commitments, if any, and which shall indicate the amount and allocation of such increase in the Aggregate Commitments and the effective date of such increase (the “Increase Effective Date”).

Each financial institution that becomes a New Lender pursuant to this Section 2.16 by the execution and delivery to the Administrative Agent of the applicable incremental commitment agreement shall be a “Lender” for all purposes under this Agreement on the applicable Increase Effective Date. The Borrower shall borrow and prepay Loans on each Increase Effective Date to the extent necessary to keep the outstanding Loans of each Lender ratable with such Lender’s revised Revolving Commitment Percentage after giving effect to any nonratable increase in the Total Revolving Commitments under this Section 2.16.

(b) As a condition precedent to each increase pursuant to subsection (a) above, the Borrower shall deliver to the Administrative Agent the following in form and substance reasonably satisfactory to the Administrative Agent:

(i) a certificate dated as of the Increase Effective Date, signed by an Authorized Officer of the Borrower certifying that each of the conditions to such increase set forth in this Section 2.16 shall have occurred and been complied with and that, before and after giving effect to such increase, no Default or Event of Default exists;

(ii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Authorized Officers of the Borrower and each Guarantor as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Authorized Officer thereof authorized to act as an Authorized Officer in connection with such increase agreement and any Guarantors’ Consent to such increase agreement, and such documents and certifications as the Administrative Agent may reasonably require to evidence that the Borrower and each Guarantor is validly existing and in good standing in its jurisdiction of organization; and

(iii) a favorable opinion of independent legal counsel reasonably acceptable to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, relating to such increase agreement and any Guarantors’ Consent to such increase agreement, addressed to the Administrative Agent and each Lender.

2.4 Amendment to Section 2.14. Section 2.14 of the Credit Agreement is hereby amended by (a) deleting “(i)” after “other than” in the first parenthetical of Subsection 2.14(f) and (b) deleting “and (ii) Permitted Second Lien Indebtedness incurred to refinance the Term Loans or the Senior Notes, up to the original principal amount of the refinanced Term Loans or Senior Notes, as applicable” after “of the refinanced Indebtedness” at the end of the first parenthetical in Subsection 2.14(f).

2.5 Amendment to Section 5.2. Section 5.2 of the Credit Agreement is hereby amended by (a) inserting “; provided, that for the purposes of this Section 5.2(d), Consolidated Cash Balance shall not be deemed to include any Net Cash Proceeds that will be repaid pursuant to Sections 5.2(e) through (h) hereof” after “then-outstanding Swingline Loans plus Revolving Loans” at the end

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of Subsection 5.2(d), (b) inserting “(other than (i) Dispositions valued in good faith by the Borrower at less than $1,000,000 individually or $10,000,000 in the aggregate for any fiscal year of the Borrower and (ii) cash received for costs and expenses incurred in the conduct of exploration and development operations in connection with Exploration and Development Dispositions),” after the first instance of “Disposition” in Subsection 5.2(f), (c) replacing “Section 11.1(bb)” with “Section 11.1(aa)” in Subsection 5.2(g), (d) deleting the phrase “less any Net Cash Proceeds used or reserved by a written notice to the Administrative Agent for a use permitted by Section 11.7(d)(iii) (provided that to the extent the Borrower determines that such reserved Net Cash Proceeds will or cannot thereafter be used as permitted by Section 11.7(d)(iii), then the Borrower shall prepay the Term Loans by the amount of unused Net Cash Proceeds)” in Subsection 5.2(g) and (e) amending and restating clause (e) as follows and inserting the following clause (h) after clause (g) thereof and re-lettering the subsequent clauses accordingly:

(e) Repayment of Loans Following Disposition of Non-Borrowing Base Properties. If the Borrower or any one of the other Credit Parties consummates a Disposition (other than (i) Dispositions valued in good faith by the Borrower at less than $1,000,000 individually or $10,000,000 in the aggregate for any fiscal year of the Borrower and (ii) cash received for costs and expenses incurred in the conduct of exploration and development operations in connection with Exploration and Development Dispositions), to a Person other than the Borrower or any one of the other Credit Parties (x) of properties not constituting Borrowing Base Properties or (y) of any Stock or Stock Equivalents of any Subsidiary owning properties not constituting Borrowing Base Properties (each a “Non-Borrowing Base Disposition”), the Borrower shall, on the Business Day after receiving such proceeds, (i) prepay the Term Loans at par in an aggregate principal amount equal to the lesser of (A) 100% of the Net Cash Proceeds obtained from such Disposition less any Net Cash Proceeds used or reserved for a purpose permitted by Section 11.7(a)(i) or if limited to the amount that could be so reserved for general corporate purposes (other than, for the avoidance of doubt, prepayment of any Indebtedness (excluding prepayment of First Out Obligations)) or to make an O&G Expenditure subject to the limitations set forth in Section 11.15 and (B) the sum of the then-outstanding Term Loans and (ii) repay the Revolving Loans with any such Net Cash Proceeds remaining after giving effect to the prepayment of Term Loans required by, and other uses permitted under, Section 5.2(e)(i); provided, that contemporaneously with any repayment of Revolving Loans made pursuant to Section 5.2(e)(ii), the Total Revolving Commitment shall be reduced by the amount of such repayment.

(h) Repayment of Loans Following Incurrence of Permitted Junior Indebtedness. If the Borrower or any one of the other Credit Parties incurs any Permitted Junior Indebtedness, the Borrower shall, on the Business Day after receiving such proceeds, prepay the Term Loans at par in an aggregate principal amount equal to (1) in the event of the initial incurrence of such Permitted Junior Indebtedness pursuant to Section 11.1(aa), the lesser of (i) the greater of (a) $106,250,000 or (b) 25% of the cash proceeds (including cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received) and (ii) the sum of the then-outstanding Term Loans and (2) thereafter, the lesser of (i) 25% of the cash proceeds (including cash proceeds subsequently received (as and

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when received) in respect of noncash consideration initially received) and (ii) the sum of the then-outstanding Term Loans.

2.6 Amendment to Section 9.14. Section 9.14(a) of the Credit Agreement is hereby amended by replacing the words “With respect to any Reserve Report delivered after a Borrowing Base Trigger Event, after” with “After”.

2.7 Amendment to Section 9.15. Section 9.15 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

9.15 Solvency. The Borrower, on a consolidated basis with its Subsidiaries, is Solvent and neither the Borrower nor any of its Subsidiaries presently intends to or presently anticipates it will (a) be or become subject to a voluntary case under any debt relief law, (b) make a general assignment for the benefit of creditors or (c) have a custodian, conservator, receiver or similar official appointed for such Person or any substantial part of such Person’s assets, and no such Person presently expects or presently anticipates it will (w) be or become subject to an involuntary case under any debt relief law, (x) be subject to a forced liquidation or otherwise be adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or bankrupt, (y) make a general assignment for the benefit of creditors as a result of any direct action by any other Person or (z) have a custodian, conservator, receiver or similar official appointed for such Person or any substantial part of such Person’s assets as a result of any direct action by any other Person.

2.8 Amendment to Section 10.1. Section 10.1 of the Credit Agreement is hereby amended by (a) inserting the words “, together with, if not otherwise required to be filed with the SEC, a customary management discussion and analysis describing the financial condition and results of operations of the Borrower and its Subsidiaries” at the end of each of Subsection 10.1(a) and 10.1(b) thereof and (b) inserting the words “contemporaneously with the delivery thereof to such other Person” at the beginning of clause (ii) of Subsection 10.1(f) thereof.

2.9 Amendment to Section 10.10. Section 10.10 of the Credit Agreement is hereby amended by (a) inserting the words “; provided that, in connection with the delivery of any Mortgages, the Administrative Agent shall receive, with regards to certain laws of the State of California, a legal opinion of Day Carter & Murphy LLP or other California counsel to the Borrower, in a form and substance reasonably satisfactory to the Administrative Agent, and in each case, subject to customary qualifications and exceptions” immediately following the words “Collateral Requirements” contained in Subsection 10.10(a)(iii) thereof and (b) inserting the following new Subsections 10.10(e) and 10.10(f):

(e) During a Borrowing Base Trigger Period, subject to any applicable limitations set forth in the Pledge Agreement, the Borrower will pledge, and if applicable will cause each other Subsidiary Guarantor (or Person required to become a Subsidiary Guarantor pursuant to Section 10.10(b)) to pledge, as soon as is practicable using commercially reasonable efforts, but in any event within ten (10) Business Days (or such longer period as the Administrative Agent shall agree) of the Fifth Amendment Effective Date or, for after-acquired property, the date it is first acquired or received by the Borrower

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or a Subsidiary Guarantor (or Person required to become a Guarantor pursuant to Section 10.10(b)), as applicable, to the Administrative Agent, for the benefit of the Secured Parties, all of the Stock (other than any Excluded Stock meeting the definition of any of clause (a)-(c) or (e)-(h) thereof) that is owned by the Borrower or any Subsidiary Guarantor (or Person required to become a Guarantor pursuant to Section 10.10(b)) in each Development Joint Venture.

(f) Subject to any applicable limitations set forth in the Security Documents or the Pledge Agreement, upon the occurrence and during the continuation of a Borrowing Base Trigger Period, as soon as practicable using commercially reasonable efforts, but in any event within thirty (30) days (or such longer period as the Administrative Agent shall agree in its reasonable discretion) of the later of the Fifth Amendment Effective Date or the first day of such Borrowing Base Trigger Period, the Borrower will execute and cause its Material Subsidiaries to execute any Mortgages necessary to provide an Acceptable Security Interest subject to one-action rule waivers (to the extent permitted by applicable law) on all non-Borrowing Base Properties of the Credit Parties; provided that in the event such non-Borrowing Base Properties are acquired during a Borrowing Base Trigger Period, the Borrower shall execute such Mortgages as soon as practicable using commercially reasonable efforts, but in any event within ten Business Days (10) days (or such longer period as the Administrative Agent shall agree) after such non-Borrowing Base Properties are acquired; provided further that (i) such assets may be subject to Liens permitted under Section 11.2 and (ii) no intention to subordinate the Acceptable Security Interest of the Administrative Agent and the Secured Parties pursuant to the Security Documents is to be hereby implied or expressed by the permitted existence of such Permitted Liens.

2.10 Amendment to Section 10.12. Section 10.12 of the Credit Agreement is hereby amended by inserting the following new Subsection 10.12(c):

(c) Notwithstanding anything herein to the contrary, upon the written request of the Administrative Agent, the Borrower shall pay the Administrative Agent all costs and expenses incurred or to be incurred in connection with an appraisal of the Elk Hills power plant.

2.11 Amendment to Section 10.13. Section 10.13 of the Credit Agreement is hereby amended by (a) inserting the words “; provided, further, that such Reserve Report shall be substantially similar to the Borrower’s year-end reserve report filed with the SEC” at the end of the first proviso of Subsection 10.13(a) thereof and (b) inserting the words “provided that such Reserve Report shall be prepared in a customary fashion substantially similar to past reserve reports delivered under this Agreement” at the end of the penultimate sentence of Subsection 10.13(a) thereof.

2.12 Amendment to Section 11.1. Section 11.1 of the Credit Agreement is hereby amended by (a) inserting the words “in an aggregate principal amount not to exceed $250,000,000 at any one time outstanding” immediately following the words “Production Payment” contained in Subsection 11.1(u) thereof, (b) inserting “and clauses (z) and (aa) below, in each case subject to any limitations on Consolidated Interest Charges contained therein” at the end of Subsection 11.1(y) and (c)

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amending and restating Subsection 11.1(aa) in its entirety as follows and deleting Subsection 11.1(bb):

(aa) during a Borrowing Base Trigger Period, (x) additional Permitted Junior Indebtedness of the Borrower or any other Credit Party incurred solely for the purposes set forth in Section 5.2(g)(i)(A) and Section 11.7(a)(ii); provided that (i) the aggregate principal amount of such Indebtedness at any time does not exceed $1,000,000,000, (ii) after giving effect to the permitted use of proceeds thereof, the aggregate increase in annual pro forma Consolidated Interest Charges (excluding, for the purposes of this Section 11.1(aa) interest that is permitted to be paid in kind) from the Fifth Amendment Effective Date to the date of such issuance or incurrence does not exceed the product of (1) $40,000,000 and (2) the ratio of aggregate amount of Permitted Junior Indebtedness incurred pursuant to this Section 11.1(aa) and $1,000,000,000 (giving effect to up to $1,000,000 for undrawn fees related to the Revolving Commitment reduction on the Fifth Amendment Effective Date), (iii) the principal amount of Senior Notes and Permitted Second Lien Debt prepaid, repurchased, redeemed or defeased is in an amount not less than $500,000,000 and (iv) the Term Loans are concurrently prepaid pursuant to Section 5.2(h) and (y) any Permitted Refinancing Indebtedness issued or incurred to refinance such Indebtedness that satisfies the requirements of clause (x) of this Section 11.1(aa).

2.13 Amendment to Section 11.2. Section 11.2 of the Credit Agreement is hereby amended by (a) inserting the words “which, in the case of Production Payments constituting Indebtedness, shall not exceed an aggregate principal amount of $250,000,000 at any one time outstanding” immediately following the words “Production Payments” contained in Subsection 11.2(q) thereof, (b) replacing “an intercreditor agreement in the form of Exhibit J” with “the Existing Intercreditor Agreement” in Subsection 11.2(y) and (c) amending and restating Subsection 11.2(aa) and 11.2(bb) in their entirety to read as follows:

(aa) during a Borrowing Base Trigger Period, Liens securing Indebtedness incurred under Section 11.1(aa); provided that in the case of Permitted Second Lien Indebtedness, such Liens are subordinated to the Liens securing the Obligations pursuant to the Existing Intercreditor Agreement; and

(bb) Liens securing the counterparty’s interests under farm-in agreements or farm-out agreements and Development Joint Ventures relating to Proved Undeveloped Reserves or Hydrocarbon Interests to which no Proved Reserves are attributable or undeveloped acreage to which no Proved Reserves are attributable, which Liens may be first priority Liens senior to the Liens securing the Obligations, if the aggregate value of the property secured by such Liens pursuant to this Section 11.2(bb), valued at the time such agreement is entered into, is less than or equal to $200,000,000; provided that, if requested by the Borrower, the Administrative Agent shall release its Mortgage to the extent it encumbers property that is the subject of the counterparty’s interests under such farm-in agreements, farm-out agreements or Development Joint Ventures and release the Liens on the interest to be transferred to the counterparty under such farm-in agreements, farm-out agreements or Development Joint Ventures; provided further, that the Administrative Agent may refile

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such Mortgage immediately following the grant and perfection of the Lien securing the counterparty’s interest permitted by this Section 11.2(bb) or after 30 days following release, whichever is earlier; provided further that the Administrative Agent shall be required to do so only if the same actions have been taken, or will be taken substantially concurrently, by the agent for the First Lien Second Out Secured Parties.

2.14 Amendment to Section 11.4. Section 11.4(a) of the Credit Agreement is hereby amended by (a) inserting the words “, other than in the case of an Exploration and Development Disposition made in compliance with this Section 11.4(a)(ii),” into Subsection 11.4(a)(ii) immediately following the first instance of the word “that” in the last proviso of such Subsection 11.4(a)(ii) and (b) replacing the proviso at the end of Section 11.4(a) with the following proviso:

provided, however, that at least 75% (or with respect to Section 11.4(a)(xiii) only, (x) 60%, in the event the Borrower’s Total Debt Leverage Ratio is greater than 4:00 to 1:00 or (y) 40%, in the event the Borrower’s Total Debt Leverage Ratio is less than or equal to 4:00 to 1:00) of the consideration received by the Borrower or any Subsidiary in connection with a Disposition permitted under Section 11.4(a) is in the form of cash, other than (A) any Disposition permitted under subsections (i), (iii)-(iv), (vii)-(ix), (xi) or (xii) of Section 11.4(a) and (B) any Disposition consisting of (x) farm-in or farm-out transactions permitted under this Section 11.4(a), or (y) Proved Undeveloped Reserves disposed of to a Development Joint Venture (any transaction permitted under this subclause (B) if the value of the acreage contributed to such Development Joint Venture by the Borrower for any such Disposition, valued at the time the Development Joint Venture is entered into, is less than or equal to $200,000,000 (an “Exploration and Development Disposition”); and provided further that if the consideration for any such Disposition pursuant to clauses (A) above equals or exceeds $100,000,000, such Disposition shall be for Fair Market Value and the determination of Fair Market Value shall be confirmed by an investment bank or made by an independent third-party reasonably acceptable to the Administrative Agent and provided further that any cash received in connection with an Exploration and Development Disposition transaction in order to fund costs and expenses incurred in the conduct of exploration and development operations may be used by the Borrower or any Subsidiary for funding such development).

2.15 Amendment to Section 11.5. Section 11.5 of the Credit Agreement is hereby amended by (a) inserting “(A)” at the beginning of Subsection 11.5(b)(viii) thereof, (b) replacing the first parenthetical contained in Subsection 11.5(b)(viii) thereof with the words “in respect of Permitted Acquisitions and (B) Investments in respect of Royalty Trusts and master limited partnerships”, (c) inserting “(x)” immediately following the first occurrence of the word “that” in the last proviso of Subsection 11.5(b)(viii) thereof, (e) inserting the words “and (y) for the avoidance of doubt, any prepayment, repurchase, redemption or defeasance of the Senior Notes, any Permitted Junior Indebtedness or any Permitted Additional Debt shall also be subject to compliance with Section 11.7” at the end of the last proviso of Subsection 11.5(b)(viii) thereof and (f) inserting the following proviso at the end of Subsection 11.5(b)(xvii) thereof:

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provided that any asset, property, equity interests or other interest that (a) is property described in clauses (d) or (f) of the definition of Excluded Stock, (b) has an aggregate value with all such property in excess of $50,000,000 and (c) is received in connection with any Investment under this clause (xvii) shall be pledged as Collateral except (i) to the extent such Investment is made in connection with a farm-in, farm-out or Development Joint Venture or (ii) to the extent otherwise excluded pursuant to clause (b) of the definition of Excluded Stock;

2.16 Amendment to Section 11.7. Section 11.7 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(a) Except as permitted by Section 11.7(b), the Borrower shall not, and shall not permit the other Credit Parties to, make any prepayment, repurchase, redemption or defeasance of the Senior Notes, any Permitted Junior Indebtedness or any Permitted Additional Debt (it being understood that payments of regularly scheduled cash interest in respect of, payment of principal on the scheduled maturity date of, the Senior Notes or Permitted Junior Indebtedness (only to the extent permitted under the definition thereof) or Permitted Additional Debt shall be permitted prior to maturity, as applicable), except the Borrower or any Credit Party, as applicable, may:

(i) prepay, repurchase, redeem or defease any Permitted Additional Debt, the Senior Notes or Permitted Second Lien Indebtedness with an amount up to (x) in the event the Borrower’s Total Debt Leverage Ratio is greater than 4:00 to 1:00, 40% multiplied by the sum of (x) Net Cash Proceeds plus (y) Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness obtained as consideration for a Non-Borrowing Base Disposition (such amount reduced by any portion of the total consideration for such Disposition received by the Borrower or such other Credit Party in the form of Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness (which Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness may comprise up to 40% of the total consideration for such Disposition)) or (y) in the event the Borrower’s Total Debt Leverage Ratio is less than or equal to 4:00 to 1:00, 60% multiplied by the sum of (x) Net Cash Proceeds plus (y) Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness obtained as consideration for a Non-Borrowing Base Disposition; provided that any such Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness obtained as consideration shall be valued at Fair Market Value and shall comprise no more than 60% of the total consideration for such Disposition; and

(ii) prepay, repurchase, redeem or defease any Permitted Additional Debt, the Senior Notes or Permitted Second Lien Indebtedness with an amount up to 75% multiplied by the sum of (x) Net Cash Proceeds plus (y) Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness obtained as proceeds, in each case of any incurrence of Indebtedness permitted under Section 11.1(aa) (such amount reduced by any portion of the total proceeds of such incurrence received by the Borrower or such other Credit Party in the form of Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness (which Permitted Additional Debt, Senior Notes or Permitted Second Lien Indebtedness may comprise up to 75% of such total proceeds));

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provided that with respect to each of clauses (i) and (ii) above, (A) the principal amount of such Senior Notes, Permitted Second Lien Indebtedness, or Permitted Additional Debt, as applicable, is prepaid, repurchased, redeemed or defeased at a discount of 35 % to par or greater (calculated for each prepayment, repurchase, redemption or defeasance on a weighted average basis giving effect (in addition to the discount in such prepayment, repurchase, redemption or defeasance) to any prior discount in prepayments, repurchases, redemptions or defeasances that have occurred from the first day of the calendar quarter in which such prepayment, repurchase, redemption or defeasance is consummated to the date such prepayment, repurchase, redemption or defeasance is consummated (it being understood that such calculation shall be made exclusive of any consideration paid to the holders of such Indebtedness in the form of Stock or the cash proceeds of Stock used to prepay, repurchase, redeem or defease such Indebtedness)), (B) after giving pro forma effect to such prepayment repurchase, redemption or defeasance, Liquidity is equal to $450,000,000 or greater (C) no Event of Default has occurred and is continuing, and (D) after giving pro forma effect to such prepayment, repurchase, redemption or defeasance and any related pro forma adjustment (including, without limitation, any substantially concurrent incurrence of Indebtedness or Disposition and with such pro forma adjustments including the recalculation of PV-10 on a pro forma basis), the Borrower is in pro forma compliance with the Financial Performance Covenants set forth in Section 11.11. For the avoidance of doubt, for the purposes of this Section 11.7(a), the amount of any Senior Notes or Permitted Second Lien Indebtedness shall be calculated using the Fair Market Value of such Senior Notes or Permitted Second Lien Indebtedness at the time of the prepayment, repurchase, redemption or defeasance thereof;

(b) Notwithstanding the foregoing, nothing in Section 11.7(a) shall prohibit (i) the repayment or prepayment of intercompany subordinated Indebtedness owed among the Borrower and/or the Subsidiaries, in either case unless an Event of Default has occurred and is continuing and the Borrower has received a notice from the Administrative Agent instructing it not to make or permit the Borrower and/or the Subsidiaries to make any such repayment or prepayment, (ii) substantially concurrent transfers of credit positions in connection with intercompany debt restructurings so long as such Indebtedness is permitted by Section 11.1 after giving effect to such transfer or (iii) the prepayment, repurchase, redemption or other defeasance of the Senior Notes, any Permitted Junior Indebtedness or any Permitted Additional Debt (x) with the amount of the Net Cash Proceeds of the issuance or sale of Stock (other than Disqualified Stock) of the Borrower within ninety (90) calendar days of the issuance of such Stock (such amount, an Equity Funded Prepayment”) or (y) in exchange for Stock (other than Disqualified Stock) of the Borrower; and

(c) The Borrower will not amend or modify the Senior Notes Documents or the documentation governing any Permitted Junior Indebtedness or any senior subordinated or subordinated Permitted Additional Debt or the terms applicable thereto to the extent that (i) any such amendment or modification, taken as a whole, would be adverse to the Lenders in any material respect or (ii) the provisions of the Senior Notes Documents or the documentation governing any senior subordinated or subordinated Permitted Additional Debt, as so amended or modified, would not be permitted to be included in the documentation governing any senior subordinated or subordinated Permitted Additional Debt at the time such Indebtedness was issued.

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2.17 Amendment to Section 11.10. Section 11.10(a)(i)(C) of the Credit Agreement is hereby amended by replacing each instance of “clause (ii)” therein with “clause (i)”.

2.18 Amendment to Section 11.11. Section 11.11 of the Credit Agreement is hereby amended and restated in its entirety as follows:

(a) Leverage Ratio. During a Borrowing Base Trigger Period, the Borrower will not permit the First Lien First Out Leverage Ratio as of the last day of each fiscal quarter of the Borrower commencing with the fiscal quarter of the Borrower ending March 31, 2018 to be greater than 2.25 to 1:00.

(b) Interest Expense Ratio. During a Borrowing Base Trigger Period, the Borrower will not permit the Interest Expense Ratio as of the last day of each fiscal quarter of the Borrower commencing with the fiscal quarter of the Borrower ending March 31, 2018 to be less than 2.00 to 1:00.

(c) Asset Coverage Ratio. As of the last day of each fiscal quarter of the Borrower (other than during a Borrowing Base Trigger Period when a Borrowing Base has been established), the Borrower will not permit the Asset Coverage Ratio to be less than the ratio applicable to such fiscal quarter set forth below:



Fiscal Quarter Ending	Asset Coverage Ratio
March 31, 2015 through December 31, 2016	1.05 to 1.00
Thereafter	1.50 to 1.00

(d) First Lien First Out Leverage Ratio. During the Fifth Amendment Covenant Period, the Borrower will not permit the First Lien First Out Leverage Ratio to exceed the ratio applicable to such fiscal quarter set forth below:



Fiscal Quarter Ending	Maximum First Lien First Out Leverage Ratio
June 30, 2016 through June 30, 2017	3:50 to 1.00
September 30, 2017 through December 31, 2017	3.25 to 1.00

(e) Minimum Interest Expense Ratio. During the Fifth Amendment Covenant Period, the Borrower will not permit the Interest Expense Ratio of the Borrower commencing with the fiscal quarter of the Borrower ending June 30, 2016 to be less than 1.20 to 1:00.

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(f) First Lien Asset Coverage Ratio. During a Borrowing Base Trigger Period, the Borrower will not permit the First Lien Asset Coverage Ratio as of any June 30 or December 31 to be less than 1.20 to 1.00.

2.19 Amendment to Section 11.15. Section 11.15 of the Credit Agreement is hereby amended and restated in its entirety as follows:

11.15 Capital Expenditures. The Borrower will not and will not permit any of the Subsidiaries to make or commit to make any Capital Expenditure (x) in excess of $125,000,000 during the 2016 fiscal year or (y) in excess of $200,000,000 during the 2017 fiscal year; provided that any amounts permitted under Section 11.15 to be made and committed as Capital Expenses during the 2016 fiscal year can be made or committed as Capital Expenses during the 2017 fiscal year; provided further that the amount permitted to be made or committed as Capital Expenses during the 2017 fiscal year at any time after June 30, 2017 can be increased dollar-for-dollar by the lesser of (a) $50,000,000 and (b) the positive difference if any between (i) Liquidity as of June 30, 2017 and (ii) the sum of $500,000,000 and Net Cash Proceeds obtained from a Non-Borrowing Base Disposition that are reserved by a written notice to the Administrative Agent pursuant to Section 5.2(e).

2.20 Amendment to Section 11.16. Section 11.16 of the Credit Agreement is hereby amended and restated in its entirety as follows:

11.16 Due Diligence. From and after the Fifth Amendment Effective Date, the Borrower shall use its commercially reasonable efforts to provide to the Administrative Agent information regarding the Non-Borrowing Base Properties as reasonably requested by the Administrative Agent in connection with customary due diligence undertaken on behalf of the Lenders.

2.21 Amendment to Section 12.4. Section 12.4 of the Credit Agreement is hereby amended and restated in its entirety as follows:

12.4 Default Under Other Agreements. (a) (i) The Borrower or any of the Subsidiaries shall default in any payment with respect to any Indebtedness (other than Indebtedness described in Section 12.1) or Hedge Obligations in excess of $125,000,000, beyond the grace period, if any, provided in the instrument or agreement under which such Indebtedness or Hedge Obligation was created or (ii) without limiting the provisions of clause (i), any Indebtedness or Hedge Obligations referred to in clause (i) shall be declared to be due and payable, or shall be required to be prepaid, defeased or redeemed other than by a regularly scheduled required prepayment or as a mandatory prepayment (and, (A) with respect to any Hedge Obligations, other than due to a termination event or equivalent event pursuant to the terms of the related Hedge Agreements and (B) other than secured Indebtedness that becomes due as a result of a Disposition (including as a result of Casualty Event) of the property or assets securing such Indebtedness permitted under this Agreement), prior to the stated maturity thereof or (b) the Borrower or any Subsidiary (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of First Lien Second Out Junior Indebtedness or (ii) fails to observe

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or perform any other agreement or condition relating to any such Second Out Junior Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto that would allow the lenders thereunder to accelerate such Second Out Junior Indebtedness.

2.22 Amendment to the provisions following Section 12.10. The following paragraph shall be added to the provisions following Section 12.10 of the Credit Agreement immediately following the last paragraph thereof:

Any amount received by the Administrative Agent from any Credit Party (or from proceeds of any Collateral) following any acceleration of the Obligations under this Agreement or any Event of Default with respect to the Borrower under Section 12.5 shall be applied in accordance with the appropriate section of the First Lien Intercreditor Agreement.

2.23 Amendment to Section 13.12. Section 13.12 of the Credit Agreement is hereby amended by replacing “an intercreditor agreement in the form of Exhibit J” with “the Existing Intercreditor Agreement” in clause (d) thereof.

2.24 Amendment to Section 14.17. Section 14.17(a) of the Credit Agreement is hereby amended by deleting the word “and” at the end of clause (v), inserting the following clause (vi) immediately following clause (v) and re-numbering the subsequent clauses accordingly:

(vi) to the extent required in order to give effect to the release contemplated under Section 11.2(bb) hereof and”

2.25 Amendment to Schedules. Schedule 1.1(a) of the Credit Agreement is hereby amended by deleting such Schedule in its entirety and replacing it with Schedule 1.1(a) attached hereto, and Schedule 1.1(b) of the Credit Agreement is hereby amended by deleting such Schedule in its entirety and replacing it with Schedule 1.1(b) attached hereto.

2.26 Amendment to Exhibits. Exhibit J attached hereto is hereby added to the Credit Agreement as Exhibit J in place of the existing Exhibit J, and the following reference thereto replaces the existing reference to Exhibit J in the list of “Schedules and Exhibits”: “Exhibit J Form of Senior Intercreditor Agreement.”

Section 3. Omnibus Amendment to Security Documents. The Majority Lenders hereby direct the Administrative Agent on behalf of the Secured Parties to enter into that certain Omnibus Amendment, dated as of the date hereof, among the Borrower, each Guarantor and the Administrative Agent, a copy of which is attached hereto as Annex A (the “Omnibus Amendment”).

Section 4. Waiver. The Administrative Agent, acting at the direction of the Majority Lenders, hereby waives compliance by the Borrower with the requirements and limitations set forth in Section 2.3, Section 5.2(g), 5.2(h), Section 10.11, Section 11.1(aa), Section 11.2 and Section 11.7 of the Credit Agreement (in each case, as may be amended by this Amendment) during the Waiver Period to the extent, and only to the extent that, the consummation of the Second Out Transactions would

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violate such requirements and/or limitations or result in a Default or Event of Default under the Credit Agreement due to the application of such requirements and/or limitations; provided that each of the waivers contained in this Section 4 shall constitute a limited, one-time waiver, and nothing contained herein shall obligate the Lenders to grant any additional or future waiver with respect to, or in connection with, any provision of any Loan Document.

Section 5. Acknowledgement. The parties hereto acknowledge and agree that, for purposes of operational convenience, the Administrative Agent may net the proceeds of any repayment under the Revolving Facility contemplated by Recital G hereof that are due to any Lender against any request for a Revolving Borrowing made as contemplated by Recital I hereof, it being understood and agreed that each of the repayment of the Revolving Loans and the funding of the Revolving Loans contemplated by Recitals G and I, respectively, shall be a separate transfer.

Section 6. Order of Prepayments. The parties hereto agree that each prepayment of any Term Loans in connection with the Second Out Transactions shall be applied in inverse order of maturity among such Term Loans.

Section 7. Effectiveness.

7.1 This Amendment shall become effective only with respect to Sections 4, 5 and 6 hereof on the first date on which each of the conditions set forth in this Section 7.1 is satisfied (the “Waiver Effective Date”):

(a) the Administrative Agent shall have received duly executed counterparts (in such number as may be requested by the Administrative Agent) of this Amendment from the Borrower, each Guarantor and the Majority Lenders;

(b) the Administrative Agent shall have received an opinion by Sullivan & Cromwell LLP, as counsel to the Credit Parties, in a form reasonably satisfactory to the Administrative Agent;

(c) the proceeds of the First Lien Second Out Junior Indebtedness incurred pursuant to the First Lien Second Out Credit Agreement contemporaneously with the effectiveness of Sections 4, 5 and 6 hereof comprise an amount not less than $500,000,000 and are funded into the Escrow Account; and

(d) no Default or Event of Default shall have occurred and be continuing as of the date hereof, after giving effect to the terms of this Amendment.

7.2 This Amendment (other than Sections 4, 5 and 6 hereof) shall become effective on the first date on which each of the conditions set forth in this Section 7.2 is satisfied (the “Amendment Effective Date”):

(a) the Waiver Effective Date shall have occurred;

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(b) the Administrative Agent shall have received an opinion by Sullivan & Cromwell LLP, as counsel to the Credit Parties, in a form reasonably satisfactory to the Administrative Agent;

(c) the Administrative Agent shall have received duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Omnibus Amendment from the Borrower and each Guarantor;

(d) the Borrower shall have permanently reduced the Revolving Commitments by $200,000,000 pursuant to the terms of Section 4.2(a) of the Credit Agreement;

(e) the initial prepayment of the Term Loans on the Early Settlement Date described in Recital G hereof shall be a concurrent condition to the occurrence of the Amendment Effective Date;

(f) the Borrower shall have paid (i) an amendment fee payable to the Administrative Agent for the account of each of the Revolving Lenders and Term Loan Lenders (including JPMorgan Chase Bank, N.A.) who has consented to this Amendment by submitting its signature page on or before 5:00 pm Houston time on Thursday, August 4, 2016 in an amount equal to 25 basis points on each such Revolving Lender’s Revolving Commitment and such Term Loan Lender’s Term Loan Commitment, as applicable, in effect on the Amendment Effective Date and (ii) to the extent invoiced, all fees and other amounts due and payable on or prior to the Amendment Effective Date, including all reasonable out-of-pocket expenses required to be reimbursed or paid by the Borrower under the Credit Agreement; and

(g) no Default or Event of Default shall have occurred and be continuing as of the date hereof, after giving effect to the terms of this Amendment;

provided, that upon the Amendment Effective Date, the terms of Section 2.5 hereof shall be deemed to be effective as of the Third Amendment Effective Date.

Section 8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 9. Miscellaneous.

9.1 (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in each other Credit Document to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended or otherwise modified by this Amendment; (b) the execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any default of the Borrower or any right, power or remedy of the Administrative Agent or the Lenders under any of the Credit Documents, nor constitute a

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waiver of any provision of any of the Credit Documents; (c) this Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart; and (d) delivery of an executed counterpart of a signature page to this Amendment by telecopier or electronic mail shall be effective as delivery of a manually executed counterpart of this Amendment.

9.2 Neither the execution by the Administrative Agent or the Lenders of this Amendment, nor any other act or omission by the Administrative Agent or the Lenders or their officers in connection herewith, shall be deemed a waiver by the Administrative Agent or the Lenders of any defaults which may exist or which may occur in the future under the Credit Agreement and/or the other Credit Documents, or any future defaults of the same provision waived hereunder (collectively “Violations”). Similarly, nothing contained in this Amendment shall directly or indirectly in any way whatsoever either: (a) impair, prejudice or otherwise adversely affect the Administrative Agent’s or the Lenders’ right at any time to exercise any right, privilege or remedy in connection with the Credit Documents with respect to any Violations; (b) except for the amendments set forth herein, amend or alter any provision of the Credit Agreement, the other Credit Documents, or any other contract or instrument; or (c) constitute any course of dealing or other basis for altering any obligation of the Borrower or any right, privilege or remedy of the Administrative Agent or the Lenders under the Credit Agreement, the other Credit Documents, or any other contract or instrument. Nothing in this letter shall be construed to be a consent by the Administrative Agent or the Lenders to any Violations.

9.3 The Borrower and each Guarantor hereby (a) acknowledges the terms of this Amendment; (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, each Credit Document to which it is a party and agrees that each Credit Document to which it is a party remains in full force and effect, except as expressly amended or modified hereby; and (c) represents and warrants to the Lenders that as of the Amendment Effective Date, after giving effect to the terms of this Amendment: (i) all of the representations and warranties contained in each Credit Document to which it is a party are true and correct in all material respects (unless already qualified by materiality in which case such applicable representation and warranty shall be true and correct), except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties shall continue to be true and correct in all material respects (unless already qualified by materiality in which case such applicable representation and warranty shall be true and correct) as of such specified earlier date, and (ii) no Default or Event of Default has occurred and is continuing.

9.4 This Amendment is a Credit Document as defined and described in the Credit Agreement and all of the terms and provisions of the Credit Agreement relating to Credit Documents shall apply hereto.

9.5 THE CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS, INCLUDING THIS AMENDMENT, EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY

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EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their officers thereunto duly authorized as of the date first above written.



BORROWER:	CALIFORNIA RESOURCES CORPORATION
	By:	/s/ Marshall D. Smith
	Name:	Marshall D. Smith
	Title:	Senior Executive Vice President and Chief Financial Officer

Signature Page