Exhibit 10.1

 

Execution Version

 

AMENDED & RESTATED CREDIT AGREEMENT

 

 

DATED AS OF
 June 22, 2011

 

AMONG

 

EAGLE ROCK ENERGY PARTNERS, L.P.,
 AS BORROWER,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
 AS ADMINISTRATIVE AGENT AND SWINGLINE LENDER,

 

BANK OF AMERICA, N.A.,
 AND
 THE ROYAL BANK OF SCOTLAND plc, 
 AS CO-SYNDICATION AGENTS,

 

BNP PARIBAS,
 AS DOCUMENTATION AGENT

 

AND

 

THE LENDERS PARTY HERETO

 

 

	
 
    	
 
    	
 
    
	
WELLS FARGO SECURITIES, 
   LLC
    	
MERRILL LYNCH, PIERCE, 
   FENNER & SMITH 
   INCORPORATED
    	
RBS SECURITIES INC.
    


 

 

AS JOINT LEAD ARRANGERS AND BOOKRUNNERS

 











 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
DEFINITIONS AND ACCOUNTING MATTERS
    	
5
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Defined Terms
    	
5
    
	
Section 1.02
    	
Types of Loans and Borrowings
    	
34
    
	
Section 1.03
    	
Terms Generally; Rules of Construction
    	
34
    
	
Section 1.04
    	
Accounting Terms and Determinations; GAAP
    	
34
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
THE CREDITS
    	
34
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Commitments
    	
34
    
	
Section 2.02
    	
Loans and Borrowings
    	
35
    
	
Section 2.03
    	
Requests for Borrowings
    	
36
    
	
Section 2.04
    	
Swingline Loans
    	
36
    
	
Section 2.05
    	
Interest Elections
    	
38
    
	
Section 2.06
    	
Funding of Borrowings
    	
39
    
	
Section 2.07
    	
Termination, Reduction and Increase of Commitments
    	
40
    
	
Section 2.08
    	
Borrowing Base
    	
42
    
	
Section 2.09
    	
Letters of Credit
    	
47
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
    	
52
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Repayment of Loans
    	
52
    
	
Section 3.02
    	
Interest
    	
52
    
	
Section 3.03
    	
Alternate Rate of Interest
    	
53
    
	
Section 3.04
    	
Prepayments
    	
53
    
	
Section 3.05
    	
Fees
    	
55
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
    	
56
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
    	
56
    
	
Section 4.02
    	
Presumption of Payment by the Borrower
    	
57
    
	
Section 4.03
    	
Certain Deductions by the Administrative Agent
    	
57
    
	
Section 4.04
    	
Disposition of Proceeds
    	
57
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
    	
60
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Increased Costs
    	
60
    
	
Section 5.02
    	
Break Funding Payments
    	
62
    
	
Section 5.03
    	
Taxes
    	
62
    
	
Section 5.04
    	
Mitigation Obligations; Replacement of Lenders
    	
65
    
	
Section 5.05
    	
Illegality
    	
66
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
CONDITIONS PRECEDENT
    	
66
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Effective Date
    	
66
    
	
Section 6.02
    	
Each Credit Event
    	
69
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
REPRESENTATIONS AND WARRANTIES
    	
69
    


 

1











 

	
Section 7.01
    	
Organization; Powers
    	
69
    
	
Section 7.02
    	
Authority; Enforceability
    	
70
    
	
Section 7.03
    	
Approvals; No Conflicts
    	
70
    
	
Section 7.04
    	
Financial Condition; No Material Adverse Change
    	
70
    
	
Section 7.05
    	
Litigation
    	
71
    
	
Section 7.06
    	
Environmental Matters
    	
71
    
	
Section 7.07
    	
Compliance with the Laws and Agreements; No Defaults
    	
72
    
	
Section 7.08
    	
Investment Company Act
    	
73
    
	
Section 7.09
    	
Taxes
    	
73
    
	
Section 7.10
    	
ERISA
    	
73
    
	
Section 7.11
    	
Disclosure; No Material Misstatements
    	
74
    
	
Section 7.12
    	
Insurance
    	
74
    
	
Section 7.13
    	
Restriction on Liens
    	
75
    
	
Section 7.14
    	
Subsidiaries
    	
75
    
	
Section 7.15
    	
Location of Business and Offices
    	
75
    
	
Section 7.16
    	
Properties; Titles, Etc.
    	
75
    
	
Section 7.17
    	
Maintenance of Properties
    	
77
    
	
Section 7.18
    	
Gas Imbalances, Prepayments
    	
77
    
	
Section 7.19
    	
Marketing of Production
    	
77
    
	
Section 7.20
    	
Security Instruments
    	
77
    
	
Section 7.21
    	
Hedging Agreements
    	
78
    
	
Section 7.22
    	
Use of Loans and Letters of Credit
    	
78
    
	
Section 7.23
    	
Solvency
    	
79
    
	
Section 7.24
    	
Anti-Terrorism Laws
    	
79
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
AFFIRMATIVE COVENANTS
    	
80
    
	
 
    	
 
    	
 
    
	
Section 8.01
    	
Financial Statements; Ratings Change; Other Information
    	
80
    
	
Section 8.02
    	
Notices of Material Events
    	
82
    
	
Section 8.03
    	
Existence; Conduct of Business
    	
83
    
	
Section 8.04
    	
Payment of Obligations
    	
83
    
	
Section 8.05
    	
Performance of Obligations under Loan Documents
    	
83
    
	
Section 8.06
    	
Operation and Maintenance of Properties
    	
83
    
	
Section 8.07
    	
Insurance
    	
84
    
	
Section 8.08
    	
Books and Records; Inspection Rights
    	
84
    
	
Section 8.09
    	
Compliance with Laws
    	
84
    
	
Section 8.10
    	
Environmental Matters
    	
84
    
	
Section 8.11
    	
Further Assurances
    	
85
    
	
Section 8.12
    	
Reserve Reports
    	
86
    
	
Section 8.13
    	
Title Information
    	
87
    
	
Section 8.14
    	
Additional Collateral; Additional Guarantors
    	
88
    
	
Section 8.15
    	
ERISA Compliance
    	
89
    
	
Section 8.16
    	
Unrestricted Subsidiaries
    	
90
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
NEGATIVE COVENANTS
    	
90
    
	
 
    	
 
    	
 
    
	
Section 9.01
    	
Financial Covenants
    	
91
    
	
Section 9.02
    	
Indebtedness
    	
93
    
	
Section 9.03
    	
Liens
    	
94
    


 

2











 

	
Section 9.04
    	
Restricted Payments
    	
95
    
	
Section 9.05
    	
Investments, Loans and Advances
    	
96
    
	
Section 9.06
    	
Designation and Conversion of Restricted and Unrestricted   Subsidiaries; Indebtedness of Unrestricted Subsidiaries
    	
97
    
	
Section 9.07
    	
Nature of Business
    	
97
    
	
Section 9.08
    	
Proceeds of Loans
    	
98
    
	
Section 9.09
    	
ERISA Compliance
    	
98
    
	
Section 9.10
    	
Sale or Discount of Receivables
    	
99
    
	
Section 9.11
    	
Mergers, Etc.
    	
99
    
	
Section 9.12
    	
Sale of Properties
    	
100
    
	
Section 9.13
    	
Environmental Matters
    	
100
    
	
Section 9.14
    	
Transactions with Shareholders and Affiliates
    	
100
    
	
Section 9.15
    	
Subsidiaries
    	
100
    
	
Section 9.16
    	
Negative Pledge Agreements; Dividend Restrictions
    	
100
    
	
Section 9.17
    	
Limitation on Issuance of Equity Interests
    	
101
    
	
Section 9.18
    	
Gas Imbalances, Take-or-Pay or Other Prepayments
    	
101
    
	
Section 9.19
    	
Hedging Agreements
    	
101
    
	
Section 9.21
    	
Amendments to Fiscal Year End; Prepayments of Other   Indebtedness
    	
102
    
	
Section 9.22
    	
Marketing Activities
    	
102
    
	
Section 9.23
    	
Anti-Terrorism Law; Anti-Money Laundering
    	
102
    
	
Section 9.24
    	
Embargoed Person
    	
103
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
EVENTS OF DEFAULT; REMEDIES
    	
103
    
	
 
    	
 
    	
 
    
	
Section 10.01
    	
Events of Default
    	
103
    
	
Section 10.02
    	
Remedies
    	
105
    
	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
THE AGENTS
    	
106
    
	
 
    	
 
    	
 
    
	
Section 11.01
    	
Appointment; Powers
    	
106
    
	
Section 11.02
    	
Duties and Obligations of Administrative Agent
    	
107
    
	
Section 11.03
    	
Action by Administrative Agent
    	
107
    
	
Section 11.04
    	
Reliance by Administrative Agent
    	
108
    
	
Section 11.05
    	
Sub-agents
    	
108
    
	
Section 11.06
    	
Resignation or Removal of Administrative Agent
    	
109
    
	
Section 11.07
    	
Agents as Lenders
    	
109
    
	
Section 11.08
    	
No Reliance
    	
109
    
	
Section 11.09
    	
Administrative Agent May File Proofs of Claim
    	
110
    
	
Section 11.10
    	
Authority of Administrative Agent to Release Collateral and   Liens
    	
110
    
	
Section 11.11
    	
The Arranger, the Syndication Agent and the   Co-Documentation Agents
    	
111
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
MISCELLANEOUS
    	
111
    
	
 
    	
 
    	
 
    
	
Section 12.01
    	
Notices
    	
111
    
	
Section 12.02
    	
Waivers; Amendments
    	
112
    
	
Section 12.03
    	
Expenses, Indemnity; Damage Waiver
    	
114
    
	
Section 12.04
    	
Assignments and Participations
    	
116
    
	
Section 12.05
    	
Survival; Revival; Reinstatement
    	
120
    
	
Section 12.06
    	
Counterparts; Integration; Effectiveness
    	
120
    


 

3











 

	
Section 12.07
    	
Severability
    	
121
    
	
Section 12.08
    	
Right of Setoff
    	
121
    
	
Section 12.09
    	
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
    	
121
    
	
Section 12.10
    	
Headings
    	
122
    
	
Section 12.11
    	
Confidentiality
    	
122
    
	
Section 12.12
    	
Interest Rate Limitation
    	
123
    
	
Section 12.13
    	
EXCULPATION PROVISIONS
    	
124
    
	
Section 12.14
    	
Collateral Matters; Hedging Agreements; Treasury Management   Agreements
    	
124
    
	
Section 12.15
    	
No Third Party Beneficiaries
    	
124
    
	
Section 12.16
    	
USA Patriot Act Notice
    	
125
    


 

EXHIBITS AND SCHEDULES

 

	
Exhibit A
    	
Form of   Note
    
	
Exhibit B
    	
Form of   Borrowing Request
    
	
Exhibit C
    	
Form of   Interest Election Request
    
	
Exhibit D-1
    	
Form of   Compliance Certificate (Effective Date)
    
	
Exhibit D-2
    	
Form of   Compliance Certificate (Ongoing)
    
	
Exhibit E
    	
Form of   Guaranty and Collateral Agreement
    
	
Exhibit F
    	
Form of   Assignment and Assumption
    
	
Exhibit G-1
    	
Form of   Commitment Increase Certificate
    
	
Exhibit G-2
    	
Form of   Additional Lender Certificate
    
	
 
    	
 
    
	
Schedule 1.01(a)
    	
Existing   Letters of Credit
    
	
Schedule 1.01(b)
    	
Security   Instruments
    
	
Schedule 7.05
    	
Litigation
    
	
Schedule 7.06
    	
Environmental   Matters
    
	
Schedule 7.14
    	
Subsidiaries
    
	
Schedule 7.18
    	
Gas   Imbalances
    
	
Schedule 7.19
    	
Marketing   Contracts
    
	
Schedule 7.20
    	
Jurisdictions   for Security Instrument Filings
    
	
Schedule 7.21
    	
Hedging   Agreements
    
	
Schedule 9.02
    	
Existing   Indebtedness
    
	
Schedule 9.03
    	
Existing   Liens
    
	
Schedule 9.05
    	
Existing   Investments
    
	
Schedule 9.14
    	
Certain   Shareholder and Affiliate Transactions
    
	
 
    	
 
    
	
Annex I
    	
Commitments
    


 

4












 

THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 22, 2011, is among:  EAGLE ROCK ENERGY PARTNERS, L.P., a limited partnership duly formed and existing under the laws of the State of Delaware (the “Borrower”); each of the Lenders from time to time party hereto; and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”); Bank of America, N.A. and The Royal Bank of Scotland plc as co-syndication agents for the Lenders (in such capacity, together with their successors in such capacity, the “Co-Syndication Agents”); and BNP Paribas, as documentation agent for the Lenders (in such capacity, together with its successors in such capacity, the “Documentation Agent”).

 

R E C I T A L S

 

A.            The Borrower wishes to refinance all outstanding Indebtedness under the Existing Credit Agreement (as defined below).

 

B.            The Borrower has requested that the Lenders provide certain loans to and extensions of credit on behalf of the Borrower.

 

C.            The Lenders have agreed to the Refinancing and to make such loans and extensions of credit subject to the terms and conditions of this Agreement.

 

D.            In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:

 

ARTICLE I
 DEFINITIONS AND ACCOUNTING MATTERS

 

Section 1.01         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, means that any such Loan, or the Loans comprising any such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

 

“Additional Lender” has the meaning assigned to such term in Section 2.07(b)(i).

 

“Additional Lender Certificate” has the meaning assigned to such term in Section 2.07(b)(ii)(F).

 

“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 (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

 

“Administrative Agent” has the meaning assigned to such term in the introductory paragraph hereto.

 

5











 

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

 

“Affected Loans” has the meaning assigned to such term in Section 5.05.

 

“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.  “Affiliated” has a meaning correlative thereto.

 

“Agents” means, collectively, the Administrative Agent, the Documentation Agent, and the Co-Syndication Agents; and “Agent” means the Administrative Agent, the Documentation Agent or any Co-Syndication Agent, as the context requires.

 

“Agreement” means this 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 Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1% and (c) the daily LIBO Rate for a one month Interest Period plus 1%.  Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the LIBO Rate, respectively.

 

“Anti-Terrorism Law” has the meaning assigned to such term in Section 7.24(a).

 

“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 below based upon the Borrowing Base Utilization Percentage then in effect:

 

	
Borrowing Base
   Utilization Percentage
    	
 
    	
ABR
    	
 
    	
LIBOR
    	
 
    	
Commitment
   Fee
    
	
Less   than 25.0%
    	
 
    	
75.0 bps
    	
 
    	
175.0 bps
    	
 
    	
37.5 bps
    
	
Greater   than or equal to 25.0% but less than 50.0%
    	
 
    	
100.0 bps
    	
 
    	
200.0 bps
    	
 
    	
37.5 bps
    
	
Greater   than or equal to 50.0% but less than 75.0%
    	
 
    	
125.0 bps
    	
 
    	
225.0 bps
    	
 
    	
45.0 bps
    
	
Greater   than or equal to 75.0% but less than 90.0%
    	
 
    	
150.0 bps
    	
 
    	
250.0 bps
    	
 
    	
50.0 bps
    
	
Greater   than or equal to 90.0%
    	
 
    	
175.0 bps
    	
 
    	
275.0 bps
    	
 
    	
50.0 bps
    


 

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.  If at any time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), fails to deliver the annual financial reports pursuant to Section 8.01(a), or fails to deliver the quarterly financial reports pursuant to Section 8.01(b), then the “Applicable Margin”

 

6











 

shall mean the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level until such time as the Reserve Report or financial statements are delivered, whereupon the Applicable Margin shall be determined as if the Reserve Report or financial statements had been timely delivered, and is to be effective as of the first Business Day immediately following the date such Reserve Report or financial statements were delivered. In the event that any financial statement or compliance certificate delivered pursuant to Section 6.01(d) or Section 8.01(c) is shown to be inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered) (an “Applicable Period”), then the Borrower shall immediately (a) deliver to the Administrative Agent a corrected compliance certificate for such Applicable Period, (b) determine the Applicable Margin for such Applicable Period based upon the corrected compliance certificate, and (c) pay to the Administrative Agent an accrued additional interest owing as a result of an increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by the Administrative Agent in accordance with Section 4.01, or receive from the Lenders any excess interest previously paid by the Borrower as a result of a decreased Applicable Margin for such Applicable Period.  The preceding sentence is in addition to rights of the Administrative Agent and Lenders with respect to Section 3.02(d) and Section 10.01 and other of their respective rights under this Agreement.

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment, as such percentage is agreed between the Administrative Agent and such Lender and is set forth on documentation on file with the Administrative Agent.

 

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender, (b) any other Person whose long term senior unsecured debt rating is A-/A3 by S&P or Moody’s (or their equivalent) or higher, (c) IntercontinentalExchange, Inc., its Subsidiaries, and their respective successors and (d) Chicago Mercantile Exchange (CME Group Inc.), its Subsidiaries and their respective successors.

 

“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) Cawley, Gillespie & Associates and (d) any other independent petroleum engineers reasonably acceptable to the Administrative Agent.

 

“Arranger” means Wells Fargo Securities, LLC, in its capacity as the left lead arranger and left bookrunner hereunder.

 

“Asset Sale” means any Disposition by the Borrower or any Restricted Subsidiary to any Person but excluding Dispositions resulting from Casualty Events.

 

7











 

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 12.04(b)), and accepted by the Administrative Agent, in the form of Exhibit F 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.

 

“Board” means the Board of Governors of the Federal Reserve System of the United States of America or any successor Governmental Authority.

 

“Borrower” has the meaning assigned to such term in the introductory paragraph hereto.

 

“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, or a Swingline Loan.

 

“Borrowing Base” means at any time an amount equal to the sum of the Upstream Component and the Midstream Component.

 

“Borrowing Base Deficiency” occurs if at any time the total Credit Exposures exceed the Loan Limit.

 

“Borrowing Base Properties” means all Upstream Component Properties and all Midstream Properties.

 

“Borrowing Base Utilization Percentage” means, as of any day, the fraction expressed as a percentage, the numerator of which is the total Credit Exposures 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 Charlotte, North Carolina or New York, New York 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 dealings in dollar deposits are carried out in the London interbank market.

 

“Capital Expenditures” means, in respect of any Person, for any period, the aggregate (determined without duplication) of all exploration and development and purchase and construction expenditures and costs that are capital in nature and any other expenditures that are capitalized on the balance sheet of such Person in accordance with GAAP.

 

8











 

“Capital Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.

 

“Casualty Event” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of the Borrower or any Guarantor.

 

“Change in Control” means:

 

(a)           The Borrower shall cease to Control the General Partner;

 

(b)           (i) any Person (other than any Principal, the Borrower or any Loan Party) has beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the Voting Securities of the General Partner or (ii) any Person, entity or group (other than any Principal) has beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the Voting Securities of the Borrower; or

 

(c)           the General Partner shall cease for any reason to be the sole general partner of the Borrower.

 

Notwithstanding the preceding, a conversion of the Borrower or any of its Restricted Subsidiaries from a limited partnership, corporation, limited liability company or other form of entity to a limited liability company, corporation, limited partnership or other form of entity or an exchange of all of the outstanding Equity Interests in one form of entity for Equity Interests in another form of entity shall not constitute a Change of Control, so long as following such conversion or exchange the Persons who have beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of the Equity Interests of the Borrower immediately prior to such transactions continue to have beneficial ownership in the aggregate more than 50% of the Voting Securities of such entity, or continue to have beneficial ownership of sufficient Voting Securities in such entity to elect a majority of its directors, managers, trustees or other persons serving in a similar capacity for such entity or its general partner (or its general partner’s general partner), as applicable, and, in either case, no Person, other than the Company, any Restricted Subsidiary or any Principal, has beneficial ownership of more than 50% of the Voting Securities of such entity or its general partner (or its general partner’s general partner), as applicable.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all requests, rules, guidelines or directives thereunder or issued in connection therewith and all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case

 

9











 

pursuant to Basel III, shall, in each case, be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

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

 

“Co-Syndication Agents” has the meaning assigned to such term in the introductory paragraph hereto.

 

“Collateral” means all Property of the Loan Parties that is secured by a Lien under one or more Security Instruments.

 

“Commercial Operation Date” means, with respect to a Material Project, the date on which such Material Project achieves commercial operation.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.07 and (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b).  The amount of each Lender’s Commitment shall be the amount as agreed between the Administrative Agent and such Lender and set forth on Annex I.  The total Commitments for all Lenders on the Effective Date equal $675,000,000.

 

“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable Margin”.

 

“Commitment Increase Certificate” has the meaning assigned to such term in Section 2.07(b)(ii)(E).

 

“Conflicts Committee” has the meaning assigned to such term in the Partnership Agreement, as in effect on the date hereof.

 

“Consolidated EBITDA” means, for any period, (a) the sum of (i) Consolidated Net Income for such period (excluding, to the extent included in the calculation of Consolidated Net Income in such period, gains or losses attributable to asset Dispositions not in the ordinary course of business) plus (ii) the following expenses or charges to the extent deducted from Consolidated Net Income in such period (including, in respect of assets classified as discontinued operations but still owned by the Borrower or a Consolidated Restricted Subsidiary as of the end of such period): Consolidated Interest Expense, income taxes (including any franchise taxes to the extent based upon net income), depreciation, depletion, amortization, other similar non-cash charges (excluding any such non-cash charge to the extent that it represents an accrual or reserve for potential cash charges in any future period or amortization of a prepaid cash charge that was paid in a prior period), and non-cash compensation expense related to the Borrower’s equity-based compensation program, minus (b) all non-cash income added to Consolidated Net Income (excluding any such non-cash income to the extent it represents the reversal of an accrual or reserve for potential cash charge in any prior period).

 

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“Consolidated Interest Expense” means, for any period, the sum (determined without duplication) of the aggregate interest expense of the Borrower and the Consolidated Restricted Subsidiaries for such period, including to the extent included in interest expense under GAAP:  (a) amortization of debt discount, (b) capitalized interest and (c) the portion of any payments or accruals under Capital Leases allocable to interest expense, plus the portion of any payments or accruals under Synthetic Leases allocable to interest expense whether or not the same constitutes interest expense under GAAP, plus the net costs under the Interest Rate Hedges and minus the net benefits under the Interest Rate Hedges.

 

“Consolidated Net Income” means with respect to the Borrower and the Consolidated Restricted Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries after allowances for taxes for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or any Consolidated Restricted Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower 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 Borrower or to a Consolidated Restricted Subsidiary, as the case may be; (b) the net income (but not loss) during such period of any Consolidated Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Restricted Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Restricted Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) any extraordinary non-cash gains or losses during such period and (d) any gains or losses attributable to writeups or writedowns of assets, including ceiling test write downs.

 

“Consolidated Net Tangible Assets” means, at any date of determination, the total amount of consolidated assets of the Borrower and its Consolidated Restricted Subsidiaries after deducting therefrom: (a) all current liabilities (excluding (i) any current liabilities that by their terms are extendable or renewable at the option of the obligor thereon to a time more than twelve (12) months after the time as of which the amount thereof is being computed, and (ii) current maturities of long-term Indebtedness) and (b) the value (net of any applicable reserves) of all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth, or on a pro forma basis would be set forth, on the consolidated balance sheet of the Borrower and its Consolidated Restricted Subsidiaries for the most recently completed fiscal quarter, prepared in accordance with GAAP.

 

“Consolidated Restricted Subsidiaries” means any Restricted Subsidiaries that are Consolidated Subsidiaries.

 

“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of the Borrower in accordance with GAAP.

 

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“Consolidated Tangible Net Worth” means, at any date of determination, all amounts that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Consolidated Restricted Subsidiaries under stockholders’ equity at such date, minus the net book amount of all assets of the Borrower and its Consolidated Restricted Subsidiaries (after deducting any reserves applicable thereto) which would be shown as intangible assets on a consolidated balance sheet of the Borrower and its Consolidated Restricted Subsidiaries as of such time prepared 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.

 

“Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans, LC Exposure and Swingline Exposure at such time.

 

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

 

“Defaulting Lender” means any Lender that has (a) failed to fund any portion of its Loans or participations in Letters of Credit within two Business Days of the date required to be funded by it hereunder unless such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) notified the Borrower, the Administrative Agent, the Issuing Bank or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a specifically identified condition precedent to funding a Loan under this Agreement cannot be satisfied), (c) failed, within two Business Days after request by the Administrative Agent or the Borrower, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans and participations in then outstanding Letters of Credit, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith dispute, or (e)(i) been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or has a parent company that has been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency

 

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proceeding other than an Undisclosed Administration, or, other than via an Undisclosed Administration, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided, that a Lender shall not become a Defaulting Lender solely as the result of the acquisition or maintenance of an ownership interest in such Lender or a parent company thereof or the exercise of control over a Lender or a parent company thereof by a Governmental Authority or an instrumentality thereof..

 

“Deficiency Amount” means, at the time of determination, the amount by which the total Credit Exposures exceeds the aggregate Loan Limit.

 

“Disposition” means any conveyance, sale, lease, sale and leaseback, assignment, farm-out, transfer or other disposal (including by way of redemption) of any Property or assets (including any capital stock or other securities of, or Equity Interests in, another Person) of the Borrower and its Subsidiaries, including such actions taken pursuant to a Recovery Event or Casualty Event.  “Dispose” shall have a correlative meaning.

 

“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 Indebtedness 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, on or prior to the date that is one year after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated.

 

“Documentation Agent” has the meaning assigned to such term in the introductory paragraph hereto.

 

“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.

 

“Earnout” means (a) any initially contingent payment obligation related to a Permitted Acquisition, including, without limitation, in the form of earnout payments, purchase price adjustments, deferred purchase price payments and bonuses and other forms of compensation to directors, officers, employees or consultants, in each case so long as (i) such payment obligations are contingent at the time such obligation is incurred or entered into, and subject to adjustment based on the performance of the Person and/or Property so acquired, (ii) such payment obligations are not subject, at the time such obligation is entered into, to any minimum payment, in whole or in part, by the Borrower or any Subsidiary, and (iii) prior to becoming fixed or matured, such payment obligations are not evidenced by a promissory note or secured by a pledge of Property by the Borrower or any Subsidiary, or (b) the portion of a payment obligation described in clause (a) which has become fixed and matured.

 

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“Effective Date” means the date on which the conditions specified in Section 6.01 are satisfied (or waived in accordance with Section 12.02).

 

“Embargoed Person” has the meaning assigned to such term in Section 9.23.

 

“Engineering Reports” has the meaning assigned to such term in Section 2.08(a)(iii)(A).

 

“Environmental Laws” means any and all Governmental Requirements pertaining in any way to the environment or the preservation or reclamation of natural resources, in effect in any and all jurisdictions in which the Borrower or any Restricted Subsidiary is conducting or at any time has conducted business, or where any Property of the Borrower or any Restricted Subsidiary is located, including without limitation, 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 Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection Governmental Requirements.  The term “oil” shall have the meaning specified in OPA, the terms “hazardous substance” and “release” (or “threatened release”) have the meanings specified in CERCLA, the terms “solid waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and the term “oil and gas waste” shall have the meaning specified in Section 91.1011 of the Texas Natural Resources Code (“Section 91.1011”); provided, however, that (a) in the event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (b) to the extent the laws of the state or other jurisdiction in which any Property of the Borrower or any Restricted Subsidiary is located establish a meaning for “oil,” “hazardous substance,” “release,” “solid waste,” “disposal,” or “oil and gas waste” which is broader than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.

 

“Environmental Permit” means any permit, registration, license, 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 Interests.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute.

 

“ERISA Affiliate” means each trade or business (whether or not incorporated) which together with the Borrower or a 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.

 

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“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA and the regulations issued thereunder, (b) the withdrawal of the Borrower, 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, (c) 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, (d) the institution of proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of withdrawal liability pursuant to section 4202 of ERISA or (f) any other event or condition which might constitute grounds under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.

 

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

 

“Event of Default” has the meaning assigned to such term in Section 10.01.

 

“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Upstream 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; (d) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance 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 Borrower or any Restricted Subsidiary or materially impair the value of such Property subject thereto; (e) Liens arising solely by virtue of customary deposit account agreements with the depositary institution or any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations

 

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promulgated by the Board and no such deposit account is intended by Borrower or any of its Restricted Subsidiaries to provide collateral to the depository institution; (f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property of the Borrower 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 purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure any monetary obligations and which in the aggregate do not materially impair the use of such Property for the purposes of which such Property is held by the Borrower or any Restricted Subsidiary or materially impair the value of such Property subject thereto without, as to Midstream Properties only, compensation therefore; (g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, plugging and abandonment bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business not to exceed $10,000,000 in the aggregate at any time; (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (i) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; and (j) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced; provided, further, that Liens described in clauses (a) through (e) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced and no intention to subordinate the first priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted Liens.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower or any Guarantor hereunder or under any other Loan Document, (a) income or franchise taxes (including the Texas Margin Tax) imposed on (or measured by) its net income in each case (i) by the United States of America or such other jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, or (ii) as the result of any other present or former connection between such recipient and the jurisdiction imposing such Tax (other than any connection arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in (a) above, (c) any backup withholding tax that is required by the Code to be withheld from amounts payable to a Lender that has failed to comply with Section 5.03(e)(ii), (d) 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 (i) is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender pursuant to any law in effect becomes a party to this Agreement (or designates a new lending office) except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending

 

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office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c) or (ii) is attributable to such Foreign Lender’s failure to comply with Section 5.03(e), and (e) any United States withholding tax that is imposed as a result of such recipient’s failure or inability to comply with the requirements of FATCA to establish an exemption from such withholding tax pursuant to FATCA.

 

“Executive Order” has the meaning assigned to such term in Section 7.24(a).

 

“Existing Credit Agreement” means that certain Credit Agreement, dated as of December 13, 2007, by and among the Borrower, Wells Fargo Bank, National Association as administrative agent and the lenders party thereto, as heretofore amended.

 

“Existing Letters of Credit” means the Letters of Credit described on Schedule 1.01(a) that were issued by Wells Fargo Bank, National Association under the Existing Credit Agreement and that shall be transferred to and deemed issued under this Agreement, as such Letters of Credit may be renewed or amended from time to time.

 

“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) and any regulations or official interpretations thereof.

 

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

 

“Fee Letter” means that certain letter agreement from the Administrative Agent, the Arranger, and the Syndication Agent to the Borrower dated May 17, 2011 concerning certain fees in connection with this Agreement.

 

“Financial Officer” means, for any Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person.  Unless otherwise specified, all references herein to a Financial Officer means a Financial Officer of the Ultimate General Partner.

 

“Financial Statements” means the financial statement or statements of the Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).

 

“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.

 

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“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to any Issuing Bank, such Defaulting Lender’s Applicable Percentage of the outstanding Letters of Credit with respect to Letters of Credit issued by such Issuing Bank other than the Letters of Credit as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or cash collateralized in accordance with the terms hereof, and (b) with respect to any Swingline Lender, such Defaulting Lender’s Applicable Percentage of outstanding Swingline Loans made by such Swingline Lender other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders.

 

“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 1.04.

 

“General Partner” means Eagle Rock Energy GP, L.P., a Delaware limited partnership.

 

“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 over the Borrower, any Restricted Subsidiary, any of their Properties, any Agent, any Issuing Bank or any Lender.

 

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

 

“Guarantors” means:

 

(a)                                  each Person listed on Schedule 7.14,

 

(b)                                 each other Material Domestic Subsidiary or other Domestic Subsidiary that guarantees the Secured Obligations pursuant to Section 8.14(b); and

 

(c)                                  each Affiliate of the Borrower that is a signatory to a Mortgage.

 

“Guaranty and Collateral Agreement” means an agreement executed by the Loan Parties (including the Borrower) in substantially the form of Exhibit E granting security interests in certain Collateral and unconditionally guarantying on a joint and several basis, payment of the Secured Obligations, 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 and including, without limitation:  (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) petroleum hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and

 

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gas waste, crude oil, and any components, fractions, or derivatives thereof; and (c) radioactive materials, asbestos containing materials, polychlorinated biphenyls, or radon.

 

“Hedge Termination Value” means, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Agreements, (a) for any date on or after the date such Hedging 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 Hedging Agreements, as determined by the counterparties to such Hedging Agreements.

 

“Hedge Unwind” has the meaning assigned to such term in Section 2.08(a)(viii).

 

“Hedging Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided, that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Hedging Agreement.

 

“Highest Lawful Rate” means, with respect to each Lender, the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Loans or on other Secured Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than applicable laws allow as of the date hereof.

 

“Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature.  Unless otherwise indicated herein, each reference to “Hydrocarbon Interests” means Hydrocarbon Interests owned by the Borrower or a Restricted Subsidiary.

 

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

 

“Indebtedness” means, for any Person, the sum of the following (without duplication):  (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services; (d) the portion of any payments or accruals under Capital Leases allocable to principal; (e) the portion of any payments

 

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or accruals under Synthetic Leases allocable to principal; (f) all Indebtedness (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Indebtedness is assumed by such Person; (g) all Indebtedness (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 Indebtedness (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Indebtedness and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Indebtedness or Property of others; (i) obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business; (j) obligations to pay for goods or services even if such goods or services are not actually received or utilized by such Person; (k) any Indebtedness of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment.  The Indebtedness of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Initial Quarter” has the meaning assigned to such term in Section 9.01(e)(ii)(A).

 

“Initial Reserve Report” means the report of Cawley, Gillespie & Associates with respect to certain Upstream Properties of the Borrower and its Restricted Subsidiaries as of December 31, 2010.

 

“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05.

 

“Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurodollar Loan (other than a Swingline 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 and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.

 

“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, nine or 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

 

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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 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.  On a one-time basis only, the Borrower may request one Interest Period to begin on the Effective Date and end on a day that is two weeks after the Effective Date.

 

“Interest Rate Hedges” means all Hedging Agreements entered into by the Borrower and its Restricted Subsidiaries for the purpose of hedging the interest rate exposure associated with the operations of the Borrower and its Restricted Subsidiaries.

 

“Interim Upstream Component Redetermination” has the meaning assigned to such term in Section 2.08(a)(ii).

 

“Interim Upstream Component Redetermination Date” means the date on which a Upstream Component that has been redetermined pursuant to an Interim Upstream Component Redetermination becomes effective as provided in Section 2.08(a)(iv).

 

“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (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 Indebtedness of, purchase or other acquisition of any other Indebtedness or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person that constitutes a business unit or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.

 

“Issuing Bank” means (a) Wells Fargo Bank, National Association, and (b) any other Lender agreed to by the Borrower, the Administrative Agent and such Lender, as applicable, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.09(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.

 

“LC Commitment” means, at any time, $150,000,000.

 

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“LC Disbursement” means a payment made by any 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.

 

“Lenders” means the lenders party hereto and any Person that shall have become a party hereto pursuant to an Assignment and Assumption or as an Additional Lender pursuant to Section 2.07(b), other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

 

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

 

“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 any Issuing Bank relating to any Letter of Credit.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate reported by Bloomberg L.P. (the “Service”) in its index of rates (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such screen of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period.

 

“LIBOR Reference Rate” means a rate of interest for Swingline Loans determined by reference to the Adjusted LIBO Rate for a one (1) month interest period, as that rate may fluctuate in accordance with changes in the Adjusted LIBO Rate as determined on a day-to-day basis.

 

“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Upstream Properties.

 

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The term “Lien” shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations.  For the purposes of this Agreement, the Borrower and its Restricted Subsidiaries shall be deemed to be the owner of any Property which they have acquired or hold 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.

 

“Loan Documents” means this Agreement, the Notes, the Letter of Credit Agreements, the Letters of Credit, the Fee Letter, and the Security Instruments.

 

“Loan Limit” means for all Lenders the lesser of (i) the total Commitments and (ii) the Borrowing Base, and for any Lender the lesser of (x) its Commitment and (y) its Applicable Percentage of the Borrowing Base.

 

“Loan Parties” means, collectively, the Borrower and the Guarantors.

 

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

 

“Majority Lenders” means, at any time while no Loans or LC Exposure is outstanding, Lenders having greater than fifty percent (50%) of the total Commitments, and at any time while any Loans or LC Exposure is outstanding, Lenders having greater than fifty (50%) 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)); provided, that if any Lender is a Defaulting Lender at the time of determination, the total Credit Exposures and Commitments of such Lender shall be excluded from the determination of Majority Lenders.

 

“Material Adverse Effect” means a material adverse change in, or material adverse effect on (a) the business, operations, Property, liabilities (actual or contingent), or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries taken as a whole, (b) the ability of the Borrower, any Restricted Subsidiary or any Guarantor to perform any of its obligations under any Loan Document to which it is a party, (c) the validity or enforceability of any Loan Document or (d) the rights and remedies of or benefits available to the Administrative Agent, any other Agent, any Issuing Bank or any Lender under any Loan Document.

 

“Material Domestic Subsidiary” means, as of any date, each Domestic Subsidiary that owns Property, excluding the value of the Equity Interests of all of its Subsidiaries, exceeding $10,000,000.  If the gross value of the Property of the Domestic Subsidiaries that are not Guarantors exceeds $25,000,000 in the aggregate, those Domestic Subsidiaries holding a majority of such Property shall each be a Material Domestic Subsidiary; provided that any Domestic Subsidiary that guarantees any Indebtedness shall be deemed a Material Domestic Subsidiary.

 

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Restricted Subsidiaries in an aggregate principal amount exceeding $25,000,000.  For purposes of determining Material Indebtedness, the “principal amount” of the

 

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obligations of the Borrower or any Restricted Subsidiary in respect of any Hedging Agreement at any time shall be the Hedge Termination Value.

 

“Material Project” means any capital expansion project undertaken by the Borrower or any Restricted Subsidiary relating to any Midstream Properties, the capital expenditures (determined in accordance with GAAP) attributable to which exceed $15,000,000.

 

“Material Project EBITDA Adjustments” has the meaning assigned to such term in Section 9.01(e)(i).

 

“Maturity Date” means June 22, 2016.

 

“Maximum Credit Amount” means the amount set forth under the heading Maximum Credit Amount on Annex I.  As of the Effective Date, the Maximum Credit Amount is $1,200,000,000.00.

 

“Midstream Attributed Value” means for any Midstream Properties, the Midstream EBITDA for such Midstream Properties multiplied by 3.75.

 

“Midstream Component” means an amount equal to the lesser of (a) Midstream EBITDA multiplied by 3.75 and (b) fifty-five percent (55%) of the Borrowing Base (or sixty percent (60%) of the Borrowing Base for the first two full fiscal quarters following an acquisition of Midstream Properties in an aggregate amount in excess of $25,000,000).

 

“Midstream EBITDA” means Consolidated EBITDA attributable to the Midstream Properties and the Midstream Hedges related thereto.

 

“Midstream Hedges” means all commodity Hedging Agreements entered into by the Borrower and its Restricted Subsidiaries, other than the Upstream Hedges.

 

“Midstream Properties” means all Property used by the Borrower in (i) gathering, compressing, treating, processing and transporting natural gas; (ii) fractionating and transporting natural gas liquids; and (iii) marketing natural gas, crude, condensate and natural gas liquids, including, without limitation, gathering lines, pipelines, storage facilities, surface leases, rights-of-way, easements and servitudes related to each of the foregoing and classified by the Borrower, in its financial reporting, as a part of its Midstream Business, as defined in such financial reporting.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency.

 

“Mortgage” means each mortgage, deed of trust or any other document creating and evidencing a Lien on real or immovable Property and other Property in favor of the Secured Parties, which shall be in a form reasonably satisfactory to the Administrative Agent and shall include each such instrument securing the obligations under the Existing Credit Agreement not released by the Secured Parties, as the same may be amended, modified, supplemented or restated from time to time in accordance with the Loan Documents.

 

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“Mortgaged Building” has the meaning assigned to such term in Section 8.14(e).

 

“Mortgaged Property” means any real Property owned by the Borrower or any Subsidiary that is subject to a Mortgage.

 

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in section 3(37) or 4001(a)(3) of ERISA.

 

“New Midstream Component Notice” has the meaning assigned to such term in Section 2.08(b)(ii).

 

“New Upstream Component Notice” has the meaning assigned to such term in Section 2.08(a)(iv).

 

“Non-Consenting Lender” means (a) any Lender that has not approved the Upstream Component proposed by the Administrative Agent pursuant to Section 2.08, or (b) any Lender that has not approved a proposed waiver or amendment that has been approved by Lenders holding 80% or more of the then outstanding total Commitments.

 

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

 

“Notes” means the promissory notes of the Borrower described in Section 2.02(d) and being substantially in the form of Exhibit A, together with all amendments, modifications, replacements, extensions and rearrangements thereof.

 

“OFAC” has the meaning assigned to such term in Section 7.24(b)(v).

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non US jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“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.

 

“Partnership Agreement” means the Agreement of Limited Partnership of the Borrower dated as of May 25, 2006.

 

“Participant” has the meaning assigned to such term in Section 12.04(c)(i).

 

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“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

 

“Permitted Acquisition” means any acquisition after the Effective Date (whether by purchase, merger, amalgamation, consolidation or otherwise), by any Loan Party in the form of acquisitions of all or substantially all of the business or a line of business (whether by the acquisition of all of the Equity Interests, Property or any combination thereof) of any other Person if each such acquisition meets all of the following requirements:

 

(a)                              no later than the closing date of any acquisition for which the Permitted Acquisition Consideration exceeds $25,000,000, the Borrower shall have delivered to the Administrative Agent and the Lenders a compliance certificate in the form of Exhibit D-2 for the most recent fiscal quarter end preceding such acquisition demonstrating, in form and substance reasonably satisfactory to the Administrative Agent and the Lenders, pro forma compliance (after giving effect to the acquisition and any Loans made or to be made in connection therewith, as if such acquisition had occurred on the first day of the applicable four (4) quarter period) with each covenant contained in Section 9.01 as of the date of the acquisition; and

 

(b)                                 the Borrower shall provide such documents and information as may be reasonably requested by the Administrative Agent or the Majority Lenders (through the Administrative Agent) in connection with the acquisition.

 

“Permitted Acquisition Consideration” means the aggregate amount of the purchase price (including, but not limited to, any assumed debt, Earnouts (valued at the maximum amount reasonably expected to be payable thereunder as determined in good faith by the Borrower) or deferred payments, but excluding any Qualified Capital Stock of the Borrower issued to the seller in any such Permitted Acquisition, net of the applicable acquired company’s cash and cash equivalents balance (including investments of the type described in Section 9.05(c)-(f)) as shown on its most recent financial statements delivered in connection with the applicable Permitted Acquisition) to be paid in connection with any applicable Permitted Acquisition as set forth in the applicable Permitted Acquisition Documents executed by the applicable Loan Party in order to consummate the applicable Permitted Acquisition.

 

“Permitted Refinancing Indebtedness” means Indebtedness (for purposes of this definition, “new Indebtedness”) incurred in exchange for, or proceeds of which are used to refinance, all of any other Indebtedness (the “Refinanced Indebtedness”); provided that (a) such new Indebtedness is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the Refinanced Indebtedness (or, if the Refinanced Indebtedness is exchanged or acquired for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount) and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such exchange or refinancing; (b) such new Indebtedness has a stated maturity no earlier than the stated maturity of the Refinanced Indebtedness and an average life no shorter than the average life of the Refinanced Indebtedness; (c) such new Indebtedness does not have a stated interest rate in excess of the stated interest rate of the Refinanced Indebtedness; (d) such new Indebtedness does not contain any covenants which are more onerous to the Borrower and its Restricted Subsidiaries than those imposed by the Refinanced Indebtedness and (e) such new Indebtedness (and any guarantees thereof) is subordinated in right of payment to the Secured

 

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Obligations (or, if applicable, the Guaranty and Collateral Agreement) to at least the same extent as the Refinanced Indebtedness and is otherwise subordinated on terms substantially reasonably satisfactory to the Administrative Agent.

 

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

 

“Plan” means any employee pension benefit plan, as defined in section 3(2) of ERISA, which is subject to Title IV of ERISA or Section 412 of the Code and is currently or hereafter sponsored, maintained or contributed to by the Borrower, a Subsidiary or an ERISA Affiliate.

 

“Prime Rate” means the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office; 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.

 

“Principal” means each of Eagle Rock Holdings, L.P., Natural Gas Partners VII, L.P., Natural Gas Partners VIII, L.P., Montierra Minerals & Production, L.P., Montierra Management LLC, Eagle Rock GP, L.L.C., NGP Income Management L.L.C., Eagle Rock Holdings NGP 7, LLC, Eagle Rock Holdings NGP 8, LLC, any Affiliated funds and investment vehicles managed by NGP Energy Capital Management, L.L.C., or any general partner, managing member, principal or managing director of any of the foregoing.

 

“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, contract rights and Equity Interests or other ownership interests of any Person), whether now in existence or owned or hereafter acquired.

 

“Proposed Upstream Component” has the meaning assigned to such term in Section 2.08(a)(iii)(A).

 

“Proposed Upstream Component Notice” has the meaning assigned to such term in Section 2.08(a)(iii)(B).

 

“Purchase Money Indebtedness” means Indebtedness, 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.

 

“Qualified Capital Stock” means, with respect to any Person, the Equity Interests of such Person that are not Disqualified Capital Stock.

 

“Recovery Event” means the receipt by the Borrower or any Guarantor of any cash insurance proceeds or condemnation awards payable by reason of a Casualty Event.

 

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“Redemption” means, with respect to any Indebtedness, the repurchase, redemption, prepayment, repayment, or defeasance or any other acquisition or retirement for value (or the segregation of funds with respect to any of the foregoing) of such Indebtedness.  “Redeem” has the correlative meaning thereto.

 

“Redetermination Date” means, with respect to any Scheduled Upstream Component Redetermination or any Interim Upstream Component Redetermination, the date that the redetermined Upstream Component related thereto becomes effective pursuant to Section 2.08(a)(iv).

 

“Refinancing” means the payment in full of all obligations owing and outstanding and termination of all commitments of lenders under the Existing Credit Agreement and the amendment of all Security Instruments granted in connection therewith.

 

“Register” has the meaning assigned to such term in Section 12.04(b)(iv).

 

“Regulation D” means Regulation D of the Board, as the same may be amended, supplemented or replaced from time to time.

 

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors (including attorneys, accountants and experts) of such Person and such Person’s Affiliates.

 

“Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing.

 

“Remedial Work” has the meaning assigned to such term in Section 8.10(a).

 

“Required Lenders” means, at any time while no Loans or LC Exposure is outstanding, Lenders having at least sixty-six and two-thirds percent (662/3%) of the total Commitments; and at any time while any Loans or LC Exposure is outstanding, Lenders holding at least sixty-six and two-thirds percent (662/3%) of the outstanding aggregate principal amount of the Loans or participation interests in Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided, that if any Lender is a Defaulting Lender at the time of determination, the total Credit Exposures and Commitments of such Lender 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 each December 31st or June 30th (or such other date in the event of an Interim Upstream Component Redetermination), the oil and gas reserves attributable to the Upstream Properties of the Borrower and the Restricted Subsidiaries, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date.

 

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the President, any Financial Officer or any Senior Vice President of such Person (or such Person’s

 

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general partner or manager).  Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Ultimate General Partner.

 

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

 

“Restricted Subsidiary” means any Subsidiary of the Borrower that is not an Unrestricted Subsidiary.

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto that is a nationally recognized rating agency.

 

“Scheduled Midstream Component Recalculation” has the meaning assigned to such term in Section 2.08(b)(ii).

 

“Scheduled Upstream Component Redetermination” has the meaning assigned to such term in Section 2.08(a)(ii).

 

“Scheduled Upstream Component Redetermination Date” means the date on which an Upstream Component that has been redetermined pursuant to a Scheduled Upstream Component Redetermination becomes effective as provided in Section 2.08(a)(iv).

 

“SEC” means the Securities and Exchange Commission or any successor Governmental Authority.

 

“Secured Hedging Agreement” means any Hedging Agreement of the Borrower or any Restricted Subsidiary with a Person while such Person is or before such Person becomes a Lender or an Affiliate of a Lender; provided that if such Person ceases to be a Lender or an Affiliate of a Lender, the Hedging Agreement with such Person shall only be a Secured Hedging Agreement to the extent transactions under such Hedging Agreement were entered into while such Person was a Lender or an Affiliate of a Lender.

 

“Secured Obligations” means any and all amounts owing or to be owing (including interest accruing at any post-default rate and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, any of its Restricted Subsidiaries or any Guarantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) by the Borrower, any of its Restricted Subsidiaries or any Guarantor (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising):  (a) to the Administrative Agent, any Issuing Bank or any Lender under any Loan Document; (b) to any counterparty under any Secured Hedging Agreement; (c) to any counterparty under any Secured Treasury Management Agreement; and (d) all renewals, extensions and/or rearrangements of any of the above.

 

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“Secured Parties” means, collectively, the Administrative Agent, each Issuing Bank, each Lender, each counterparty to a Secured Hedging Agreement and each counterparty to a Secured Treasury Management Agreement.

 

“Secured Treasury Management Agreement” means any Treasury Management Agreement of the Borrower or a Restricted Subsidiary with a Person while such Person is or before such Person becomes a Lender or an Affiliate of a Lender; provided that if such Person ceases to be a Lender or an Affiliate of a Lender, the Treasury Management Agreement with such Person shall only be a Secured Treasury Management Agreement to the extent transactions under such Treasury Management Agreement were entered into while such Person was a Lender or an Affiliate of a Lender.

 

“Security Instruments” means the Guaranty and Collateral Agreement, the Mortgages, the other agreements, instruments or certificates described or referred to in Schedule 1.01(b), and any and all other agreements, instruments, consents or certificates now or hereafter executed and delivered by the Borrower or any other Person (other than Secured Hedging Agreements, Secured Treasury Management Agreements or participation or similar agreements between any Lender and any other lender or creditor with respect to any Secured Obligations pursuant to this Agreement) in connection with, or as security for the payment or performance of the Secured Obligations, the Notes, this Agreement, the Existing Credit Agreement or reimbursement obligations under the Letters of Credit, as such agreements may be amended, modified, supplemented or restated from time to time.

 

“Solvent” means, with respect to any Person as of any date, that (a) the value of the assets of such Person (both at fair value and present fair saleable value) is, on the date of determination, greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person as of such date, (b) as of such date, such Person is able to pay all liabilities of such Person as such liabilities mature, and (c) as of such date, such Person does not have unreasonably small capital given the nature of its business.  In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

“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.

 

“Subject Transaction” has the meaning assigned to such term in Section 9.01(e).

 

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“Subsidiary” means:  (a) any Person of which at least a majority of the outstanding Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board of directors, manager or other governing body of such Person (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) is at the time directly or indirectly owned or controlled by (i) another Person, (ii) one or more of such other Person’s Subsidiaries or (iii) collectively, such other Person and one or more of such other Person’s Subsidiaries, and (b) any partnership of which such other Person or any of such other Person’s Subsidiaries is a general partner.  Unless otherwise indicated herein, each reference to the term “Subsidiary” means a Subsidiary of the Borrower.

 

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.

 

“Swingline Lender” means Wells Fargo Bank, National Association, in its capacity as lender of Swingline Loans hereunder.

 

“Swingline Loan” means a Loan made pursuant to Section 2.04.

 

“Synthetic Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of U.S. federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of the Property subject to such operating lease upon expiration or early termination of such lease.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

 

“Termination Date” means the earlier of (a) the Maturity Date and (b) the date of termination of the Commitments.

 

“Total Funded Indebtedness” means, at any date and without duplication, all Indebtedness of the Borrower and the Consolidated Restricted Subsidiaries on a consolidated basis as described in clauses (a), (d), (e), (f), (g), (h) and (k) of the definition of Indebtedness (but (i) with respect to clauses (g), (h) and (k), only to the extent such liabilities relate to Indebtedness described in clauses (a), (d), (e) and (f), and (ii) with respect to clause (k), only to the extent such liability is not fully covered by partnership assets).

 

“Total Leverage Ratio” means the ratio of Total Funded Indebtedness to Consolidated EBITDA for the four (4) fiscal quarters ending on the last day of the fiscal quarter immediately preceding the date of determination for which financial statements are available.

 

“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

 

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party, the Refinancing, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, the guaranteeing of the Secured Obligations and the other obligations of its Restricted Subsidiaries under the Guaranty and Collateral Agreement, and the grant of Liens by the Borrower on Collateral 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 Secured Obligations and the other obligations under the Guaranty and Collateral Agreement by such Guarantor and such Guarantor’s grant of the security interests and provision of Collateral under the Security Instruments, and the grant of Liens by such Guarantor on Collateral pursuant to the Security Instruments.

 

“Treasury Management Agreement” means any agreement governing the provision of treasury or cash management services, including deposit accounts, funds transfer, automated clearinghouse, auto-borrow, zero balance accounts, returned check concentration, controlled disbursement, lockbox, account reconciliation and reporting and trade finance services.

 

“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.

 

“Ultimate General Partner” means Eagle Rock Energy G&P, LLC, a Delaware limited liability company.

 

“Undisclosed Administration” means in relation to a Lender the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator under or based on the law in the country where such Lender is subject to home jurisdiction supervision if applicable law requires that such appointment is not to be publicly disclosed.

 

“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as such on Schedule 7.14 or which the Borrower has designated in writing to the Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 9.06.

 

“Upstream Component” means at any time an amount equal to the amount determined in accordance with Section 2.08(a)(iii), as the same may be adjusted from time to time pursuant to Section 2.08(a)(v), Section 2.08(a)(vi), Section 2.08(a)(vii), or Section 2.08(a)(viii).

 

“Upstream Component Properties” means the Upstream Properties evaluated in the most recently delivered Reserve Report.

 

“Upstream Component Redetermination” means a Scheduled Upstream Component Redetermination or an Interim Upstream Component Redetermination.

 

“Upstream Hedges” means all commodity Hedging Agreements entered into by the Borrower and its Restricted Subsidiaries related to the Upstream Component Properties.

 

“Upstream Properties” means (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby

 

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(including, without limitation, all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests, but excluding any Hydrocarbons bought and/or sold pursuant to the Borrower’s Hydrocarbon gathering, processing and transportation businesses; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing, but excluding, in each case, all Midstream Properties.

 

“Upstream Weighting” means the percentage obtained by dividing the Upstream Component by the Borrowing Base then in effect (prior to giving effect to any adjustment thereto pursuant to Section 2.08(a)(vi)).

 

“Voting Securities” means, with respect to any Person, Equity Interests of any class or kind having the power to vote for the election of the members of the governing body of such Person.

 

“Wells Fargo” means Wells Fargo Bank, National Association.

 

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

 

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Section 1.02                            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 1.03                            Terms Generally; Rules of Construction.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), (b) 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, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections, Exhibits, Annexes and Schedules shall be construed to refer to Articles and Sections of, and Exhibits, Annexes 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 1.04                            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 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.

 

ARTICLE II
 THE CREDITS

 

Section 2.01                            Commitments.  Subject to the terms and conditions set forth herein, each Lender agrees to make revolving loans to the Borrower during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Credit Exposure exceeding such Lender’s Loan Limit or (b) the total Credit Exposures exceeding the total Loan Limit.

 

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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 $1,000,000 and not less than $1,000,000.  At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000; 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 2.09(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, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

 

(d)                                 Notes.  The Loans made by each Lender, if requested by such Lender, shall be evidenced by a single promissory note of the Borrower in substantially the form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the date of this Agreement, (ii) 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) any Lender that becomes a party hereto in connection with an increase in the total Commitments pursuant to Section 2.07(b), as of the effective date of such increase, in each case, payable to the order of such Lender in a principal amount equal to its Commitment as in effect on such date, and otherwise duly completed.  In the event that any Lender’s Commitment increases or decreases for any reason (whether pursuant to Section 2.07, Section 12.04(b) or otherwise), if requested by such Lender, the Borrower shall deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to the order of such Lender in a principal amount equal to its Commitment after giving effect to such increase or decrease, and otherwise duly completed.  The date, amount, Type, interest rate and, if applicable, Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer,

 

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may be endorsed by such Lender on a schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender.  Failure to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note.

 

Section 2.03                            Requests for Borrowings.  To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, Eastern time, three (3) Business Days before the date of the proposed Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Eastern 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 2.09(e).  Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, facsimile or other electronic transmission to the Administrative Agent of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower.  Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

 

(i)                                     the aggregate amount of the requested Borrowing;

 

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

 

(iii)                               whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

 

(iv)                              in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

 

(v)                                 the current total Credit Exposures (without regard to the requested Borrowing) and the pro forma total Credit Exposures (giving effect to the requested Borrowing).

 

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 (1) month’s duration.  Each Borrowing Request shall constitute a representation that the amount of the requested Borrowing shall not cause the total Credit Exposures to exceed the total Commitments.

 

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

 

Section 2.04                            Swingline Loans.

 

(a)                                  Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the

 

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aggregate principal amount of outstanding Swingline Loans exceeding $30,000,000 or (ii) the sum of the total Credit Exposures exceeding the total Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan.  Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

 

(b)                                 To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by hand delivery, facsimile or other electronic transmission), not later than 2:00 p.m., Eastern time, on the day of a proposed Swingline Loan.  Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan.  The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower.  The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e), by remittance to the applicable Issuing Bank) by 4:00 p.m., Eastern time, on the requested date of such Swingline Loan.

 

(c)                                  The Swingline Lender may by written notice, given to the Administrative Agent not later than 10:00 a.m., Eastern time, on any Business Day, require the Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding.  Such notice shall specify the aggregate amount of Swingline Loans in which Lenders will participate.  Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans.  Each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Loans.  Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.  Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Lenders.  The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender.  Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any

 

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reason.  The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

 

Section 2.05                            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 2.05.  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. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

 

(b)                                 Interest Election Requests.  To make an election pursuant to this Section 2.05, 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 or other electronic transmission to the Administrative Agent of a written Interest Election Request in substantially the form of Exhibit C and signed by the Borrower.

 

(c)                                  Information in Interest Election Requests.  Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

 

(i)                                     the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.05(c)(iii) and (iv) shall be specified for each resulting Borrowing);

 

(ii)                                  the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

 

(iii)                               whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

 

(iv)                              if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

 

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one (1) month’s duration.

 

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(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:  (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 2.06                            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 2:00 p.m., Eastern time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04.  The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to the account of the Borrower designated in the Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e) shall be remitted by the Administrative Agent to the relevant 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 time of any Borrowing (or prior to the proposed time of any same day ABR Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.06(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 agrees 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 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.  If such Lender does not pay such corresponding amount to the Administrative Agent within three (3) Business Days after demand, the Borrower agrees 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 the interest rate

 

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applicable to ABR Loans.  If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrower 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 2.07                            Termination, Reduction and Increase of Commitments.

 

(a)                                  Optional Termination and Reduction of Commitments.

 

(i)                                     The Borrower may at any time terminate, or from time to time reduce, the total Commitments; provided that (A) each reduction of the total Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (B) the Borrower shall not terminate or reduce the total Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Credit Exposures would exceed the total Commitments.

 

(ii)                                  The Borrower shall notify the Administrative Agent of any election to terminate or reduce the total Commitments under Section 2.07(a)(i) at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof.  Each notice delivered by the Borrower pursuant to this Section 2.07(a)(ii) shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon (i) the effectiveness of other credit facilities or (ii) the issuance or incurrence of other indebtedness permitted under Section 9.02, and in each such case, such notice may be revoked by the Borrower by notice to the Administrative Agent on or prior to the specified effective date if such condition is not satisfied.

 

(iii)                               Other than as provided in Section 2.07(a)(iv) below, any termination or reduction of the Commitments shall be permanent and may not be reinstated except pursuant to Section 2.07(b).  Each reduction of the Commitments shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.

 

(iv)                              If any Lender shall be a Defaulting Lender, the Borrower, at the Borrower’s election may elect to terminate such Defaulting Lender’s Commitment hereunder; provided that (i) such termination must be of the Defaulting Lender’s entire Commitment, (ii) the Borrower shall pay all amounts owed by the Borrower to such Defaulting Lender under this Agreement and under the other Loan Documents (including principal of and interest on the Loans owed to such Defaulting Lender, commitment fees accrued prior to the time such Defaulting Lender became a Defaulting Lender, and letter of credit fees accrued prior to the time such Defaulting Lender became a Defaulting Lender but specifically excluding any amounts owing under Section 5.02 as result of such payment of Loans) and shall deposit with the Administrative Agent cash collateral in the amount equal to such Defaulting Lender’s ratable share of the LC Exposure, including

 

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any such LC Exposure that has been reallocated pursuant to Section 4.05(a)(iv); and (iii) a Defaulting Lender’s Commitment may be terminated by the Borrower under this Section 2.07(a)(iv) if and only if at such time, the Borrower has elected, or is then electing, to terminate the Commitments of all then existing Defaulting Lenders.  Upon written notice to the Defaulting Lender and Administrative Agent of the Borrower’s election to terminate a Defaulting Lender’s Commitment pursuant to this clause (c) and the payment and deposit of amounts required to be made by the Borrower under clause (ii) above, (A) such Defaulting Lender shall cease to be a “Lender” hereunder for all purposes except that such Lender’s rights under Section 5.01, Section 5.03, Section 12.02, and Section 12.03 shall continue with respect to events and occurrences occurring before or concurrently with its ceasing to be a “Lender” hereunder, (B) such Defaulting Lender’s Commitment shall be terminated, and (C) such Defaulting Lender shall be relieved of its obligations hereunder, provided that, any such termination will not be deemed to be a waiver or release of any claim by Borrower, the Administrative Agent or any Lender may have against such Defaulting Lender.

 

(b)                                 Optional Increase in Commitments.

 

(i)                                     Subject to the conditions set forth in Section 2.07(b)(ii), the Borrower may increase the total Commitments then in effect by increasing the Commitment of a Lender or by causing a Person that at such time is not a Lender to become a Lender (an “Additional Lender”).

 

(ii)                                  Any increase in the Commitments shall be subject to the following additional conditions:

 

(A)                              at no time shall the total Commitments exceed the Maximum Credit Amount;

 

(B)                                no Default shall have occurred and be continuing at the effective date of such increase;

 

(C)                                the Borrower shall have paid all compensation required by Section 5.02 (if any);

 

(D)                               no Lender’s Commitment may be increased without the consent of such Lender;

 

(E)                                 if the Borrower elects to increase the total Commitments by increasing the Commitment of a Lender, the Borrower and such Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit G-1 (a “Commitment Increase Certificate”), and if requested by such Lender, the Borrower shall deliver a new Note payable to the order of such Lender in a principal amount equal to its Commitment after giving effect to such increase, and otherwise duly completed;

 

(F)                                 if the Borrower elects to increase the total Commitments by causing an Additional Lender to become a party to this Agreement, then, upon the

 

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prior written consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), the Borrower and such Additional Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit G-2 (an “Additional Lender Certificate”), together with an Administrative Questionnaire, and if requested by such Additional Lender, the Borrower shall deliver a Note payable to the order of such Additional Lender in a principal amount equal to its Commitment, and otherwise duly completed; and

 

(G)                                the Borrower and its Restricted Subsidiaries shall have delivered to the Administrative Agent such legal opinions, resolutions, amendment to Security Instruments and other documents as the Administrative Agent may reasonably request.

 

(iii)                               Subject to acceptance and recording thereof pursuant to Section 2.07(b)(iv), from and after the effective date specified in the Commitment Increase Certificate or the Additional Lender Certificate:  (A) the amount of the total Commitments 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 the other Loan Documents 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 total Commitments.

 

(iv)                              Upon its receipt of a duly completed Commitment Increase Certificate or an Additional Lender Certificate, executed by the Borrower and the Lender or the Borrower and the Additional Lender party thereto, as applicable, the Administrative Questionnaire referred to in Section 2.07(b)(ii), if applicable, the written consent of the Administrative Agent to such increase required by Section 2.07(b)(i)(F), and all other documents and payments required by this Section 2.07(b), the Administrative Agent shall accept such 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).

 

Section 2.08                            Borrowing Base.

 

(a)                                  Upstream Component.

 

(i)                                     Initial Upstream Component.  For the period from and including the Effective Date to but excluding the first Redetermination Date, the amount of the Upstream Component shall be $353,000,000; provided, that if the Borrower issues any unsecured Indebtedness in excess of $350,000,000 prior to the Effective Date, such $353,000,000 shall be reduced in accordance with Section 2.08(a)(vi).  Notwithstanding the foregoing, the Upstream Component may be subject to further adjustments from time

 

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to time before the first Redetermination Date pursuant to Section 2.08(a)(v), Section 2.08(a)(vii) or  Section 2.08(a)(viii).

 

(ii)                                  Upstream Component Redeterminations.  The Upstream Component shall be redetermined semi-annually in accordance with this Section 2.08(a)(ii) (a “Scheduled Upstream Component Redetermination”), and subject to Section 2.08(a)(iv), such redetermined Upstream Component (and resulting new Borrowing Base) shall become effective and applicable to the Borrower, the Agents, any Issuing Bank and the Lenders on April 1st and October 1st of each year, commencing October 1, 2011.  In addition, the Borrower may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at the direction of the Majority Lenders, by notifying the Borrower thereof, elect to cause the Upstream Component to be redetermined one time each between Scheduled Upstream Component Redeterminations in accordance with this Section 2.08(a)(ii) (each such redetermination, an “Interim Upstream Component Redetermination”).

 

(iii)                               Upstream Component Redetermination Procedure.

 

(A)                              Each Upstream Component 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 Upstream Component Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an Interim Upstream Component 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 Upstream Component (the “Proposed Upstream Component”) based upon such Engineering Report and such other information (consistent with the Administrative Agent’s normal oil and gas lending criteria and the price assumptions used by the Administrative Agent in evaluating oil and gas loans generally, in each case as they exist at the particular time).

 

(B)                                The Administrative Agent shall notify the Borrower and the Lenders of the Proposed Upstream Component (the “Proposed Upstream Component Notice”):

 

(1)                                  in the case of a Scheduled Upstream Component Redetermination (1) 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 or before the March 15th and September 15th of such year following the date of delivery, or (2) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to

 

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Section 8.12(a) and (c) in a timely and complete manner, then promptly after the Administrative Agent has received complete Engineering Reports from the Borrower and has had a reasonable opportunity to determine the Proposed Upstream Component in accordance with Section 2.08(a)(iii)(A); and

 

(2)                                  in the case of an Interim Upstream Component Redetermination, promptly, and in any event, within fifteen (15) days after the Administrative Agent has received the required Engineering Reports.

 

(C)                                Any Proposed Upstream Component that would increase the Upstream Component then in effect must be approved or deemed to have been approved by all of the Lenders (except for any Defaulting Lender) as provided in this Section 2.08(a)(iii)(C); and any Proposed Upstream Component that would decrease or maintain the Upstream Component then in effect must be approved or be deemed to have been approved by the Required Lenders as provided in this Section 2.08(a)(iii)(C).  Upon receipt of the Proposed Upstream Component Notice, each Lender shall have fifteen (15) days to, in its sole discretion and consistent with such Lender’s normal and customary oil and gas lending criteria, agree with the Proposed Upstream Component or disagree with the Proposed Upstream Component by proposing an alternate Upstream Component.  If at the end of such fifteen (15) days, any Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be an approval of the Proposed Upstream Component.  If, at the end of such 15-day period, all of the Lenders, in the case of a Proposed Upstream Component that would increase the Upstream Component then in effect, or the Required Lenders, in the case of a Proposed Upstream Component that would decrease or maintain the Upstream Component then in effect, have approved or deemed to have approved, as aforesaid, then the Proposed Upstream Component shall become the new Upstream Component and the Borrowing Base, giving effect to the new Upstream Component, shall become the new Borrowing Base, effective on the date specified in Section 2.08(a)(iv).  If, however, at the end of such 15-day period, all of the Lenders or the Required Lenders, as applicable, have not approved or deemed to have approved, as aforesaid, then (1) the Administrative Agent shall poll the Lenders to ascertain the highest Upstream Component then acceptable to all Lenders or the number of Lenders sufficient to constitute the Required Lenders, as applicable, and such amount shall become the new Upstream Component and the Borrowing Base, giving effect to the new Upstream Component, shall become the new Borrowing Base, effective on the date specified in Section 2.08(a)(iv) and (2) Borrower may replace any Non-Consenting Lender with respect to such Proposed Upstream Component as provided in Section 5.04(b).

 

(iv)                              Effectiveness of a Redetermined Upstream Component.  After a Proposed Upstream Component is approved or is deemed to have been approved by all of the Lenders or the Required Lenders, as applicable, pursuant to Section 2.08(a)(iii)(C), the Administrative Agent shall notify the Borrower and the Lenders of the amount of the

 

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redetermined Upstream Component (the “New Upstream Component Notice”) and the resulting new Borrowing Base, and such amounts shall become the new Upstream Component and the new Borrowing Base, respectively, effective and applicable to the Borrower, the Agents, any Issuing Bank and the Lenders:

 

(A)                              in the case of a Scheduled Upstream Component 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 April 1st or October 1st, as applicable, following such notice, or (B) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on the Business Day next succeeding delivery of such notice; and

 

(B)                                in the case of an Interim Upstream Component Redetermination or an adjustment to the Upstream Component under Section 2.08(a)(v), Section 2.08(a)(vi), Section 2.08(a)(vii), or Section 2.08(a)(viii), on the Business Day next succeeding delivery of such notice.

 

Such amount shall then become the Upstream Component until the next Scheduled Upstream Component Redetermination Date, the next Interim Upstream Component Redetermination Date or the next adjustment to the Upstream Component under Section 2.08(a)(v), Section 2.08(a)(vi), Section 2.08(a)(vii), or Section 2.08(a)(viii), whichever occurs first.  Notwithstanding the foregoing, no Upstream Component Redetermination shall become effective until the New Upstream Component Notice related thereto is received by the Borrower.

 

(v)                                 Reduction of Upstream Component Upon Asset Dispositions.  Upon the Disposition of any Upstream Component Properties, if the sum of (A) the attributed Upstream Component value of all Upstream Component Properties Disposed of since the last redetermination of the Upstream Component and (B) the aggregate Midstream Attributed Value of Midstream Properties Disposed of since the last calculation of the Midstream Component exceeds five percent (5%) of the Borrowing Base then in effect, the Administrative Agent shall adjust the Upstream Component in an amount equal to the Upstream Component value attributable to the Upstream Component Properties being Disposed of.  The Administrative Agent shall promptly notify the Borrower and the Lenders in writing of the Upstream Component value attributable to the Upstream Component Properties being Disposed of in the calculation of the then-effective Upstream Component and upon receipt of such notice, the Upstream Component shall be reduced by such amount.

 

(vi)                              Reduction of Upstream Component Upon Issuance of Unsecured Indebtedness.  Upon the issuance or incurrence of any unsecured indebtedness after the date hereof pursuant to Section 9.02(h), the Upstream Component then in effect shall be reduced by an amount equal to the product of (i) 0.25 multiplied by the principal amount of such newly issued indebtedness (without regard to any original issue discount) and (ii)

 

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the Upstream Weighting.  The Administrative Agent shall promptly notify the Borrower and the Lenders of the new Upstream Component.

 

(vii)                           Reduction of Upstream Component Associated with Title Defects or Exceptions.  The Upstream Component may be reduced from time to time as provided in Section 8.13(c).

 

(viii)                        Reduction of Upstream Component Upon Termination of Hedge Positions.  If the Borrower or a Restricted Subsidiary shall terminate prior to the contracted term therefore or create any off-setting positions in respect of any Upstream Hedges (whether evidenced by a floor, put or Hedging Agreement) (a “Hedge Unwind”) and the aggregate net value of all such Hedge Unwinds since the last determination of the Upstream Component exceeds 2.5% of the effective Upstream Component, then the Administrative Agent shall have the right to adjust the Upstream Component in an amount equal to the Upstream Component value attributable to such terminated or off-setting hedge positions in the calculation of the then-effective Upstream Component.  The Administrative Agent shall promptly notify the Borrower and the Lenders in writing of any such adjustment to the Upstream Component and the resulting new Upstream Component and resulting new Borrowing Base giving effect to such new Upstream Component, shall become effective as of the date of such notice.

 

(b)                                 Midstream Component.

 

(i)                                     Initial Midstream Component.  For the period from and including the Effective Date to but excluding the first Scheduled Midstream Component Recalculation, the amount of the Midstream Component shall be $322,000,000

 

(ii)                                  Scheduled Recalculations of the Midstream Component.  Midstream EBITDA (and hence the Midstream Component of the Borrowing Base) will be recalculated quarterly (each such recalculation, a “Scheduled Midstream Component Recalculation”) in connection with the delivery of the consolidated financial statements of the Borrower and its Consolidated Restricted Subsidiaries pursuant to Section 8.01(a),  Section 8.01(b) and the compliance certificate pursuant to Section 8.01(c).  The Administrative Agent shall notify the Borrower and the Lenders of the amount of the recalculated Midstream Component (the “New Midstream Component Notice”) and the resulting new Borrowing Base, and such amount shall become the new Midstream Component and the Borrowing Base, giving effect to the new Midstream Component, shall become the new Borrowing Base, effective and applicable to the Borrower, the Agents, any Issuing Bank and the Lenders as of the day such financial statements are delivered.

 

(iii)                               Pro Forma Adjustments to Midstream Component.  Pro forma adjustments, as reasonably determined by the Borrower and approved by the Administrative Agent, shall be made to Midstream EBITDA (and hence the Midstream Component of the Borrowing Base) between Scheduled Midstream Component Recalculations for (A) acquisitions of Midstream Properties (either through a direct acquisition of such Midstream Properties or through a Permitted Acquisition),

 

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individually or in the aggregate, with Midstream Attributed Value in excess of 5% of then effective Midstream Component since the last recalculation pursuant to Section 2.08(b)(ii), (B) Dispositions of Midstream Properties if the sum of (1) the attributed Upstream Component value of all Upstream Component Properties Disposed of since the last redetermination of the Upstream Component and (2) the aggregate Midstream Attributed Value of Midstream Properties sold since the last recalculation of the Midstream Component exceeds five percent (5%) of the Borrowing Base then in effect and (C) Material Projects as provided in Section 9.01(e).  The Administrative Agent shall notify the Borrower and the Lenders of the amount of the adjusted Midstream Component  and the resulting new Borrowing Base, and such amount shall become the new Midstream Component and the Borrowing Base, giving effect to the adjusted Midstream Component, shall become the new Borrowing Base, shall be effective and applicable to the Borrower, the Agents, any Issuing Bank and the Lenders as of the day of such notice.

 

Section 2.09                            Letters of Credit.

 

(a)                                  General.  The Borrower, the Administrative Agent, the Issuing Bank, and Lenders hereby agree that all Existing Letters of Credit shall be deemed to be issued under this Agreement as of the Effective Date and shall constitute Letters of Credit hereunder for all purposes (except that no Issuing Bank’s standard issuance fee shall be payable on such deemed issuance).  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 applicable Issuing Bank, at any time and from time to time during the Availability Period.  In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement, the terms and conditions of this Agreement shall control.

 

(b)                                 Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or facsimile (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent (not less than three (3) Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice:

 

(i)                                     requesting the issuance of a Letter of Credit or identifying the Letter of Credit to be amended, renewed or extended;

 

(ii)                                  specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day);

 

(iii)                               specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.09(c));

 

(iv)                              specifying the amount of such Letter of Credit;

 

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(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 current total Credit Exposures (without regard to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma total Credit Exposures (giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit).

 

Each notice shall constitute a representation that after giving effect to the requested issuance, amendment, renewal or extension, as applicable, (A) the LC Exposure shall not exceed the LC Commitment and (B) the total Credit Exposures shall not exceed the total Commitments.

 

If requested by an Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit.

 

(c)                                  Expiration Date.  Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one (1) year after the date of the issuance of such Letter of Credit, provided that such Letter of Credit may provide for automatic extensions of such expiration date (such Letter of Credit, an “Auto-Extension Letter of Credit”) for additional periods of 365 days thereafter, and (ii) the date that is five (5) Business Days prior to the Maturity Date.  The Borrower shall be required to make a specific request to the applicable Issuing Bank for any extension of an Auto-Extension Letter of Credit.  Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable Issuing Bank to permit the extension of such Letter of Credit at any time to an expiry date not later than five (5) Business Days prior to the Maturity Date; provided, however, that such Issuing Bank shall not permit any such extension if (A) such Issuing Bank has determined that it would not be permitted at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof, or (B) it has received notice (which may be by telephone or in writing) from the Administrative Agent, on or before the day that is five (5) Business Days before the last day in which notice of non-extension for such Letter of Credit may be given, that one or more of the applicable conditions specified in Section 6.02 is not then satisfied, and directing such Issuing Bank not to permit such extension.

 

(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 any Issuing Bank or the Lenders, the applicable Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit.  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 applicable Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.09(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

 

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pursuant to this Section 2.09(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

 

(e)                                  Reimbursement.  If any Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, Eastern 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., Eastern time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, Eastern time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., Eastern 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 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 (or, if such LC Disbursement is less than $1,000,000, a Swingline Loan) 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 (or Swingline Loan).  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(a) with respect to Loans made by such Lender (and Section 2.05(a) shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to such 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 2.09(e), the Administrative Agent shall distribute such payment to such Issuing Bank or, to the extent that Lenders have made payments pursuant to this Section 2.09(e) to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear.  Any payment made by a Lender pursuant to this Section 2.09(e) to reimburse such Issuing Bank for any LC Disbursement (other than the funding of ABR Loans or a Swingline Loan 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 2.09(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 any Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not substantially comply with the terms of such Letter of Credit or

 

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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 2.09(f), constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder, absent such Issuing Bank’s gross negligence or willful misconduct.  Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of any Issuing Bank; provided that the foregoing shall not be construed to excuse such 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 such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of any Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised all requisite care in each such determination.  In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, such 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 applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit.  Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by facsimile) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.

 

(h)                                 Interim Interest.  If any Issuing Bank shall make any LC Disbursement, then, until the Borrower shall have reimbursed such Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing under Section 2.09(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 2.09(h) shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to Section 2.09(e) to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment.

 

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(i)                                     Replacement of an Issuing Bank.  Any 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 replaced 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 an Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor and any other existing Issuing Banks or to any previous Issuing Bank, or to such successor and all other existing Issuing Banks and previous Issuing Banks, as the context shall require.  After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

 

(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 2.09(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, in the case of an Event of Default, the LC Exposure, and 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 Borrower or any Restricted Subsidiary described in Section 10.01(i) or Section 10.01(j).  The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Banks 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 2.09(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 Borrower or any of its Subsidiaries may now or hereafter have against any such beneficiary, any Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever.  Such deposit shall be held as collateral securing the payment and performance of the Borrower’s and the Guarantor’s obligations under this Agreement and the other Loan Documents.  The Administrative Agent shall have exclusive dominion and control, including the

 

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exclusive right of withdrawal, over such account.  Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest.  Interest or profits, if any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Banks for LC Disbursements for which they have not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time, and if such moneys shall exceed the LC Exposure at any time, such excess shall be reimbursed to the Borrower.  If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, 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 (3) Business Days after all Events of Default have been cured or waived.

 

ARTICLE III
 PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

Section 3.01                            Repayment of Loans.  The Borrower hereby unconditionally promises to pay (a) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan (other than the Swingline Loans) on the Termination Date and (b) to the Swingline Lender or the Administrative Agent for the account of each Lender, as applicable, the outstanding aggregate principal and accrued and unpaid interest under each Swingline Loan no later than the earlier to occur of (i) the tenth (10th) day following such Swingline Loan Borrowing and (ii) the Termination Date; provided, that on each date that a Borrowing (other than a Swingline Loan) is made, the Borrower shall repay all Swingline Loans then outstanding.

 

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)                                  Swingline Loans.  Each Swingline Loan shall bear interest at the LIBOR Reference Rate plus the Applicable Margin for a Eurodollar Borrowing, but in no event to exceed the Highest Lawful Rate.

 

(d)                                 Post-Default Rate.  Notwithstanding the foregoing, if an Event of Default has occurred and is continuing, then, upon request of Majority Lenders, all Loans outstanding and any fees or amounts payable by the Borrower or any Restricted Subsidiary hereunder or under any other Loan Document,  shall bear interest from the date of such Event of Default at the rate then applicable to such Loans or such fees or amounts, plus the Applicable Margin, if any, plus an additional two percent (2%), but in no event to exceed the Highest Lawful Rate.

 

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(e)                                  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(d) 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.

 

(f)                                    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 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.  If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

 

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

 

(b)                                 the Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or facsimile 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, (i) 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) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

Section 3.04                            Prepayments.

 

(a)                                  Optional Prepayments.  The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with Section 3.04(b).

 

(b)                                 Notice and Terms of Optional Prepayment.  The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by facsimile or other electronic transmission) of any

 

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prepayment hereunder not later than 12:00 noon, Eastern 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 notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07(a), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07(a).  Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02.  Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02.

 

(c)                                  Mandatory Prepayments.

 

(i)                                     If, after giving effect to any termination or reduction of the total Commitments pursuant to Section 2.07(a), the total Credit Exposures exceeds the total Commitments, then the Borrower shall make a prepayment in accordance with Section 3.04(c)(v) on the date of such termination or reduction in an aggregate principal amount equal to such excess.

 

(ii)                                  If a Borrowing Base Deficiency results from or exists immediately after any adjustment of the Borrowing Base due to a Scheduled Upstream Component Redetermination or Interim Upstream Component Redetermination of the Upstream Component or Scheduled Midstream Component Recalculation of the Midstream Component, then within thirty (30)  days of the effective date of such new Borrowing Base, the Borrower shall elect (A) to prepay the Loans in an aggregate principal amount equal to such Deficiency Amount or (B) to pay such Deficiency Amount in six (6) equal installments, the first such installment being due and payable by the first Business Day after such election has been made and the remaining installments due monthly thereafter until such Deficiency Amount is paid in full; provided, that all payments under this Section 3.04(c)(ii) must be made prior to the Maturity Date.

 

(iii)                               If a Borrowing Base Deficiency results from or exists immediately after any adjustment to the Borrowing Base other than pursuant to any Scheduled Upstream Component Redetermination or Interim Upstream Component Redetermination of the Upstream Component or Scheduled Midstream Component Recalculation of the Midstream Component, then the Borrower shall make a prepayment on the date of such adjustment in an aggregate amount equal to such Deficiency Amount.

 

(iv)                              Each payment made pursuant to this Section 3.04(c) shall be used to prepay the Borrowings, and if any Borrowing Base Deficiency remains after prepaying all of the Borrowings as a result of an LC Exposure, such excess shall be paid to the Administrative Agent on behalf of the Lenders to be held as cash collateral as provided in Section 2.09(j).  Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first, to any Swingline Loans then outstanding, second, ratably to any ABR Borrowings then outstanding, and, third, to any Eurodollar Borrowings then outstanding,

 

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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.  Prepayments permitted or required under this Section 3.04 shall be without premium or penalty, except as required under Section 5.02.

 

Section 3.05                            Fees.

 

(a)                                  Commitment Fees.  The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Defaulting 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 (notwithstanding such Lender’s Applicable Percentage of the Borrowing Base) during the period from and including the date of this Agreement to but excluding the Termination Date; provided that for purposes of calculating commitment fees pursuant to this Section 3.05(a), Swingline Loans shall not be deemed to be a utilization of Commitments.  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 year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

(b)                                 Letter of Credit Fees.  The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender (other than a Defaulting Lender except as provided in Section 4.05(a)(iii)(B)) 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 applicable Issuing Bank 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, and (iii) to the applicable Issuing Bank, for its own account, its standard fees with respect to the 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

 

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year shall be payable on the third (3rd) 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 any Issuing Bank pursuant to this Section 3.05(b) shall be payable within ten (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.

 

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

 

Section 4.01                            Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

 

(a)                                  Payments by the Borrower.  The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon, Eastern 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.  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 any 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.

 

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(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 or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements or Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swingline Loans; 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 and Swingline Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall apply).  The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

 

Section 4.02                            Presumption of Payment by the Borrower.  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or any 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 applicable 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 applicable 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 such 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 2.06(b), Section 2.09(d), Section 2.09(e) or Section 4.02 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.

 

Section 4.04                            Disposition of Proceeds.  The Security Instruments contain an assignment by the Borrower and/or the Guarantors unto and in favor of the Administrative Agent for the

 

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

 

Section 4.05                            Defaulting Lenders.

 

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

 

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

 

(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 or Swingline Lender hereunder; third, to cash collateralize the Fronting Exposure of any Issuing Bank and Swingline Lender with respect to such Defaulting Lender; 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 Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued and Swingline Loans made under this Agreement; sixth, to the payment of any amounts owing to the Lenders, the Issuing Banks or Swingline Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Issuing Banks or Swingline Lenders against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment

 

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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 and Swingline Loans are held by the Lenders pro rata in accordance with the Commitments under the applicable Facility without giving effect to Section 4.05(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 4.05(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)                               Certain Fees.

 

(A)                              No Defaulting Lender shall be entitled to receive any Commitment Fee 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)

 

(B)                                Each Defaulting Lender shall be entitled to receive fees with respect to its participations in Letters of Credit for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Applicable Percentage of the stated amount of Letters of Credit for which such Defaulting Lender has provided cash collateral pursuant to Section 2.09(j).

 

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

 

(iv)                              Reallocation of Participations to Reduce Fronting Exposure.  All or any part of such Defaulting Lender’s participation in any outstanding Letters of Credit and Swingline Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to

 

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such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 6.02 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Loan Limit.  No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

(v)                                 Cash Collateral, Repayment of Swingline Loans.  If the reallocation described in clause (iv) 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, (x) first, prepay Swingline Loans in an amount equal to the Swingline Lenders’ Fronting Exposure and (y) second, cash collateralize the Issuing Banks’ Fronting Exposure in accordance with the procedures set forth in Section 2.09(j).

 

(b)                                 Defaulting Lender Cure.  If the Borrower, the Administrative Agent and each Swingline Lender and 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 and Swingline Loans to be held pro rata by the Lenders in accordance with the Commitments under the applicable Facility (without giving effect to Section 4.05(a)(iv), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

(c)                                  New Swingline Loans/Letters of Credit.  So long as any Lender is a Defaulting Lender, (i) the Swingline Lender shall not be required to fund any Swingline Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swingline Loan and (ii) 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.

 

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:

 

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(i)                                     impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge 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);

 

(ii)                                  impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender; OR

 

(iii)                               subject any Lender to any Taxes with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Rate Loan made by it (other than (A) Indemnified Taxes covered by Section 5.03 and (B) Excluded Taxes);

 

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 (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered; provided that the Borrower shall have no obligation to pay any such costs incurred or suffered more than six (6) months prior to the demand therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof.

 

(b)                                 Capital Requirements.  If any Lender or any Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such 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 such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered; provided that the Borrower shall have no obligation to pay any such costs incurred or suffered more than six (6) months prior to the demand therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof.

 

(c)                                  Certificates.  A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such 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 such Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

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(d)                                 Effect of Failure or Delay in Requesting Compensation.  Except as provided above, failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation.

 

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 include an amount determined by such Lender 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.

 

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 ten (10) days after receipt thereof.

 

Section 5.03                            Taxes.

 

(a)                                  Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower or any Guarantor under any Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the Borrower or any Guarantor shall be required by applicable law to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased 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 Borrower or such Guarantor shall make such deductions and (iii) the Borrower or such Guarantor 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.

 

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(c)                                  Indemnification by the Borrower.  The Borrower shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such 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 an 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. The Borrower shall also indemnify the Administrative Agent, within ten (10) days after demand therefor, for any amount which a Lender or the Issuing Bank for any reason fails to pay indefeasibly to the Administrative Agent as required by paragraph (g) below; provided that (i) the Borrower shall not be required to indemnify the Administrative Agent pursuant to this sentence to the extent that any such amount paid or payable as required by such paragraph (g) is a direct result of the Administrative Agent’s gross negligence or willful misconduct, and (ii) such Lender or Issuing Bank, as the case may be, shall indemnify the Borrower to the extent of any such payment the Borrower makes to the Administrative Agent pursuant to this sentence.

 

(d)                                 Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(e)                                  Status of Lenders; Tax Documentation.  (i)  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, in the event that the Borrower is a resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

 

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(A)      duly completed copies of IRS Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party;

 

(B)        duly completed copies of IRS Form W-8ECI;

 

(C)        in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of IRS Form W-8BEN; or

 

(D)       any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

 

(ii)                                  Any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent executed originals of Internal Revenue Service Form W-9 or such other documentation or information prescribed by applicable Laws or reasonably requested by the Borrower or the Administrative Agent certifying, to the extent such Lender is legally entitled to do so, that such Lender is not subject to backup withholding tax requirements.

 

(iii)                               If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (iii), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(f)                                    Tax Refunds.  If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 5.03, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 5.03 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay

 

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the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this paragraph (f), in no event will the Administrative Agent or any Lender be required to pay any amount to an indemnifying party pursuant to this paragraph (f) the payment of which would place the Administrative Agent or Lender in a less favorable net after-Tax position than the Administrative Agent or Lender would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This Section 5.03 shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person.

 

(g)                                 Indemnification of the Administrative Agent.  Each Lender shall indemnify the Administrative Agent within ten (10) days after demand therefor, for the full amount of any Excluded Taxes attributable to such Lender that are payable or paid by the Administrative Agent, and reasonable expenses arising therefrom or with respect thereto, whether or not such Excluded 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, as the case may be, under any Loan Document against any amount due to the Administrative Agent under this paragraph (g). The agreements of this paragraph (g) shall survive the resignation and/or replacement of the Administrative Agent.

 

(h)                                 Survival.  Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower, each Lender and the Issuing Bank contained in this Section shall survive the payment in full of the Obligations and the termination of the Commitments until the expiration of the applicable statute of limitations.

 

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, (iv) any Lender declines to make a Eurodollar Loan under

 

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Section 5.05, or (v) any Lender becomes a Non-Consenting Lender, 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 (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, and (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, 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).

 

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.  The obligations of the Lenders to make Loans and of any Issuing Bank to issue Letters of Credit hereunder shall not become effective until the Business Day on which each of the following conditions is satisfied (or waived in accordance with Section 12.02):

 

(a)                                  The Administrative Agent, the Arranger and the Lenders shall have received all commitment, 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 (including, without limitation, the costs and expenses for recordation of certain Security Instruments and the fees and expenses of legal counsel pursuant to Section 12.03(a)).

 

(b)                                 The Administrative Agent shall have received a certificate of the Secretary or an Assistant Secretary of each Loan Party setting forth (i) resolutions of its board of directors (or its equivalent) with respect to the authorization of such Loan Party 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 such Loan Party (A) who are authorized to sign the Loan

 

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Documents to which such Loan Party is a party and (B) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the Transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the Organization Documents of such Loan Party, certified as being true and complete.  The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from such Loan Party 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 each Loan Party.

 

(d)                                 The Administrative Agent shall have received a compliance certificate substantially in the form of Exhibit D-1, duly and properly executed by a Financial Officer and dated as of the Effective Date.

 

(e)                                  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.

 

(f)                                    The Administrative Agent shall have received duly executed Notes payable to the order of each Lender that has requested a Note in a principal amount equal to its Commitment dated as of the date hereof.

 

(g)                                 The Administrative Agent shall have received from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Security Instruments.  In connection with the execution and delivery of the Security Instruments, the Administrative Agent shall:

 

(i)                                     be reasonably satisfied that the Security Instruments including amendments to the Security Instruments securing the Existing Credit Agreement create first priority, perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d) and (f) of the definition thereof, but subject to the provisos at the end of such definition) on (A) at least 80% of the total value of the Upstream Component Properties as reflected in the Initial Reserve Report, and (B) all of the other material tangible and intangible Property of the Loan Parties (other than any Property for which the Administrative Agent determines, in its sole discretion, that the cost of obtaining a Lien on such Property is excessive in relation to the value afforded thereby); and

 

(ii)                                  to the extent certificated, have received certificates, together with undated, blank stock powers for each such certificate, representing any Equity Interests of any of the Guarantors.

 

(h)                                 The Administrative Agent shall have received an opinion of (i) Thompson & Knight LLP, special counsel to the Borrower and the other Loan Parties, and (ii) local counsel in any jurisdictions in which any Security Instruments are to be recorded as reasonably requested

 

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by the Administrative Agent, in each case, in form and substance satisfactory to the Administrative Agent.

 

(i)                                     The Administrative Agent shall have received certificates of insurance coverage of the Borrower evidencing that the Borrower is carrying insurance in accordance with Section 7.12.

 

(j)                                     The Administrative Agent shall have received the Financial Statements referred to in Section 7.04(a) and the Initial Reserve Report accompanied by a certificate covering the matters described in Section 8.12(c).

 

(k)                                  The Administrative Agent shall have received three-year financial projections for the Borrower and its Subsidiaries.

 

(l)                                     The Administrative Agent shall have received appropriate UCC search certificates reflecting no prior Liens encumbering the Properties of the Borrower and the Guarantors for each of the following jurisdictions:  Delaware, Texas, and any other jurisdiction requested by the Administrative Agent, other than those securing the Existing Credit Agreement on or prior to the Effective Date or Liens permitted by Section 9.03.

 

(m)                               The Administrative Agent shall have received a solvency certificate from a Financial Officer, in form and substance satisfactory to the Administrative Agent and the Lenders, certifying that after giving effect to the Transactions on the Effective Date, each of (i) the Loan Parties on an individual basis, and (ii) the Loan Parties taken as a whole, is Solvent.

 

(n)                                 Each document (including any Uniform Commercial Code financing statement) required by this Agreement or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than Excepted Liens), shall be in proper form for filing, registration or recordation.

 

(o)                                 Concurrently with the initial Loans hereunder, the Refinancing shall have occurred.

 

(p)                                 The Borrower shall have issued at least $250,000,000 of senior notes satisfying the requirement of Section 9.02(h) on or prior to the Effective Date.

 

(q)                                 No event, development or circumstance has occurred or exists that has resulted in, or could reasonably be expected to have a Material Adverse Effect since December 31, 2010.

 

(r)                                    The Credit Parties shall have provided the documentation and other information reasonably requested by the Administrative Agent that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act.

 

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(s)                                  The Borrower shall have received all necessary governmental and third-party consents and such consents shall be in full force and effect.

 

The Administrative Agent shall notify 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), and of any Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

 

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

 

(b)                                 The representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, such representations and warranties shall continue to be true and correct in all material respects as of such specified earlier date.

 

(c)                                  The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03, a request for a Letter of Credit and related Letter of Credit Agreement in accordance with Section 2.09(b), or a request for a Swingline Loan pursuant to Section 2.04(b) as applicable.

 

Each request for a Borrowing and each request for the issuance, amendment, renewal or extension of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in Section 6.02(a) through (c).

 

ARTICLE VII
 REPRESENTATIONS AND WARRANTIES

 

The Borrower (on behalf of itself and its Restricted Subsidiaries), and each Guarantor by its execution of a Guaranty and Collateral Agreement, represents and warrants to the Administrative Agent, the Issuing Banks and the Lenders that:

 

Section 7.01                            Organization; Powers.  Each of the Borrower and the Restricted Subsidiaries is a legal entity 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, authorizations, consents, approvals and qualifications could not reasonably be expected to have a Material Adverse Effect.

 

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Section 7.02                            Authority; Enforceability.  The Transactions are within each Loan Party’s corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action (including, without limitation, any action required to be taken by any class of directors 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 a Loan Party is a party has been duly executed and delivered by such Loan Party and constitutes a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

Section 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, whether interested or disinterested, of 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 contemplated thereby, except such as have been obtained or made and are in full force and effect other than (i) the recording and filing of the Security Instruments as required by this Agreement and (ii) those third party approvals or consents which, if not made or obtained, would not cause a Default hereunder, could not reasonably be expected to have a Material Adverse Effect or do not have an adverse effect on the enforceability of the Loan Documents, (b) will not violate any applicable law or regulation or any Organization Document of the Borrower or any Restricted Subsidiary or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any Restricted Subsidiary or its Properties, or give rise to a right thereunder to require any payment to be made by the Borrower or such Restricted Subsidiary and (d) will not result in the creation or imposition of any Lien on any Property of the Borrower 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 to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) contained in its Form 10-K as of and for the fiscal year ended 2010 filed with the SEC, with a report by Deloitte & Touche LLP, independent public accountants, and (ii) as contained in its Form 10-Q as of and for each fiscal quarter and the portion of such fiscal year ended March 31, 2011 filed with the SEC.  Such Financial Statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the unaudited quarterly Financial Statements.

 

(b)                                 Since December 31, 2010, (i) there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect and (ii) the business of the Borrower and its Restricted Subsidiaries has been conducted only in the ordinary course consistent with past business practices.

 

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(c)                                  Neither the Borrower nor any Restricted Subsidiary has on the date hereof any material Indebtedness (including Disqualified Capital Stock) or any contingent liabilities, off-balance sheet liabilities or partnerships, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in the Financial Statements.

 

(d)                                 The projections regarding the financial performance of the Borrower and its Consolidated Subsidiaries furnished to the Lenders have been prepared in good faith by the Borrower and based upon assumptions believed by the Borrower to be reasonable at the time such projections were provided (and on the Effective Date in the case of forecasts provided prior to the Effective Date) (it being recognized by the Lenders, however, that projections as to future events are not to be viewed as facts and that actual 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 Loan Parties make no representation that such projections will be realized).

 

Section 7.05                            Litigation.

 

(a)                                  Except as set forth on Schedule 7.05, there are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Restricted Subsidiary or any of their Properties (i) as to which there is a reasonable possibility of an adverse determination that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, or (ii) that involve any Loan Document or the Transactions.

 

(b)                                 Since the date of this Agreement, there has been no change in the status of the matters disclosed in Schedule 7.05 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

 

Section 7.06                            Environmental Matters.  Except for such matters as set forth on Schedule 7.06 or that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

 

(a)                                  the Borrower and the Restricted Subsidiaries and each of their respective Properties and operations thereon are, and within all applicable statute of limitation periods have been, in compliance with all applicable Environmental Laws;

 

(b)                                 the Borrower and the Restricted Subsidiaries have obtained all Environmental Permits required for their respective operations and each of their Properties, with all such Environmental Permits being currently in full force and effect, and none of Borrower or the Restricted Subsidiaries has received any written notice or otherwise has knowledge that any such existing Environmental Permit will be revoked or that any application for any new Environmental Permit or renewal of any existing Environmental Permit will be protested or denied;

 

(c)                                  there are no claims, demands, suits, orders, inquiries, investigations, requests for information or proceedings concerning any violation of, or any liability (including as a potentially responsible party) under, any applicable Environmental Law that is pending or, to

 

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the Borrower’s knowledge, threatened against the Borrower 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 Borrower or any Restricted Subsidiary contain or have contained any:  (i) underground storage tanks; (ii) asbestos-containing materials; (iii) landfills or dumps; (iv) hazardous waste management units as defined pursuant to RCRA or any comparable state law; or (v) sites on or nominated for the National Priority List promulgated pursuant to CERCLA or any state remedial priority list promulgated or published pursuant to any comparable state law;

 

(e)                                  there has been no Release or, to the Borrower’s knowledge, threatened Release, of Hazardous Materials at, on, under or from the Borrower’s or any Restricted Subsidiary’s Properties, there are no investigations, remediations, abatements, removals, or monitorings of Hazardous Materials required under applicable Environmental Laws at such Properties and, to the knowledge of the Borrower, none of such Properties are adversely affected by any Release or threatened Release of a Hazardous Material originating or emanating from any other real property;

 

(f)                                    neither the Borrower 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 Borrower’s or any Restricted Subsidiary’s Properties and, to the Borrower’s knowledge, there are no conditions or circumstances that would reasonably be expected to result in the receipt of such written notice;

 

(g)                                 there has been no exposure of any Person or property to any Hazardous Materials as a result of or in connection with the operations and businesses of any of the Borrower’s or the Restricted Subsidiaries’ Properties that would reasonably be expected to form the basis for a claim for damages or compensation and, to the Borrower’s knowledge, there are no conditions or circumstances that would reasonably be expected to result in the receipt of notice regarding such exposure;

 

(h)                                 the Borrower and the Restricted Subsidiaries have provided to the Lenders complete and correct copies of all environmental site assessment reports, investigations, studies, analyses, and correspondence on environmental matters (including matters relating to any alleged non-compliance with or liability under Environmental Laws) that are in any of the Borrower’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.

 

(a)                                  Each of the Borrower and each Restricted Subsidiary 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

 

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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)                                 Neither the Borrower nor any Restricted Subsidiary is in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default or would require the Borrower or a Restricted Subsidiary to Redeem or make any offer to Redeem under any indenture, note, credit agreement or instrument pursuant to which any Material Indebtedness is outstanding or by which the Borrower or any Restricted Subsidiary or any of their Properties is bound.

 

(c)                                  No Default has occurred and is continuing.

 

Section 7.08                            Investment Company Act.  Neither the Borrower 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.

 

Section 7.09                            Taxes.  Each of the Borrower and its Restricted Subsidiaries has timely filed or caused to be filed all 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 Borrower or such Restricted Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.  Such returns accurately reflect in all material respects all liability for taxes of the Borrower and its Restricted Subsidiaries thereof for the periods covered thereby.  No Governmental Authority has asserted any Lien or other claim against the Borrower or its Restricted Subsidiaries with respect to unpaid taxes which has not been discharged or resolved, except (x) any amount the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided for on the books of the relevant Loan Party and (y) Permitted Liens.

 

Section 7.10                            ERISA.

 

(a)                                  The Borrower, the Restricted Subsidiaries and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan.

 

(b)                                 Each Plan is, and has been, maintained in substantial compliance with ERISA and, where applicable, the Code.

 

(c)                                  No Plan or any trust created under any such Plan has been terminated.  No liability to the PBGC (other than for the payment of current premiums which are not past due) by the Borrower, any Restricted Subsidiary or any ERISA Affiliate has been or is expected by the Borrower, any Restricted Subsidiary or any ERISA Affiliate to be incurred with respect to any Plan.  No ERISA Event with respect to any Plan has occurred.

 

(d)                                 Full payment when due has been made of all amounts which the Borrower, the Restricted Subsidiaries or any ERISA Affiliate is required under the terms of each

 

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Plan or applicable law to have paid as contributions to such Plan as of the date hereof, and no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan.

 

(e)                                  The actuarial present value of the benefit liabilities under each Plan does not, as of the end of the Borrower’s most recently ended fiscal year, exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities.  The term “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA.

 

(f)                                    Neither the Borrower, the Restricted Subsidiaries nor any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the six-year period preceding the date hereof sponsored, maintained or contributed to, any Multiemployer Plan.

 

(g)                                 Neither the Borrower, the Restricted Subsidiaries nor any ERISA Affiliate is required to provide security under section 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the Plan.

 

Section 7.11                            Disclosure; No Material Misstatements.  The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Restricted Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower or any Restricted Subsidiary to the Administrative Agent or any Lender or any of their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.  There is no fact peculiar to the Borrower or any Restricted Subsidiary which could reasonably be expected to have a Material Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which has not been set forth in this Agreement or the Loan Documents or the other documents, certificates and statements furnished to the Administrative Agent or the Lenders by or on behalf of the Borrower or any Restricted Subsidiary prior to, or on, the date hereof in connection with the transactions contemplated hereby.  There are no statements or conclusions in any Reserve Report which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that projections concerning volumes attributable to the Upstream Component Properties and related production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and that the Borrower and the Restricted Subsidiaries do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

 

Section 7.12                            Insurance.  The Borrower has, and has caused all of its Restricted Subsidiaries to have, (a) all insurance policies sufficient for the compliance by each of them with

 

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all material Governmental Requirements and all material agreements and (b) insurance coverage in at least amounts and against such risk (including, without limitation, public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Borrower and its Restricted Subsidiaries.  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.  No mortgaged building, plant, terminal or other surface property is located in a special flood hazard area as designated by any Governmental Authority, except to the extent flood insurance is in force with respect to such portion.

 

Section 7.13                            Restriction on Liens.  Neither the Borrower nor any of the Restricted Subsidiaries is a party to any material agreement or arrangement (other than (a) Capital Leases creating Liens and Purchase Money Indebtedness permitted by Section 9.03(c), but then only on the Property subject of such Capital Lease or Purchase Money Indebtedness, (b) customary provisions restricting subletting or assignment of leases or rights thereunder, (c) restrictions with respect to Property securing Indebtedness permitted under Section 9.02 pursuant to Liens permitted under Section 9.03, and (d) temporary restrictions with respect to an Asset Sale otherwise permitted hereunder pending the consummation of such sale), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Administrative Agent and the Lenders on or in respect of their Properties to secure the Secured Obligations and the Loan Documents.

 

Section 7.14                            Subsidiaries.  As of the date of this Agreement, except as set forth on Schedule 7.14, the Borrower has no Subsidiaries and the Borrower has no Foreign Subsidiaries.  Schedule 7.14 (a) identifies each Subsidiary as either Restricted or Unrestricted and (b) with respect to each Restricted Subsidiary, states the jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office, and each Restricted Subsidiary on such Schedule 7.14 is a Wholly-Owned Subsidiary.

 

Section 7.15                            Location of Business and Offices.  The Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in the public records of its jurisdiction of organization is Eagle Rock Energy Partners L.P., and the organizational identification number of the Borrower in its jurisdiction of organization is 4164963 (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)).  .

 

Section 7.16                            Properties; Titles, Etc.

 

(a)                                  Each of the Borrower and the Restricted Subsidiaries has (i) good and defensible title to, valid leasehold interests in, or valid easements or other property interests in all of its Upstream Properties, Midstream Properties and other real Property and (ii) good and valid title to all of its personal Property, in the case of each of (i) and (ii), free and clear of all Liens except Liens permitted by Section 9.03.

 

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(b)                                 After giving full effect to the Excepted Liens, the Borrower or the Restricted Subsidiary specified as the owner of the Upstream Component Properties owns the net interests in Hydrocarbon production attributable to the Upstream Component Properties as reflected in the most recently delivered Reserve Report, and the ownership of such Upstream Component Properties shall not in any material respect obligate the Borrower or such Restricted Subsidiary to bear the costs and expenses relating to the maintenance, development and operations of each such Upstream Component Property in an amount in excess of the working interest of each Upstream Component Property set forth in the most recently delivered Reserve Report that is not offset by a corresponding proportionate increase in the Borrower’s or such Restricted Subsidiary’s net revenue interest in such Upstream Component Property.

 

(c)                                  The Borrower and its Restricted Subsidiaries own the Midstream Properties that generated the Midstream EBITDA used in the most recent calculation of the Midstream Component as may be adjusted pursuant to Section 2.08(b)(iii), except for Midstream Properties Disposed of since the most recent calculation of the Midstream Component that do not meet the thresholds provided by Section 2.08(b)(iii) with respect to the Disposition of such Midstream Properties.

 

(d)                                 All leases and agreements necessary for the conduct of the business of the Borrower and the 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.

 

(e)                                  The rights and Properties presently owned, leased or licensed by the Borrower and the Restricted Subsidiaries including, without limitation, all easements and rights of way, include all rights and Properties necessary to permit the Borrower and the Restricted Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the date hereof, except where the failure to so own, lease or license such rights or Properties could not reasonably be expected to have a Material Adverse Effect.

 

(f)                                    All of the Properties of the Borrower and the 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 except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

(g)                                 The Borrower and each Restricted Subsidiary owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual Property material to its business, and the use thereof by the Borrower 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.  The Borrower and its Restricted Subsidiaries either own or have valid licenses or other rights to use all databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in the business of the exploration and

 

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production of Hydrocarbons, with such exceptions as could not reasonably be expected to have 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 offices, plants, wells, gas processing plants, platforms, improvements, fixtures, equipment, and other Property (other than Upstream Properties) owned, leased or used by the Borrower and its Restricted Subsidiaries in the conduct of their businesses are (i) structurally sound with no known defects, and (ii) sufficient for the operation of the businesses of the Borrower and its Restricted Subsidiaries as currently conducted.

 

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 Borrower or any of its Restricted Subsidiaries to deliver Hydrocarbons produced from the Upstream Component Properties of the Borrower or any Restricted Subsidiary at some future time without then or thereafter receiving full payment therefor exceeding one bcf of gas (on an mcf equivalent basis) in the aggregate.

 

Section 7.19                            Marketing of Production.  Except for Hedging Agreements permitted by Section 9.19, contracts listed and in effect on the date hereof on Schedule 7.19, and thereafter either disclosed in writing to the Administrative Agent or included in the most recently delivered Reserve Report (with respect to all of which contracts the Borrower represents that it or its Restricted Subsidiaries are receiving a price for all Hydrocarbon production attributable to the Upstream Component Properties sold thereunder which is computed substantially in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject Property’s delivery capacity), no material agreements exist which are not cancelable on sixty (60) days notice or less without penalty or detriment for the sale of Hydrocarbon production attributable to the Upstream Component Properties (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 such production at a fixed price and (b) have a maturity or expiry date of longer than six (6) months from the date hereof.

 

Section 7.20                            Security Instruments.

 

(a)                                  Guaranty and Collateral Agreement.  The provisions of the Guaranty and Collateral Agreement are effective to create, in favor of the Administrative Agent for the benefit of the Secured Parties, a legal, valid and enforceable Lien on, and security interest in, all of the Collateral described thereon, and (i) when financing statements and other filings in appropriate form are filed in the offices specified in the Guaranty and Collateral Agreement and (ii) upon the taking of possession or control by the Administrative Agent of the Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Administrative Agent to the extent possession or control by the Administrative Agent is required by the Guaranty and Collateral Agreement), the Liens created by the Guaranty and Collateral Agreement shall constitute fully perfected first priority Liens on, and security interests in, all right, title and interest of the Loan Parties in the Collateral covered thereby (other than such Collateral in which a security interest cannot be perfected by filing,

 

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possession or control under the Uniform Commercial Code as in effect at the relevant time in the relevant jurisdiction), in each case free of all Liens other than Excepted Liens, and prior and superior to all other Liens other than Excepted Liens.

 

(b)                                 Mortgages.  Each Mortgage is effective to create, in favor of the Administrative Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, all of the Mortgaged Property thereunder and the proceeds thereof, subject only to Excepted Liens, and when the Mortgages are filed in the offices specified on Schedule 7.20 (or, in the case of any Mortgage executed and delivered after the date thereof in accordance with the provisions of Section 8.11 and Section 8.14, when such Mortgage is filed in the appropriate offices), the Mortgages shall constitute fully perfected first priority Liens on, and security interests in, all right, title and interest of the Loan Parties in the Mortgaged Property and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens permitted by such Mortgage.

 

(c)                                  Valid Liens.  Each Security Instrument delivered pursuant to Section 8.11 or Section 8.14, upon execution and delivery thereof, is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, all of the Collateral thereunder, and when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable Governmental Requirements, such Security Instrument will constitute fully perfected first priority Liens on, and security interests in, all right, title and interest of the Loan Parties in such Collateral that can be perfected by such filings or recordings, in each case with no other Liens except for applicable Excepted Liens.

 

Section 7.21                            Hedging Agreements.  Schedule 7.21, 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 Hedging Agreements of the Borrower and each Restricted Subsidiary (specifying the category of each Hedging Agreement, which categories include Upstream Hedges, Midstream Hedges and Interest Rate Hedges), the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement.

 

Section 7.22                            Use of Loans and Letters of Credit.  The proceeds of the Loans and the Letters of Credit shall be used to provide working capital (a) to refinance the Existing Credit Agreement and pay fees and expenses incurred therewith, (b) for Capital Expenditures and Permitted Acquisitions, and (c) for general corporate purposes, including distributions permitted under Section 9.04(d).  The Borrower 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.  Following the application of any Loan or Letter of Credit, not more than 25% of the value of the assets of the Borrower and its Restricted Subsidiaries will be represented by or made up of margin stock.

 

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Section 7.23                            Solvency.  Each Loan Party is Solvent.  No Loan Party is planning to take any action described in Section 10.01(i) or Section 10.01(j).

 

Section 7.24                            Anti-Terrorism Laws.

 

(a)                                  The Borrower is not, and to the knowledge of the Borrower, none of the Borrower’s Affiliates, officers or directors is in violation of any Governmental Requirement relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, and the Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., in each case, as amended from time to time.

 

(b)                                 The Borrower is not, and to the knowledge of the Borrower, no Affiliate, officer, director, broker or other agent of the Borrower acting or benefiting in any capacity in connection with the Loans is any of the following:

 

(i)                                     a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

 

(ii)                                  a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

 

(iii)                               a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)                              a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

 

(v)                                 a Person that is named as a “specially designated national and blocked Person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list.

 

(c)                                  No Loan Party and, to the knowledge of the Borrower, no broker or other agent of any Loan Party acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in paragraph (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any Property or interests in Property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

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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, the Borrower (on behalf of itself and its Restricted Subsidiaries) and each Guarantor by its execution of the Guaranty and Collateral Agreement, covenants and agrees with the Lenders, the Agents and the Issuing Banks that:

 

Section 8.01                            Financial Statements; Ratings Change; Other Information.  The Borrower will furnish to the Administrative Agent and each Lender:

 

(a)                                  Annual Financial Statements.  As soon as available, but in any event in accordance with then applicable law and not later than ninety (90) days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Deloitte & Touche LLP, KPMG, LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; provided, that the timely filing with the SEC of the Borrower’s annual report on Form 10-K will satisfy the reporting requirements of this Section 8.01(a).

 

(b)                                 Quarterly Financial Statements.  As soon as available, but in any event in accordance with then applicable law and not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower 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; provided, that the timely filing with the SEC of the Borrower’s quarterly reports on Form 10-Q will satisfy the reporting requirements of this Section 8.01(b).

 

(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 Exhibit D-2 hereto (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 9.01, (iii) setting forth the calculation of Midstream EBITDA and the Midstream Component and (iv) stating whether any change in

 

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GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 7.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

 

(d)                                 Certificate of Financial Officer — Consolidating Information.  If, at any time, all of the Consolidated Subsidiaries of the Borrower 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 Borrower.

 

(e)                                  Certificate of Financial Officer — Hedging Agreements.  Concurrently with the delivery of each Reserve Report hereunder, a certificate of a Financial Officer, in form and substance satisfactory to the Administrative Agent, setting forth as of a recent date, a true and complete list of all Hedging Agreements of the Borrower and each Restricted Subsidiary (specifying the category of each Hedging Agreement, which categories include Upstream Hedges, Midstream Hedges and Interest Rate Hedges), the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark-to-market value therefor, any new credit support agreements relating thereto not listed on Schedule 7.21, any margin required or supplied under any credit support document, and the counterparty to each such agreement.

 

(f)                                    Annual Budget.  As soon as practicable and in any event no later than thirty (30) days prior to the beginning of each fiscal year, a consolidated budget for such fiscal year.

 

(g)                                 SEC and Other Filings; Reports to Shareholders.  Promptly after the same become publicly available, copies of all material reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC, or with any national or foreign securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; provided, that the timely filing with the SEC of any such materials will satisfy the reporting requirements of this Section 8.01(g).

 

(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 indenture, loan or credit or other similar agreement, 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.  Within 30 days of a written request by the Administrative Agent, a list of all Persons purchasing Hydrocarbons related to production attributable to the Upstream Component Properties from the Borrower or any Restricted Subsidiary.

 

(j)                                     Notice of Sales of Borrowing Base Properties.  In the event the Borrower or any Restricted Subsidiary intends to Dispose of any Borrowing Base Properties or any Equity Interests in any Restricted Subsidiary owning Borrowing Base Properties that would trigger a

 

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reduction of the Upstream Component under Section 2.08(a)(v) or a Midstream Component recalculation under Section 2.08(b)(iii), prior written notice of such Disposition to the Administrative Agent.

 

(k)                                  Notice of Casualty Events.  Prompt written notice, and in any event within three (3) 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, in each case, having a fair market value in excess of $25,000,000.

 

(l)                                     Permitted Refinancing Indebtedness.  In the event the Borrower intends to refinance any Indebtedness with the proceeds of Permitted Refinancing Indebtedness as contemplated by Section 9.02(b), prior written notice of such intended offering therefor, the amount thereof and the anticipated date of closing, and a copy of the preliminary offering memorandum (if any) and the final offering memorandum (if any).

 

(m)                               Information Regarding Loan Parties.  Prompt written notice (and in any event at least ten (10) days prior thereto) of any change (i) in any Loan Party’s corporate name, (ii) in the location of any Loan Party’s chief executive office, (iii) in any Loan Party’s identity or corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in any Loan Party’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in any Loan Party’s federal taxpayer identification number.

 

(n)                                 Notice of Issuance of Indebtedness.  In the event the Borrower intends to issue any Indebtedness permitted under Section 9.02(h), prior written notice of the amount and terms of such Indebtedness.

 

(o)                                 Notices of Hedging Agreement Terminations.  Promptly, but in any event within five (5) Business Days, after any Hedge Unwind, written notice of such Hedge Unwind, identifying the terminated or off-set Upstream Hedges.

 

(p)                                 Other Requested Information.  Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Restricted Subsidiary (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA), or compliance with the terms of this Agreement or any other Loan Document, as the Administrative Agent may reasonably request.

 

Section 8.02                            Notices of Material Events.  The Borrower will furnish to the Administrative Agent for further distribution to each Lender prompt written notice (and in any event within five (5) Business Days) 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 Borrower or any Affiliate thereof not previously disclosed in writing to the Lenders or any material adverse development in any action, suit, proceeding, investigation or

 

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arbitration (whether or not previously disclosed to the Lenders) that, in either case, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

 

(c)                                  the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Restricted Subsidiaries in an aggregate amount exceeding $25,000,000; and

 

(d)                                 any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

 

Each notice delivered under this Section 8.02 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

 

Section 8.03                            Existence; Conduct of Business.  The Borrower will, and will cause each Restricted Subsidiary to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, consents, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which its 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 Borrower will, and will cause each Restricted Subsidiary to, pay its obligations, including Tax liabilities of the Borrower 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, (b) the Borrower or such Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect or result in the seizure or levy of any Property of the Borrower or any Restricted Subsidiary.

 

Section 8.05                            Performance of Obligations under Loan Documents.  The Borrower will repay the Loans according to the reading, tenor and effect thereof, and the Borrower will, and will cause each 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.

 

Section 8.06                            Operation and Maintenance of Properties.  The Borrower, at its own expense, will, and will cause each Restricted Subsidiary to:

 

(a)                                  operate its Properties or cause such 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 Properties and the production and

 

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sale of Hydrocarbons and other minerals therefrom, except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect;

 

(b)                                 preserve, maintain and keep in good repair, condition, working order and efficiency (ordinary wear and tear excepted) all Property material to the conduct of its business, including, without limitation, all equipment, machinery and facilities; and

 

(c)                                  to the extent the Borrower is not the operator of any Property, the Borrower shall use commercially reasonable efforts to cause the operator to comply with this Section 8.06.

 

Section 8.07                            Insurance.  The Borrower will, and will cause each 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 (including hazard insurance and flood insurance as appropriate).  The loss payable clauses or provisions in said insurance policy or policies insuring any of the Collateral for the Loans shall be endorsed in favor of and made payable to the Administrative Agent as its interests may appear and such policies shall name the Administrative Agent as an “additional insured” and provide that the insurer will endeavor to give at least thirty (30) days’ prior notice of any cancellation to the Administrative Agent.

 

Section 8.08                            Books and Records; Inspection Rights.  The Borrower will, and will cause each Restricted Subsidiary to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.  The Borrower will, and will cause each Restricted Subsidiary to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.

 

Section 8.09                            Compliance with Laws.  The Borrower will, and will cause each 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.

 

Section 8.10                            Environmental Matters.

 

(a)                                  The Borrower shall at its sole expense:  (i) comply, and shall cause its Properties and operations and each Restricted Subsidiary and each Restricted Subsidiary’s Properties and operations to comply, with all applicable Environmental Laws, the breach of which could be reasonably expected to have a Material Adverse Effect; (ii) not dispose of or otherwise release, and shall cause each Restricted Subsidiary not to dispose of or otherwise release, any Hazardous Material on, under, about or from any of the Borrower’s or its Restricted Subsidiaries’ Properties or any other Property to the extent caused by the Borrower’s or any of its Restricted Subsidiaries’ operations except in compliance with applicable Environmental Laws, the disposal or release of which could reasonably be expected to have a Material Adverse

 

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Effect; (iii) timely obtain or file, and shall cause each Restricted Subsidiary to timely obtain or file, all notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or its Restricted Subsidiaries’ Properties, which failure to obtain or file could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion, and shall cause each 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”) in the event any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other actual or threatened release of any Hazardous Material on, under, about or from any of the Borrower’s or its Restricted Subsidiaries’ Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material Adverse Effect; and (v) establish and implement, and shall cause each Subsidiary to establish and implement, such procedures as may be necessary to continuously determine and assure that the Borrower’s and its Restricted Subsidiaries’ obligations under this Section 8.10(a) are timely and fully satisfied, which failure to establish and implement could reasonably be expected to have a Material Adverse Effect.

 

(b)                                 The Borrower will promptly, but in no event later than five (5) days of the occurrence of a triggering event, notify the Administrative Agent and the Lenders in writing of any threatened action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit by any landowner or other third party against the Borrower or its Restricted Subsidiaries or their Properties of which the Borrower has knowledge in connection with any Environmental Laws (excluding routine testing and corrective action) if the Borrower reasonably anticipates that such action will result in liability (whether individually or in the aggregate) in excess of $25,000,000, not fully covered by insurance, subject to normal deductibles.

 

(c)                                  The Borrower will, and will cause each Restricted Subsidiary to, provide environmental audits and tests in accordance with American Society of Testing Materials standards upon request by the Administrative Agent and the Lenders and no more than once per year in the absence of any Event of Default (or as otherwise required to be obtained by the Administrative Agent or the Lenders by any Governmental Authority), in connection with any future acquisitions of Upstream Properties.

 

Section 8.11                            Further Assurances.

 

(a)                                  The Borrower at its sole expense will, and will cause each 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 Borrower 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 Secured Obligations, or to correct any material omissions in 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

 

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priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary, in the sole discretion of the Administrative Agent, in connection therewith.

 

(b)                                 The Borrower hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of 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 Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

 

Section 8.12                            Reserve Reports.

 

(a)                                  On or before March 1st and September 1st of each year, commencing September 1, 2011, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report evaluating the Upstream Component Properties of the Borrower and its Restricted Subsidiaries as of the immediately preceding December 31st and June 30th.  The Reserve Report as of December 31 of each year shall be prepared by one or more Approved Petroleum Engineers, and the June 30 Reserve Report of each year shall be prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate (provided, that projections concerning volumes attributable to the Upstream Component Properties and related production and cost estimates contained in such Reserve Report are necessarily based upon professional opinions, estimates and projections and such opinions, estimates and projections may not ultimately prove accurate) and to have been prepared in accordance with the procedures used in the immediately preceding December 31 Reserve Report.

 

(b)                                 In the event of an Interim Upstream Component Redetermination, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate (provided, that projections concerning volumes attributable to the Upstream Component Properties and related production and cost estimates contained in such Reserve Report are necessarily based upon professional opinions, estimates and projections and such opinions, estimates and projections may not ultimately prove accurate) and to have been prepared in accordance with the procedures used in the immediately preceding December 31 Reserve Report.  For any Interim Upstream Component Redetermination requested by the Administrative Agent or the Borrower pursuant to Section 2.08(a)(ii), the Borrower shall provide such Reserve Report with an “as of” date as required by the Administrative Agent as soon as possible, but in any event no later than thirty (30) days following the receipt of such request.

 

(c)                                  With the delivery of each Reserve Report, the Borrower shall provide to the Administrative Agent and the Lenders a certificate from a Responsible Officer certifying that in all material respects:  (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct (provided, that projections concerning volumes attributable to the Upstream Component Properties and related production and cost estimates contained in such Reserve Report are necessarily based upon professional opinions, estimates and projections and such opinions, estimates and projections may not ultimately prove accurate), (ii) except as set forth on an exhibit to the certificate, on a net basis

 

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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 Borrowing Base Properties which would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons either generally or produced from such Oil and Gas Borrowing Base Properties at some future time without then or thereafter receiving full payment therefor, (iii) none of their Upstream Component Properties have been sold since the date of the last Upstream Component determination except as set forth on an exhibit to the certificate, which certificate shall list all of its Upstream Component Properties sold and in such detail as reasonably required by the Administrative Agent, (iv) attached to the certificate is a list of all marketing agreements entered into subsequent to the later of the date hereof or the most recently delivered Reserve Report which the Borrower could reasonably be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof, and (v) attached thereto is a schedule of the Upstream Component Properties that are Mortgaged Properties and demonstrating the percentage of the total value of the Upstream Component Properties that the value of such Mortgaged Properties represent in compliance with Section 8.14(a).

 

(d)                                 Concurrently with the delivery of the Reserve Reports in connection with Section 8.12(a) and (b), the Borrower shall furnish to the Administrative Agent and the Lenders a report setting forth, for the period since the last delivery of such information, 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) during such period 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 during such period.

 

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 Upstream Component Properties 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 Upstream Component Properties as set forth in such Reserve Report.

 

(b)                                 If the Borrower has provided title information for additional Upstream Component Properties under Section 8.13(a), the Borrower shall, within sixty (60) days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Upstream Component 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, or (ii) deliver title information for Upstream Component Properties not previously reviewed 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 value of the Upstream Component Properties as set forth in the most recent Reserve Report.

 

(c)                                  If the Borrower is unable to cure any title defect requested by the Administrative Agent or the Lenders to be cured within the 60-day period or the Borrower does

 

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not comply with the requirements to provide acceptable title information covering 80% of the value of the Upstream Component Properties as set forth in the most recent Reserve Report, such default shall not be a Default, but instead the Administrative Agent shall have the right to exercise the following remedy in its 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.  To the extent that the Administrative Agent are not satisfied with title to any Upstream Component Property after the 60-day period has elapsed, such unacceptable Mortgaged Property shall not count towards the 80% requirement, and the Administrative Agent may send a notice to the Borrower and the Lenders that the then outstanding Upstream Component shall be reduced by an amount as determined by the Administrative Agent to cause the Borrower to be in compliance with the requirement to provide acceptable title information on 80% of the value of the Upstream Component Properties as set forth in the most recent Reserve Report.  This new Upstream Component shall become effective immediately after receipt of such notice.

 

Section 8.14                            Additional Collateral; Additional Guarantors.

 

(a)                                  In connection with each Upstream Component Redetermination, the Borrower shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.12(c)(iii)) to ascertain whether the Mortgaged Properties represent at least 80% of the total value of the Upstream Component Properties as set forth in such 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 80% of such total value, then the Borrower shall, and shall cause its Restricted Subsidiaries to, grant, within thirty (30) days of delivery of the certificate required under Section 8.12(c), to the Administrative Agent as security for the Secured Obligations a first-priority Lien (provided that Excepted Liens of the type described in clauses (a) to (d) and (f) of the definition thereof may exist, but subject to the provisos at the end of such definition) on additional Upstream Component Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 80% 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 Upstream Properties and such Restricted Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).

 

(b)                                 In the event that (i) the Borrower or any Restricted Subsidiary acquires any Material Domestic Subsidiary, (ii) the Borrower determines that any Restricted Subsidiary is a Material Domestic Subsidiary or (iii) any Domestic Subsidiary incurs or guarantees any Indebtedness, the Borrower shall promptly (and in any event within thirty (30) days of such acquisition, determination, incurrence or guaranty) cause such Restricted Subsidiary to guarantee the Secured Obligations pursuant to the Guaranty and Collateral Agreement.  In connection with any guaranty, the Borrower shall, or shall cause such Domestic Subsidiary to, (A) execute and deliver a supplement to the Guaranty and Collateral Agreement executed by such Domestic Subsidiary, (B) cause the owner of the Equity Interests in such Domestic Subsidiary to pledge

 

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such Equity Interests (including, without limitation, to the extent certificated, delivery of original stock certificates evidencing the Equity Interests of such Domestic Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof) and (C) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent.

 

(c)                                  In the event that the Borrower or any Domestic Subsidiary becomes the owner of a Foreign Subsidiary, then the Borrower shall promptly, or shall cause such Domestic Subsidiary to promptly (and in any event within thirty (30) days after such acquisition or formation) (i) execute and deliver a supplement to the Guaranty and Collateral Agreement, (ii) pledge 66% of all the Equity Interests of such Foreign Subsidiary (including, without limitation, to the extent certificated, delivery of original stock certificates evidencing such Equity Interests of such Foreign Subsidiary, together with appropriate stock powers for each certificate duly executed in blank by the registered owner thereof), so long as such pledge does not result in adverse tax consequences to the Borrower or such Domestic Subsidiary, and (iii) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent.

 

(d)                                 The Borrower will at all times cause the other material tangible and intangible Property of the Borrower and each Restricted Subsidiary not covered by clauses (a) through (c) above to be subject to a Lien pursuant to the Security Instruments; provided, that in the case of a Permitted Acquisition, the Borrower and the applicable Restricted Subsidiaries shall have thirty (30) days (subject to extension in the sole discretion of the Administrative Agent) in which to satisfy this Section 8.14(d); provided further, that if the Administrative Agent determines, in its sole discretion, that the cost of obtaining a Lien on any such other material tangible or intangible Property is excessive in relation to the value afforded thereby, the Administrative Agent may waive the requirements of this Section 8.14(d) with respect to such Property.

 

(e)                                  The Liens on such Mortgaged Properties shall exclude “Buildings” (as defined in 39 C.F.R. § 339.2, as such may be amended from time to time) except with respect to material Buildings required by the Administrative Agent to be subject to a Lien, in which case, with respect to each such material Building (each a “Mortgaged Building”) which is located in a “flood hazard area,” as indicated on the Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), as such map may be revised from time to time, Borrower will, upon written notice by Administrative Agent, obtain flood insurance with respect to such Mortgaged Building under the National Flood Insurance Program (“NFIP”), if such insurance is available, in such amount as Administrative Agent may from time to time reasonably require, not to exceed, however, the maximum coverage available to Borrower under the NFIP.

 

Section 8.15                            ERISA Compliance.  The Borrower will promptly furnish and will cause the Restricted Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent (a) promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan or any trust created thereunder, (b) immediately upon becoming aware of the occurrence of any ERISA Event or of any “prohibited transaction,” as described in section 406 of ERISA or in

 

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section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by the President or the principal Financial Officer, the Restricted Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action the Borrower, the Restricted Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (c) immediately upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan.  With respect to each Plan (other than a Multiemployer Plan), the Borrower will, and will cause each Restricted Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of section 412 of the Code (determined without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.

 

Section 8.16                            Unrestricted Subsidiaries.  The Borrower:

 

(a)                                  will cause the management, business and affairs of each of the Borrower 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 its Restricted Subsidiaries to be commingled) so that each Unrestricted Subsidiary will be treated as a legal entity separate and distinct from Borrower and the Restricted Subsidiaries;

 

(b)                                 will not, and will not permit any of the Restricted Subsidiaries to, incur, assume, guarantee or be or become liable for any Indebtedness of any of the Unrestricted Subsidiaries; and

 

(c)                                  will not permit any Unrestricted Subsidiary to hold any Equity Interest in, or any Indebtedness of, the Borrower or any Restricted Subsidiary.

 

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, the Borrower (on behalf of itself and its Restricted Subsidiaries) and each Guarantor by its execution of the Guaranty and Collateral Agreement covenants and agrees with the Lenders, the Administrative Agent and the Issuing Banks that:

 

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Section 9.01                            Financial Covenants.

 

(a)                                  Interest Coverage Ratio.  The Borrower will not, as of the last day of any fiscal quarter, permit the ratio of Consolidated EBITDA for the period of four (4) fiscal quarters then ending to Consolidated Interest Expense for such period to be less than 2.50 to 1.00.

 

(b)                                 Total Leverage Ratio.  The Borrower will not, as of the last day of any fiscal quarter, permit the Total Leverage Ratio to be greater than 4.50 to 1.00.

 

(c)                                  Current Ratio.  The Borrower will not permit its ratio of consolidated current assets (including availability under this Credit Agreement up to the Loan Limit but excluding non-cash assets under ASC 815) to consolidated current liabilities (excluding non-cash obligations under ASC 815 and current maturities under this Agreement) to be less than 1.00 to 1.00.

 

(d)                                 Certain Calculations.  With respect to any period during which (i) a recalculation of Midstream EBITDA has been made pursuant to Section 2.08(b)(iii) or (ii) an asset acquisition, Permitted Acquisition, Disposition, or redesignation of a Subsidiary as either an Unrestricted Subsidiary or a Restricted Subsidiary having , in each case of this clause (ii), a fair market value in excess of $20,000,000, has occurred (each, a “Subject Transaction”), for purposes of determining compliance with the financial covenants set forth in this Section 9.01 and for purposes of determining Midstream EBITDA as used in Section 2.08(b)(ii), Consolidated EBITDA shall be calculated with respect to such period on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to a Subject Transaction, are factually supportable and are expected to have a continuing impact, in each case, determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act of 1933 and as interpreted by the staff of the SEC, which would include cost savings resulting from head count reduction, closure of facilities and similar restructuring charges, which pro forma adjustments shall be certified by the chief financial officer of the Ultimate General Partner) using historical financial statements (audited, if available) applicable to the subject of such Subject Transaction and the consolidated financial statements of the Borrower and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period (and assuming that such Indebtedness bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the weighted average of the interest rates applicable to outstanding Loans incurred during such period).

 

(e)                                  Material Projects.

 

(i)                                     With respect to any Material Project, the following adjustments (the “Material Project EBITDA Adjustments”) may be made, at the Borrower’s discretion, to Consolidated EBITDA:

 

(A)                              not more than 90 days prior to the Commercial Operation Date of such Material Project (but including the fiscal quarter in which such Commercial Operation Date occurs) and upon at least 75% completion of any Material Project supported by fee-based contracts with committed throughput

 

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volumes, a percentage (based on the then-current completion percentage of such Material Project as of the date of determination) of an amount to be approved by the Administrative Agent as the projected Consolidated EBITDA attributable to such Material Project for the first 12-month period following the scheduled Commercial Operation Date of such Material Project (such amount to be determined based upon projected revenues from customer contracts, projected revenues that are determined by the Administrative Agent, in its discretion, to otherwise be highly probable, the creditworthiness and applicable projected production of the prospective customers, capital and other costs, operating and administrative expenses, scheduled Commercial Operation Date, commodity price assumptions and other factors deemed appropriate by the Administrative Agent), may be added, at the Borrower’s option, to actual Consolidated EBITDA for the fiscal quarter in which construction or expansion of such Material Project commences and for each fiscal quarter thereafter until the Commercial Operation Date of such Material Project (including the fiscal quarter in which such Commercial Operation Date occurs, but net of any actual Consolidated EBITDA attributable to such Material Project following such Commercial Operation Date); provided that if the actual Commercial Operation Date does not occur by the scheduled Commercial Operation Date, then the foregoing amount shall be reduced for quarters ending after the scheduled Commercial Operation Date to (but excluding) the first full quarter after the actual Commercial Operation Date, by the following percentage amounts depending on the period of delay (based on the period of actual delay or then-estimated delay, whichever is longer):  (1) 60 days or less, 0%, (2) longer than 60 days, but not more than 90 days, 50%, and 3) longer than 90 days, 100%; and

 

(B)                                beginning with the first full fiscal quarter following the Commercial Operation Date of such Material Project and for the two (2) immediately succeeding fiscal quarters, an amount equal to the projected Consolidated EBITDA attributable to such Material Project for the balance of the four (4) full fiscal quarter period following such Commercial Operation Date, may be added, at the Borrower’s option, to actual Consolidated EBITDA for such fiscal quarters.

 

(ii)                                  Notwithstanding anything else contained in this Section 9.01(e):

 

(A)                              no Material Project EBITDA Adjustment shall be allowed with respect to any Material Project unless at least thirty (30) days prior to the last day of the fiscal quarter for which the Borrower desires to commence inclusion of such Material Project EBITDA Adjustment in Consolidated EBITDA with respect to a Material Project (the “Initial Quarter”), the Borrower shall have delivered to the Administrative Agent written pro forma projections of Consolidated EBITDA attributable to such Material Project and such other documentation as the Administrative Agent may reasonably request, all in form and substance satisfactory to the Administrative Agent,

 

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(B)                                no Material Project EBITDA Adjustment shall be allowed with respect to any Material Project unless prior to the last day of the Initial Quarter, the Administrative Agent shall have approved (such approval not to be unreasonably withheld) such projections and shall have received such other information and documentation as the Administrative Agent may reasonably request, all in form and substance satisfactory to the Administrative Agent,

 

(C)                                the aggregate amount of all Material Project EBITDA Adjustments with respect to a particular Material Project shall not exceed twenty percent (20%) of the capital cost of such Material Project, and

 

(D)                               the aggregate amount of all Material Project EBITDA Adjustments during any period shall be limited to ten percent (10%) of the total actual Consolidated EBITDA for such period (which total actual Consolidated EBITDA shall be determined without including any Material Project EBITDA Adjustments).

 

Section 9.02                            Indebtedness.  The Borrower will not, and will not permit any Restricted Subsidiary to, incur, create, assume or suffer to exist any Indebtedness, except:

 

(a)                                  the Secured Obligations arising under or secured by the Loan Documents or any guaranty of or suretyship arrangement for the Secured Obligations arising under the Loan Documents;

 

(b)                                 Indebtedness of the Borrower and its Restricted Subsidiaries existing on the date hereof that is set forth on Schedule 9.02, and any Permitted Refinancing Indebtedness in respect thereof;

 

(c)                                  accounts payable and accrued expenses, liabilities or other obligations to pay the deferred purchase price of Property or services, from time to time incurred in the ordinary course of business which are not greater than ninety (90) days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

 

(d)                                 Indebtedness (i) under Capital Leases and (ii) that constitutes Purchase Money Indebtedness; provided that the aggregate amount of all Indebtedness described in this Section 9.02(d) at any one time outstanding shall not exceed an amount equal to two and half percent (2.5%) of Consolidated Tangible Net Worth;

 

(e)                                  Indebtedness associated with bonds or surety obligations required by Governmental Requirements in connection with the operation of the Upstream Properties;

 

(f)                                    unsecured intercompany Indebtedness between the Borrower and any Restricted Subsidiary or between Restricted Subsidiaries to the extent permitted by Section 9.05(g); provided that such Indebtedness is not held, assigned, transferred, negotiated or pledged to any Person other than the Borrower or one of its Wholly-Owned Subsidiaries, and, provided further, that any such Indebtedness owed by a Loan Party shall be subordinated to the Secured Obligations on terms set forth in the Guaranty and Collateral Agreement;

 

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(g)                                 endorsements of negotiable instruments for collection in the ordinary course of business;

 

(h)                                 unsecured Indebtedness in respect of a private placement or public sale of unsecured senior or subordinated notes by the Borrower and unsecured guarantees of such notes by one or more of the Guarantors; provided that (i) no Event of Default has occurred and is continuing or would occur after giving effect to such incurrence, (ii) after giving effect to the incurrence of such Indebtedness on a pro forma basis, the Borrower shall be in compliance with all covenants set forth in Section 9.01 as of the date of incurrence, (iii) the latest maturity date of such Indebtedness shall not be prior to the ninety-first (91st) day after the Maturity Date and shall not have a weighted average life to maturity that is shorter than that of the existing Loans, and (iv) such Indebtedness does not have the benefit of, directly or indirectly, any covenants and related definitions that are materially more restrictive than those set forth herein; provided further that upon the incurrence of such Indebtedness after the date hereof, the Upstream Component in effect at such time will be reduced at the time of such issuance as provided in Section 2.08(a)(vi).

 

(i)                                     Indebtedness arising from agreements providing for indemnification or from guaranties or letters of credit, surety bonds or performance bonds securing the performance of (but not the payment of the purchase price by) the Borrower or any Restricted Subsidiary pursuant to such agreements, in connection with Permitted Acquisitions or Asset Sales by the Borrower or any of its Restricted Subsidiaries;

 

(j)                                     Indebtedness which may be deemed to exist pursuant to any guaranty, performance, surety, statutory, appeal or similar obligations (but not obligations for borrowed money) incurred in the ordinary course of business;

 

(k)                                  Indebtedness under Treasury Management Agreements;

 

(l)                                     guaranties by any Loan Party of Indebtedness of any other Loan Party with respect to Indebtedness otherwise permitted to be incurred pursuant to this Section 9.02; and

 

(m)                               other Indebtedness not to exceed five percent (5%) of Consolidated Tangible Net Worth in the aggregate at any one time outstanding; provided that if such Indebtedness exceeds ten percent (10%) of the Borrowing Base, upon the incurrence of such Indebtedness, the Borrowing Base will be redetermined using the procedures for an Interim Upstream Component Redetermination in accordance with Section 2.08.

 

Section 9.03                            Liens.  The Borrower will not, and will not permit any 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 Secured Obligations pursuant to the Security Instruments;

 

(b)                                 Excepted Liens;

 

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(c)                                  Liens securing Capital Leases and Purchase Money Indebtedness permitted by Section 9.02(d) but only on the Property under lease or the Property purchased with such Purchase Money Indebtedness, as applicable;

 

(d)                                 Liens described on Schedule 9.03;

 

(e)                                  any interest or title of a lessor or sublessor under any lease of real estate permitted hereunder;

 

(f)                                    Liens solely on any cash earnest money deposits made by the Borrower or any Restricted Subsidiary in connection with any letter of intent or purchase agreement permitted hereunder;

 

(g)                                 purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business;

 

(h)                                 licenses of patents, trademarks and other intellectual property rights granted by the Borrower or any Restricted Subsidiary in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of the Borrower or any Restricted Subsidiary;

 

(i)                                     Liens on Property acquired in a Permitted Acquisition that as of the date of such Permitted Acquisition secure Hedging Agreements; provided that such Liens shall only be permitted for thirty (30) days after the date of such Permitted Acquisition; and

 

(j)                                     Liens on Property not constituting Collateral or Upstream Component Property and not otherwise permitted by the foregoing clauses of this Section 9.03; provided that the aggregate principal or face amount of all Indebtedness secured under this Section 9.03(j) shall not exceed four percent (4%) of Consolidated Tangible Net Worth in the aggregate at any one time outstanding.

 

Section 9.04                            Restricted Payments.  The Borrower will not, and will not permit any of its Restricted Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital to its stockholders or make any distribution of its Property to its Equity Interest holders, except:

 

(a)                                  the Borrower 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);

 

(b)                                 Restricted Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests;

 

(c)                                  the Borrower may make Restricted Payments pursuant to and in accordance with equity incentive plans or other benefit plans for management or employees of the Borrower and its Restricted Subsidiaries;

 

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(d)                                 the Borrower may make cash distributions in an amount not to exceed “Available Cash” (as such term is defined in the Partnership Agreement as in effect on the date hereof); provided that immediately before and after giving effect to such distribution, (i) no Borrowing Base Deficiency exists and (ii) no Default or Event of Default has occurred or would be caused by such distribution; and

 

(e)                                  the Borrower and Restricted Subsidiaries may make Restricted Payments to their equity holders as otherwise permitted pursuant to clauses (a) through (d) of Section 9.14; provided that immediately before and after giving effect to such distribution, no Default or Event of Default has occurred or would be caused by such distribution.

 

Section 9.05                            Investments, Loans and Advances.  The Borrower will not, and will not permit any 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 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 (1) year from the date of creation thereof;

 

(d)                                 commercial paper maturing within one (1) year from the date of creation thereof rated in the highest grade by S&P or Moody’s;

 

(e)                                  deposits maturing within one (1) year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the date of such bank or trust company’s most 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 or, in the case of any Foreign Subsidiary, a bank organized in a jurisdiction in which the Foreign Subsidiary conducts operations having assets in excess of $500,000,000 (or its equivalent in another currency);

 

(f)                                    deposits in money market funds investing exclusively in Investments described in Section 9.05(c), Section 9.05(d) or Section 9.05(e);

 

(g)                                 Investments (i) made by the Borrower in or to the Guarantors, (ii) made by any Restricted Subsidiary in or to the Borrower or any Guarantor, and (iii) made by the Borrower or any Restricted Subsidiary in or to all other Domestic Subsidiaries which are not Guarantors in an aggregate amount at any one time outstanding not to exceed $10,000,000;

 

(h)                                 loans or advances in the ordinary course of business to employees, officers or directors of the Borrower or any of its Restricted Subsidiaries, in each case only as permitted by applicable law, including Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to exceed $1,000,000 in the aggregate at any time;

 

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(i)            Investments in stock, obligations or securities received in settlement of debts arising from Investments permitted under this Section 9.05 owing to the Borrower or any Restricted Subsidiary as a result of a bankruptcy or other insolvency proceeding of the obligor in respect of such debts or upon the enforcement of any Lien in favor of the Borrower or any of its Restricted Subsidiaries; provided that the Borrower shall give the Administrative Agent prompt written notice in the event that the aggregate amount of all Investments held at any one time under this Section 9.05(i) exceeds $10,000,000;

 

(j)            Investments pursuant to Hedging Agreements otherwise permitted under this Agreement;

 

(k)           Investments in Unrestricted Subsidiaries, provided that (i) the aggregate amount of all such Investments at any one time shall not exceed $25,000,000 (or its equivalent in other currencies as of the date of Investment) and (ii) the Borrowing Base Utilization Percentage is less than 80% immediately before and immediately after giving effect such Investment;

 

(l)            Permitted Acquisitions; and

 

(m)          other Investments not to exceed $25,000,000 in the aggregate at any time.

 

Section 9.06         Designation and Conversion of Restricted and Unrestricted Subsidiaries; Indebtedness of 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 Borrower 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, including a newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after giving effect, to such designation, neither a Default nor a Borrowing Base Deficiency would exist and (ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount equal to the fair market value as of the date of such designation of the Borrower’s direct and indirect Equity Interests in such Subsidiary and such Investment would be permitted to be made at the time of such designation under Section 9.05(k).  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 and its 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 9.15.

 

Section 9.07         Nature of Business.  The Borrower will not, and will not permit any Restricted Subsidiary to, engage (directly or indirectly) in any business other than those

 

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businesses in which the Borrower and its Restricted Subsidiaries are engaged on the Effective Date (or which are reasonably related thereto or are reasonable extensions thereof).

 

Section 9.08         Proceeds of Loans.  The Borrower will not permit the proceeds of the Loans to be used for any purpose other than those permitted by Section 7.22.  Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulations T, U or X or any other regulation of the Board or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect.  If requested by the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

 

Section 9.09         ERISA Compliance.  The Borrower will not, and will not permit any Restricted Subsidiary to, at any time:

 

(a)           terminate, or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability of the Borrower, a Restricted Subsidiary or any ERISA Affiliate to the PBGC.

 

(b)           fail to make, or permit any ERISA Affiliate to fail to make, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the Borrower, a Restricted Subsidiary or any ERISA Affiliate is required to pay as contributions thereto.

 

(c)           permit to exist, or allow any ERISA Affiliate to permit to exist, any accumulated funding deficiency within the meaning of section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan.

 

(d)           permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by the Borrower, a Restricted Subsidiary or any ERISA Affiliate to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities.  The term “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA.

 

(e)           contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan.

 

(f)            acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower or a Restricted Subsidiary or with respect to any ERISA Affiliate of the Borrower or a Restricted Subsidiary if such Person sponsors, maintains or contributes to, or has any liability with respect to, (i) any Multiemployer Plan, or (ii) any other Plan under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan

 

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termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities.

 

(g)           incur, or permit any ERISA Affiliate to incur, a liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA.

 

(h)           amend, or permit any ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Borrower, a Restricted Subsidiary or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code.

 

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

 

Section 9.11         Mergers, Etc.  The Borrower will not, and will not permit any 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 Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property to any other Person (whether now owned or hereafter acquired) (any such transaction, a “consolidation”), or liquidate or dissolve; provided that the Borrower or any Restricted Subsidiary may participate in a consolidation with any other Person; provided that:

 

(a)           (i) no Default is continuing, (ii) any such consolidation would not cause a Default hereunder, (iii) if the Borrower consolidates with any Person, the Borrower shall be the surviving Person (or, so long as no Change in Control shall have occurred, the surviving entity is a Person organized under the laws of the United States or any state thereof that expressly assumes in writing (in form and substance satisfactory to the Administrative Agent) all obligations and liabilities applicable to it under the Loan Documents), (iv) if any Restricted Subsidiary consolidates with any Person (other than the Borrower or another Restricted Subsidiary) and such Restricted Subsidiary is not the surviving Person, such surviving Person shall expressly assume in writing (in form and substance satisfactory to the Administrative Agent) all obligations and liabilities of such Restricted Subsidiary under the Loan Documents and (v) the Upstream Component will be redetermined using the procedures for an Interim Upstream Component Redetermination in accordance with Section 2.08 (but shall be in addition to any Interim Upstream Component Redetermination  provided in Section 2.08) and the Midstream Component will be recalculated in accordance with Section 2.08(b)(iii);

 

(b)           any Restricted Subsidiary (including a Foreign Subsidiary) may participate in a consolidation with the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or any other Restricted Subsidiary that is a Domestic Subsidiary (provided that if one of such parties to the consolidation is a Foreign Subsidiary, such Domestic Subsidiary shall be the continuing or surviving Person) and if one of such Restricted Subsidiaries is a Wholly-Owned Subsidiary, then the surviving Person shall be a Wholly-Owned Subsidiary; and

 

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(c)           any Foreign Subsidiary of the Borrower may participate in a consolidation with any one or more Foreign Subsidiaries; provided that if one of such Foreign Subsidiaries is a Wholly-Owned Subsidiary, the survivor shall be a Wholly-Owned Subsidiary.

 

Section 9.12         Sale of Properties.  The Borrower will not, and will not permit any Restricted Subsidiary to Dispose of any Borrowing Base Property (other than a Disposition by a Loan Party to another Loan Party), including any Subsidiary, unless (i) 75% of the consideration received in respect of such Disposition is cash or cash equivalents, (ii) the consideration received in respect of such Disposition shall be equal to or greater than the fair market value of such Property, (iii) if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to that effect, and (iv) no Default or Event of Default shall occur as a result of such Disposition; provided (A) certain Dispositions of Upstream Component Properties permitted hereby may, pursuant to Section 2.08(a)(v), result in a redetermination of the Upstream Component as provided therein and (B) certain Dispositions of Midstream Component Properties permitted hereby may, pursuant to Section 2.08(b)(iii), result in a recalculation of the Midstream Component as provided therein.

 

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

 

Section 9.14         Transactions with Shareholders and Affiliates.  The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than a Loan Party) unless such transactions are otherwise permitted 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 foregoing restriction shall not apply to (a) reasonable and customary fees paid to members of the board of directors (or similar governing body) of the Borrower and its Restricted Subsidiaries, (b) compensation arrangements for directors, officers and other employees of the Borrower and its Restricted Subsidiaries entered into in the ordinary course of business, (c) transactions approved by the Conflicts Committee, and (d) transactions described in Schedule 9.14.

 

Section 9.15         Subsidiaries.  The Borrower will not, and will not permit any Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless the Borrower complies with Section 8.14(b), Section 8.14(c) and Section 9.06.  The Borrower shall not, and shall not permit any Restricted Subsidiary to, sell, assign or otherwise Dispose of any Equity Interests in any Restricted Subsidiary except in compliance with Section 9.12.  Neither the Borrower nor any Restricted Subsidiary shall have any Foreign Subsidiaries.

 

Section 9.16         Negative Pledge Agreements; Dividend Restrictions.  The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist

 

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any contract, agreement or understanding (other than (a) this Agreement and the Security Instruments, (b) restrictions with respect to Property securing Indebtedness pursuant to Liens permitted under Section 9.03, (c) customary provisions restricting subletting or assignment of leases or rights thereunder, and (d) temporary restrictions with respect to an Asset Sale otherwise permitted hereunder pending the consummation of such sale), 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 and the Lenders or restricts any Restricted Subsidiary from paying dividends or making distributions to the Borrower or any Guarantor, or which requires the consent of or notice to other Persons in connection therewith.

 

Section 9.17         Limitation on Issuance of Equity Interests.  The Borrower shall not permit any Restricted Subsidiary to issue any Equity Interest (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, any Equity Interest, except for Equity Interest issued to another Loan Party.  The Borrower and the Restricted Subsidiaries shall comply with Section 8.11 and Section 8.14 with respect to any such issued Equity Interests.

 

Section 9.18         Gas Imbalances, Take-or-Pay or Other Prepayments.  The Borrower will not, and will not permit any Restricted Subsidiary to, allow gas imbalances, take-or-pay or other prepayments with respect to the Borrowing Base Properties of the Borrower or any Restricted Subsidiary that would require the Borrower or such Restricted Subsidiary to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefor to exceed one bcf of gas (on an mcf equivalent basis) in the aggregate.

 

Section 9.19         Hedging Agreements.  The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any Hedging Agreements with any Person other than (a) Upstream Hedges (i) with an Approved Counterparty and (ii) the notional volumes for which do not exceed, as of the date such Hedging Agreement is executed, the greater of (A) 90% of the reasonably anticipated projected production from proved, developed, producing Upstream Component Properties for each month during the period during which such Hedging Agreement is in effect for each of crude oil and natural gas, calculated separately and (B) 85% (for the first three years after the date such Hedging Agreement is executed and 75% thereafter) of forecasted production from total proved Upstream Component Properties for each month during the period during which such Hedging Agreement is in effect for each of crude oil and natural gas, calculated separately; provided that the notional volumes of such Upstream Hedges that constitute commodity puts or floors purchased by the Borrower or any Restricted Subsidiary shall not be included in the calculations described in this clause (ii), (b) Midstream Hedges with an Approved Counterparty and that are not speculative in nature, and (c) Interest Rate Hedges with an Approved Counterparty and that are not speculative in nature.

 

References in this Section 9.19 to Upstream Component Properties shall include Upstream Properties anticipated to be acquired by the Borrower pursuant to an executed purchase agreement, to the extent that such properties represent proved developed producing properties; provided, that to the extent the Borrower has entered into Hedging Agreements based upon projected production from Upstream Properties anticipated to be acquired pursuant to such purchase agreement, and such purchase agreement is terminated or the Borrower determines that all or a portion of such acquisition will not occur, the Borrower will, not later than 60 days after

 

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the earliest to occur of such termination, determination, and the date of entering into such Hedging Agreement, terminate such Hedging Agreements to the extent of the projected production attributable to the Upstream Properties that will not be so acquired.

 

Section 9.20         Amendments to Fiscal Year End; Prepayments of Other Indebtedness.

 

(a)           The Borrower shall not, and shall not permit any Restricted Subsidiary to, amend or otherwise modify (or permit to be amended or modified) its Organization Documents in a manner that would be adverse to the Lenders in any material respect.

 

(b)           The Borrower shall not, and shall not permit any Restricted Subsidiary to, change the last day of its fiscal year from December 31 of each year, or the last days of the first three fiscal quarters in each of its fiscal years from March 31, June 30 and September 30 of each year, respectively.

 

(c)           The Borrower shall not, and shall not permit any Restricted Subsidiary to, make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any outstanding subordinated Indebtedness or other Indebtedness permitted by Section 9.02(h), except as otherwise permitted by this Agreement.

 

Section 9.21         Marketing Activities.  The Borrower will not, and will not permit any of its Restricted Subsidiaries to, engage in marketing activities for any Hydrocarbons attributable to the Borrowing Base Properties or enter into any contracts related thereto other than (a) contracts for the sale of Hydrocarbons attributable to the Upstream Component Properties scheduled or reasonably estimated to be produced therefrom during the period of such contract, (b) contracts for the sale of such Hydrocarbons scheduled or reasonably estimated to be produced from proved Upstream Component Properties of third parties during the period of such contract associated with the Upstream Component Properties of the Borrower and its Restricted Subsidiaries that the Borrower or one of its Restricted Subsidiaries has the right to market pursuant to joint operating agreements, unitization agreements or other similar contracts that are usual and customary in the oil and gas business, (c) other contracts for the purchase and/or sale of such Hydrocarbons of third parties (i) which have generally offsetting provisions (i.e., corresponding pricing mechanics, delivery dates and points and volumes) such that no material “position” is taken and (ii) for which appropriate credit support has been taken to alleviate the material credit risks of the counterparty thereto, and (d) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be received from third parties for processing by the Borrower or any Restricted Subsidiary.

 

Section 9.22         Anti-Terrorism Law; Anti-Money Laundering.

 

(a)           The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 7.24, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any Property or interests in Property blocked pursuant to the Executive Order or any other Anti-Terrorism Law,

 

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or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Borrower shall deliver to any Lender any certification or other evidence requested from time to time by such Lender confirming the Borrower’s and the Subsidiaries’ compliance with this Section 9.22(a)).

 

(b)           The Borrower shall not, and shall not permit any Subsidiary to, cause or permit any of the funds of the Borrower or any Subsidiary that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of any Governmental Regulation.

 

Section 9.23         Embargoed Person.  The Borrower shall not, and shall not permit any Subsidiary to, permit (a) any of the funds or Properties of the Borrower or any Subsidiary that are used to repay the Loans to constitute Property of, or be beneficially owned directly or indirectly by, any Person subject to sanctions or trade restrictions under United States law (“Embargoed Person” or “Embargoed Persons”) that is identified on (i) the “List of Specially Designated Nationals and Blocked Persons” maintained by OFAC and/or on any other similar list maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or Governmental Regulation promulgated thereunder, with the result that the investment in the Borrower or any Subsidiary (whether directly or indirectly) is prohibited by a Governmental Regulation, or the Loans would be in violation of a Governmental Regulation, or (ii) the Executive Order, any related enabling legislation or any other similar Executive Orders or (b) any Embargoed Person to have any direct or indirect interest, of any nature whatsoever in the Borrower or any Subsidiary, with the result that the investment in the Borrower or any Subsidiary (whether directly or indirectly) is prohibited by a Governmental Regulation or the Loans are in violation of a Governmental Regulation.

 

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.

 

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(c)           Any representation or warranty made or deemed made by or on behalf of the Borrower or any 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, unless otherwise already modified by materiality, when made or deemed made.

 

(d)           The Borrower or any Restricted Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in Section 8.02(a), Section 8.03 (solely with respect to legal existence), Section 8.14 or Article IX.

 

(e)           The Borrower or any Restricted Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in Section 8.01(a), Section 8.01(b) or Section 8.01(c), and such failure shall continue unremedied for a period of fifteen (15) days.

 

(f)            The Borrower or any 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), Section 10.01(d) or Section 10.01(e)) or any other Loan Document, and such failure shall continue unremedied for a period of thirty (30) days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender).

 

(g)           The Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable, and any grace or cure period related thereto shall have expired.

 

(h)           Any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits, subject to any applicable grace or cure period, the holder or holders of such Material Indebtedness or any trustee or agent on its or their behalf to cause such 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 Borrower or any Restricted Subsidiary to make an offer in respect thereof.

 

(i)            An involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any 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 Borrower or any Restricted Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for thirty (30) days or an order or decree approving or ordering any of the foregoing shall be entered.

 

(j)            The Borrower or any 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

 

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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(i), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any 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; or any stockholder of the Borrower shall make any request or take any action for the purpose of calling a meeting of the stockholders of the Borrower to consider a resolution to dissolve and wind-up the Borrower’s affairs.

 

(k)           (i) One or more judgments for the payment of money in an aggregate amount in excess of $25,000,000 (to the extent not covered by independent third party insurance provided by insurers of the highest claims paying rating or financial strength as to which the insurer does not dispute coverage and is not subject to an insolvency proceeding) or (ii) any one or more non-monetary judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, shall be rendered against the Borrower, any Restricted Subsidiary or any combination thereof and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor or judgment creditors to attach or levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any such judgment.

 

(l)            The Loan Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with their terms against 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 the Borrower or any Restricted Subsidiary or any of their Affiliates shall so state in writing.

 

(m)          An ERISA Event shall have occurred that when taken together with all other ERISA Events that have occurred, results in liability of the Borrower and its Restricted Subsidiaries in an aggregate amount exceeding $25,000,000 in the aggregate.

 

(n)           A Change in Control shall occur.

 

Section 10.02       Remedies.

 

(a)           In the case of an Event of Default other than one described in 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 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

 

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Borrower and the Guarantors accrued hereunder and under the Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(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(i) or Section 10.01(j), the Commitments shall automatically terminate 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 other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(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 Secured Obligations constituting fees, expenses and indemnities payable to the Administrative Agent in its capacity as such;

 

(ii)           second, pro rata to payment or reimbursement of that portion of the Secured Obligations constituting fees, expenses and indemnities payable to the Lenders;

 

(iii)          third, pro rata to payment of accrued interest on the Loans;

 

(iv)          fourth, pro rata to payment of (A) principal outstanding on the Loans, (B) Secured Obligations referred to in clause (b) of the definition of Secured Obligations owing in respect of Secured Hedging Agreements, (C) Secured Obligations referred to in clause (c) of the definition of Secured Obligations owing in respect of Secured Treasury Management Agreements, and (D) cash collateral to be held by the Administrative Agent to secure the LC Exposure;

 

(v)           fifth, pro rata to any other Secured Obligations; and

 

(vi)          sixth, any excess, after all of the Secured Obligations shall have been paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental Requirement.

 

ARTICLE XI
 THE AGENTS

 

Section 11.01       Appointment; Powers.  Each of the Lenders and each 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

 

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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 have no 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 not have any 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 have no duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or 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 Borrower 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 or percentage 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

 

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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 or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the action to be taken and (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, neither the Documentation Agent nor any Co-Syndication Agent shall have any obligation to perform any act in respect thereof.  The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or the Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02), and otherwise the Administrative Agent shall not be liable for any action taken or not taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.

 

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

 

Section 11.05       Sub-agents.  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-

 

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agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

 

Section 11.06       Resignation or Removal of Administrative Agent.  Subject to the appointment and acceptance of a successor Administrative Agent as provided in this Section 11.06, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Banks 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 or removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the Administrative Agent’s resignation hereunder, the provisions of this Article XI and Section 12.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

 

Section 11.07       Agents as Lenders.  Each bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower 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, any Issuing Bank 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, any Issuing Bank 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 Borrower 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 Borrower 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, neither the Agents nor the Arranger shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs,

 

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financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of such Agent or Arranger 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 Borrower 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 Secured Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 12.03) allowed in such judicial proceeding; and

 

(b)           to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and

 

any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 12.03.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Secured Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

 

Section 11.10       Authority of Administrative Agent to Release Collateral and Liens.  Each Lender and each Issuing Bank hereby authorizes the Administrative Agent to release any Collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents.  Each Lender and each Issuing Bank hereby authorizes the Administrative Agent to execute and deliver to the Borrower, at the Borrower’s sole cost and expense, any and all releases of Liens, termination statements, assignments or other documents reasonably requested by the Borrower in

 

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connection with any Disposition of Property to the extent such Disposition is permitted by the terms of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.

 

Section 11.11       The Arranger, the Documentation Agent and the Co-Syndication Agents.  The Arranger, the Documentation Agent and the Co-Syndication Agents shall have no 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.  No Arranger, Documentation Agent or Co-Syndication Agent shall have or be deemed to have any fiduciary relationship with any Lender.

 

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:

 

(i)            if to the Borrower, to it at the following:

 

Eagle Rock Energy Partners, L.P.

1415 Louisiana Street, Suite 2700

Houston, Texas  77002

Attention:  Jeff Wood

Phone:  281-408-1203

Fax:  281-715-4157

Email:  jeff.wood@eaglerockenergy.com

 

with a copy to:

 

Eagle Rock Energy Partners, L.P.

1415 Louisiana Street, Suite 2700

Houston, Texas  77002

Attention:  Charles C. Boettcher

Phone:  (281) 408-1260

Fax:  (281) 715-4142

Email:  c.boettcher@eaglerockenergy.com

 

(ii)           if to the Administrative Agent or the Issuing Bank, as follows:

 

Wells Fargo Bank, National Association

1000 Louisiana Street, 9th Floor

Houston, TX 77002

Attention: Michael Real

 

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Phone: (713) 319-1914

Fax: (713) 319-1925

Email: realm@wellsfargo.com

 

with a copy to:

 

Wells Fargo Bank, National Association

1525 West W.T. Harris Blvd - 1B1

Mailcode: MACD1109-019

Charlotte, NC 28262

Attention: Agency Services

Fax: (704) 590-2782

Email: agencyservices.requests@wachovia.com

 

(iii)          if to any other Lender, to it at its address (or facsimile number) set forth in its Administrative Questionnaire.

 

(b)                                 Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II, Article III, Article IV and Article V unless otherwise agreed by the Administrative Agent and the applicable Lender.  The Administrative Agent 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 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, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by 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

 

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of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.

 

(b)           Neither this Agreement nor any provision hereof nor any Security Instrument nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) increase the Upstream Component without the written consent (or deemed consent pursuant to Section 2.08(a)(iii)(C)) of each Lender, decrease or maintain the Upstream Component without the consent (or deemed consent pursuant to Section 2.08(a)(iii)(C)) of the Required Lenders, or modify in any manner Section 2.08 without the consent of each Lender, (iii) change the definition of “Midstream Component” in a manner that would have the direct effect of increasing the Borrowing Base without the consent of each Lender; (iv) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Secured Obligations hereunder or under any other Loan Document, without the written consent of each Lender affected thereby, (v) postpone the scheduled date of payment or prepayment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or any other Secured Obligations hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Termination Date without the written consent of each Lender affected thereby, (vi) 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, (vii) waive or amend Section 8.14 or change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without the written consent of each Lender, (viii) release any Guarantor (except as set forth in the Guaranty and Collateral 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 80%, without the written consent of each Lender, or (ix) change any of the provisions of this Section 12.02(b) or the definitions of “Required Lenders” or “Majority Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or make any determination or grant any consent hereunder or any other Loan Documents, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any Issuing Bank or the Swingline Lender hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, such Issuing Bank or the Swingline Lender as the case may be.  Notwithstanding the foregoing, (A) 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, (B) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver, or consent hereunder, except that the Commitment of such Lender may not be increased or extended or the principal thereof reduced or forgiven without the consent of such Lender, except as provided in Section 2.07(a)(iv) and (C) the provisions of clause (B) may not be amended without the consent of each Lender (including any Defaulting Lender).

 

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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 one counsel for the Administrative Agent and, if necessary, of one local counsel to the Lenders in each necessary jurisdiction retained by the Administrative Agent and other outside consultants for the Administrative Agent, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental 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 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 any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iv) upon the occurrence and during the continuance of an Event of Default, all out-of-pocket expenses incurred by any Agent, any Issuing Bank, the Swingline Lender or any Lender, including the reasonable fees, charges and disbursements of any counsel, 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; provided, that to the extent that the costs and expenses referred to in this clause (iv) consist of fees, charges and disbursements of counsel, the Borrower shall be obligated to pay such fees, costs and expenses for only one counsel to Administrative Agent and for only on counsel acting for all Lenders (other than Administrative Agent) (absent a conflict of interest, in which case the Lenders may engage and be reimbursed for additional counsel to the affected Lenders similarly situated, taken as a whole.

 

(b)           THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, EACH ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE 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

 

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CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY 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 AN 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 BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY 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 OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS 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

 

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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 (i) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE, OR MATERIAL BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR (ii) ARISES SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS NOT INVOLVING (A) AN ACT OR OMISSION OF OR A BREACH OF THE LOAN DOCUMENTS BY THE BORROWER OR ANY RELATED PARTIES OR (B) A CLAIM AGAINST THE ADMINISTRATIVE AGENT, SWINGLINE LENDER OR ISSUING BANK IN SUCH CAPACITY.

 

(c)           To the extent that the Borrower fails to pay any amount required to be paid by it to the Agents, the Arranger, any Issuing Bank or the Swingline Lender under Section 12.03(a) or (b), but without affecting such payment obligations of the Borrower, each Lender severally agrees to pay to such Agents, Arranger, Issuing Bank, Swingline Lender, 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, Arranger, Issuing Bank or Swingline Lender in its capacity as such.

 

(d)           To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

 

(e)           All amounts due under this Section 12.03 shall be payable upon written demand therefor.

 

Section 12.04       Assignments and Participations.

 

(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

 

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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 Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of 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 (other than to a natural person or to a Loan Party or any Affiliate of a Loan Party) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

 

(A)          the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; 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, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;

 

(B)           each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;

 

(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; and

 

(D)          the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

 

(iii)          Subject to Section 12.04(b)(iv) and the acceptance and recording thereof, from and after the effective date specified in each Assignment and Assumption

 

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the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c).

 

(iv)          The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount 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 Banks 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, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(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)(ii)(C) 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 any Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the proviso to Section 12.02 that affects such Participant.  In addition, such

 

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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 that such Participant agrees to be subject to Section 4.01(c) as though it were a Lender.

 

(ii)           A Participant shall not be entitled to receive any greater payment under Section 5.01 or Section 5.03 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.03 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 5.03(e) as though it were a Lender.  Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant in such Lender’s Loans and the principal amounts (and stated interest) of each such Participant’s interest in such Lender’s 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 its Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in such Lender’s commitments, loans, letters of credit or its other obligations under any Loan Document) 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 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 such Lender’s 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.

 

(d)           Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank having jurisdiction over such Lender, and this Section 12.04(d) shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(e)           Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of the interests or obligations of any Lender or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Borrower and the Guarantors to file a registration statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

 

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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 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 Secured Obligations or proceeds of any Collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Secured Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Administrative Agent’s and the Lenders’ Liens, security interests, rights, powers and remedies under this Agreement and each Loan Document shall continue in full force and effect.  In such event, each Loan Document shall be automatically reinstated and the Borrower shall take such action as may be reasonably requested by the Administrative Agent and the Lenders to effect such reinstatement.

 

Section 12.06       Counterparts; Integration; Effectiveness.

 

(a)           This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.

 

(b)           This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof and thereof.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

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(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 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 Hedging Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any Restricted Subsidiary against any of and all the obligations of the Borrower 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.  The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.

 

Section 12.09       GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

 

(a)           THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS 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 SHALL 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, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF

 

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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 ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

 

(d)           EACH PARTY HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) 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; (III) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (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 Banks 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, (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

 

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Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 12.11, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Hedging 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, any 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 Borrower or any Restricted Subsidiary relating to the Borrower or any Restricted Subsidiary and their businesses, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower or a Restricted Subsidiary; provided that, in the case of information received from the Borrower 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.

 

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 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 Secured Obligations, it is agreed as follows:  (a) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Loans 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 Secured Obligations (or, to the extent that the principal amount of the Secured Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (b) in the event that the maturity of the Loans 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 Secured Obligations (or, to the extent that the principal amount of the Secured Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the

 

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Loans 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.

 

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; Hedging Agreements; Treasury Management Agreements.  Notwithstanding anything to the contrary contained herein, the terms and provisions of this Agreement shall not apply to any Hedging Agreements or Treasury Management Agreements, except to the extent necessary for all Secured Hedging Agreements and Secured Treasury Management Agreements to be secured by the Security Instruments on a pari passu basis with other Indebtedness and for the proceeds from the Security Instruments to be applied as set forth in Section 10.02(c) hereof.  No Lender or Affiliate of a Lender shall have any voting rights under any Loan Document as a result of the existence of obligations owed to it under any such Secured Hedging Agreements or Secured Treasury Management 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 Banks to issue, amend, renew or extend Letters of Credit hereunder are solely for the benefit of the Borrower,

 

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and no other Person (including, without limitation, any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent, any Issuing Bank or any Lender for any reason whatsoever.  There are no third party beneficiaries.

 

Section 12.16       USA Patriot Act Notice.  Each Lender hereby notifies 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)) (the “USA Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower and its Subsidiaries, which information includes the name and address of the Borrower and its Subsidiaries other information that will allow such Lender to identify the Borrower and its Subsidiaries in accordance with the USA Patriot Act.

 

Section 12.17       Existing Credit Agreement.  On the date of this Agreement, the Existing Credit Agreement shall be amended and restated in its entirety by this Agreement, and the Existing Credit Agreement shall be replaced hereby; provided that the Borrower, the Administrative Agent and the Lenders agree that on the date of the initial funding of Loans hereunder, the loans and other Indebtedness of the Borrower under the Existing Credit Agreement shall be renewed, rearranged, modified and extended with the proceeds of the initial funding and the “Commitments” of the lenders under the Existing Credit Agreement shall be superseded by this Agreement and terminated.  This Agreement is not in any way intended to constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or evidence payment of all or any portion of such obligations and liabilities.  The terms and conditions of this Agreement and the Administrative Agent’s, the Lenders’ and the Issuing Banks’ rights and remedies under this Agreement and the other Loan Documents shall apply to all of the Indebtedness incurred under the Existing Credit Agreement and in respect of the Existing Letters of Credit.  The undersigned hereby waive (i) any right to receive any notice of such termination,  (ii) any right to receive any notice of prepayment of amounts owed under the Existing Credit Agreement, and (iii) any right to receive compensation under Section 5.02 of the Existing Credit Agreement in respect of Eurodollar Loans outstanding under the Existing Credit Agreement resulting from such rearrangement.  Each Lender that was a party to the Existing Credit Agreement hereby agrees to return to the Borrower, with reasonable promptness, any promissory note delivered by the Borrower to such Lender in connection with the Existing Credit Agreement.

 

Section 12.18       No Fiduciary Duty.  Each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the “Lenders”), may have economic interests that conflict with those of the Loan Parties, their stockholders and/or their affiliates.  The Loan Parties acknowledge and agree that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Lenders, on the one hand, and the Loan Parties, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in favor of any Loan Party, its stockholders or its affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is currently advising or will advise any Loan Party, its stockholders or its Affiliates on other matters) or any other obligation to any Loan Party except the obligations expressly set forth in

 

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the Loan Documents and (y) each Lender is acting solely as principal and not as the agent or fiduciary of any Loan Party, its management, stockholders, creditors or any other Person.  Each Loan Party acknowledges and agrees that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto.  Each Loan Party agrees that it will not claim that any Lender has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to such Loan Party, in connection with such transaction or the process leading thereto.

 

[SIGNATURES BEGIN NEXT PAGE]

 

126












 

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

 

	
BORROWER:
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
By:    Eagle Rock Energy GP, L.P.
    
	
 
    	
By:    Eagle Rock Energy G&P, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Jeffrey P. Wood
    
	
 
    	
 
    	
Name:
    	
Jeffrey P. Wood
    
	
 
    	
 
    	
Title:
    	
Senior Vice President & Chief Financial Officer 
    


 

Signature Page to Credit Agreement

 











 

	
ADMINISTRATIVE   AGENT and LENDER
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION,

as   Administrative Agent and Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Michael Real
    
	
 
    	
Name:   
    	
Michael   Real
    
	
 
    	
Title:
    	
Director
    


 

Signature Page to Credit Agreement

 











 

	
DOCUMENTATION   AGENT and LENDER
    	
BNP   PARIBAS,

as   Documentation Agent and Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Andrew Ostrov
    
	
 
    	
Name:   
    	
Andrew   Ostrov
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BNP   PARIBAS,

as   Documentation Agent and Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Rick Hawthorne
    
	
 
    	
Name:   
    	
Rick   Hawthorne
    
	
 
    	
Title:
    	
Director
    


 

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CO-SYNDICATION   AGENT and LENDER
    	
THE   ROYAL BANK OF SCOTLAND plc,
    
	
 
    	
as   Co-Syndication Agent and Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Sanjay Remond
    
	
 
    	
Name:   
    	
Sanjay   Remond
    
	
 
    	
Title:
    	
Authorised   Signatory
    


 

Signature Page to Credit Agreement

 











 

	
 CO-SYNDICATION AGENT and LENDER
    	
BANK   OF AMERICA, N.A.,
    
	
 
    	
as   Co-Syndication Agent and Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Christopher Renyi
    
	
 
    	
Name:   
    	
Christopher   Renyi
    
	
 
    	
Title:
    	
Vice   President
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
COMPASS   BANK,
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Greg Determann
    
	
 
    	
Name:   
    	
Greg   Determann
    
	
 
    	
Title:
    	
Senior   Vice President
    


 

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LENDER
    	
CITIBANK,   N.A., 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   John F. Miller
    
	
 
    	
Name:   
    	
John   F. Miller
    
	
 
    	
Title:
    	
Attorney-in-fact
    


 

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LENDER
    	
COMERICA   BANK, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Justin Crawford
    
	
 
    	
Name:   
    	
Justin   Crawford
    
	
 
    	
Title:
    	
Vice   President
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
ING   CAPITAL, LLC, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Charles Hall
    
	
 
    	
Name:   
    	
Charles   Hall
    
	
 
    	
Title:
    	
Managing   Director
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
ROYAL   BANK OF CANADA, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Jason S. York
    
	
 
    	
Name:   
    	
Jason   S. York
    
	
 
    	
Title:
    	
Authorized   Signatory
    


 

Signature Page to Credit Agreement

 












 

	
LENDER
    	
REGIONS   BANK, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Kelly L. Elmore III
    
	
 
    	
Name:   
    	
Kelly   L. Elmore III
    
	
 
    	
Title:
    	
Senior   Vice President
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
THE   BANK OF NOVA SCOTIA, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   John Frazell
    
	
 
    	
Name:   
    	
John   Frazell
    
	
 
    	
Title:
    	
Director
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
UBS   LOAN FINANCE LLC, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Irja R. Otsa
    
	
 
    	
Name:   
    	
Irja   R. Otsa
    
	
 
    	
Title:
    	
Associate   Director
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   April Varner-Nanton
    
	
 
    	
Name:   
    	
April   Varner-Nanton
    
	
 
    	
Title:
    	
Director
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
CAPITAL   ONE, N.A., 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Matthew L. Molero
    
	
 
    	
Name:   
    	
Matthew   L. Molero
    
	
 
    	
Title:
    	
Vice   President
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
U.S.   BANK NATIONAL ASSOCIATION, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Justin M. Alexander
    
	
 
    	
Name:   
    	
Justin   M. Alexander
    
	
 
    	
Title:
    	
Vice   President
    


 

Signature Page to Credit Agreement

 











 

	
LENDER
    	
GOLDMAN   SACHS LENDING PARTNERS LLC, 
    
	
 
    	
as   Lender 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Mark Walton
    
	
 
    	
Name:   
    	
Mark   Walton
    
	
 
    	
Title:
    	
Authorized   Signatory
    


 

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Annex I

 

	
NAME OF LENDER
    	
 
    	
APPLICABLE PERCENTAGE
    	
 
    	
COMMITMENT
    	
 
    
	
Wells Fargo Bank, N.A.
    	
 
    	
11.1111111111111000
    	
%
    	
$
    	
75,000,000
    	
 
    
	
Bank of America, N.A.
    	
 
    	
10.3703703703704000
    	
%
    	
$
    	
70,000,000
    	
 
    
	
The Royal Bank of Scotland plc
    	
 
    	
10.3703703703704000
    	
%
    	
$
    	
70,000,000
    	
 
    
	
BNP Paribas
    	
 
    	
9.62962962962963000
    	
%
    	
$
    	
65,000,000
    	
 
    
	
Compass Bank
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
Citibank, N.A.
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
Comerica Bank
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
ING Capital LLC
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
Royal Bank of Canada
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
Regions Bank
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
The Bank of Nova Scotia
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
UBS Loan Finance LLC
    	
 
    	
6.2962962962963000
    	
%
    	
$
    	
42,500,000
    	
 
    
	
Capital One, N.A.
    	
 
    	
3.7037037037037000
    	
%
    	
$
    	
25,000,000
    	
 
    
	
U.S. Bank National Association
    	
 
    	
3.7037037037037000
    	
%
    	
$
    	
25,000,000
    	
 
    
	
Goldman Sachs Lending Partners LLC
    	
 
    	
0.7407407407407410
    	
%
    	
$
    	
5,000,000
    	
 
    
	
TOTAL:  
    	
 
    	
100.00
    	
%
    	
$
    	
675,000,000