Document:

ex4-1.htm

Exhibit 4.1

 

 

IFM Investments Limited

 

 

 

and

 

 

 

American Stock Transfer & Trust Company, L.L.C.,

 

as Rights Agent

 

 

 

Rights Agreement

 

Dated as of November 17, 2010

  

  

  

 

TABLE OF CONTENTS

 

Page

 

	
Section 1.

	
Certain Definitions

	
1

	
Section 2.

	
Appointment of Rights Agent

	
7

	
Section 3.

	
Issuance of Rights Certificates

	
7

	
Section 4.

	
Form of Rights Certificates

	
9

	
Section 5.

	
Countersignature and Registration

	
9

	
Section 6.

	
Transfer, Split-Up, Consolidation and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates

	
10

	
Section 7.

	
Exercise of Rights; Purchase Price; Expiration Date of Rights

	
11

	
Section 8.

	
Cancellation and Destruction of Rights Certificates

	
13

	
Section 9.

	
Reservation and Availability of Ordinary Shares and Preferred Shares

	
13

	
Section 10.

	
Preferred Shares Record Date

	
14

	
Section 11.

	
Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights

	
15

	
Section 12.

	
Certificate of Adjusted Purchase Price or Number of Shares

	
22

	
Section 13.

	
Consolidation, Merger, Scheme of Arrangement or Sale or Transfer of Assets, Cash Flow or Earning Power

	
22

	
Section 14.

	
Fractional Rights and Fractional Shares

	
24

	
Section 15.

	
Rights of Action

	
25

	
Section 16.

	
Agreement of Rights Holders

	
25

	
Section 17.

	
Rights Certificate Holder Not Deemed a Shareholder

	
26

	
Section 18.

	
Concerning the Rights Agent

	
26

	
Section 19.

	
Merger or Consolidation or Change of Name of Rights Agent

	
27

	
Section 20.

	
Duties of Rights Agent

	
27

	
Section 21.

	
Change of Rights Agent

	
29

	
Section 22.

	
Issuance of New Rights Certificates

	
30

	
Section 23.

	
Termination

	
30

	
Section 24.

	
Notice of Certain Events

	
31

	
Section 25.

	
Notices

	
32

	
Section 26.

	
Supplements and Amendments

	
32

	
Section 27.

	
Successors

	
33

	
Section 28.

	
Determinations and Actions by the Board of Directors, etc

	
33

	
Section 29.

	
Benefits of this Agreement

	
33

	
Section 30.

	
Severability

	
33

	
Section 31.

	
Governing Law

	
34

	
Section 32.

	
Counterparts

	
34

	
Section 33.

	
Descriptive Headings

	
34

	 	 	 
	EXHIBITS	 	 
	 	 	 
	Exhibit A -- 	Form of Rights Certificates	 
	Exhibit B -- 	Form of Summary of Rights	 
	Exhibit C -- 	Form of Certificate of Designation	 

                                                                                             

  

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RIGHTS AGREEMENT

 

RIGHTS AGREEMENT, dated as of November 17, 2010 (the “Agreement”), between IFM Investments Limited, a Cayman corporation (the “Company”), and American Stock Transfer & Trust Company, L.L.C., a New York limited liability trust company (the “Rights Agent”).

 

W I T N E S S E T H:

 

WHEREAS, on November 17, 2010 (the “Rights Issuance Authorization Date”), the Board of Directors of the Company (the “Board”) authorized the issuance of one Right (as hereinafter defined) for each Ordinary Share (as hereinafter defined) of the Company outstanding at the close of business on November 29, 2010 (the “Record Date”), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for each Ordinary Share of the Company issued between the Record Date and the Distribution Date (as hereinafter defined) and in certain other circumstances provided herein, each Right initially representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions hereinafter set forth (the “Rights”);

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

 

Section 1.         Certain Definitions.  For purposes of this Agreement, the following terms have the meanings indicated:

 

(a)           “Acquiring Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15 percent or more of the Ordinary Shares then outstanding, but shall not include:

 

(i)              the Company, any Subsidiary of the Company, any employee benefit or compensation plan of the Company or of any of its Subsidiaries or any Person organized, appointed or established by the Company and holding Ordinary Shares for or pursuant to the terms of any such employee benefit or compensation plan;

 

(ii)             any such Person who or which, together with all Affiliates and Associates of such Person, has become and is the Beneficial Owner of 15 percent or more of the Ordinary Shares at the time outstanding as the result of (x) a change in the aggregate number of Ordinary Shares outstanding since the last date on which such Person acquired Beneficial Ownership of any Ordinary Shares or (y) an  adjustment to the number of Ordinary Shares issuable upon exchange or conversion of securities held by them if such adjustments arise in accordance with the terms of agreements or notes outstanding on the date hereof, unless and until such Person, after becoming aware that such Person has become the Beneficial Owner of 15 percent or more of the then outstanding Ordinary Shares, acquires beneficial ownership of additional Ordinary Shares representing one percent or more of the Ordinary Shares (other than as a result of any further adjustments of a similar nature);

 

  

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(iii)            any such Person who or which, together with all Affiliates and Associates of such Person, has become and is the Beneficial Owner of 15 percent or more of the Ordinary Shares at the time outstanding as the result of the acquisition by such Person or one or more of its Affiliates or Associates of Beneficial Ownership of additional Ordinary Shares if such Person has reported or is required to report such ownership (but less than 20 percent) on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company and such acquisition was made without the knowledge of such Person (as determined in good faith by the Board) that such Person or one or more of its Affiliates or Associates would thereby become an Acquiring Person for purposes of this Agreement; provided that, if such Person (x) fails, within 10 Business Days of being requested by the Company to advise it regarding the same, to certify to the Company that such Person acquired Ordinary Shares in excess of 14.9 percent inadvertently or without knowledge of the terms of the Rights, or (y) acquires, after the Person becomes aware of the terms of the Rights and while the Beneficial Owner of more than 14.9 percent of the outstanding Ordinary Shares, Beneficial Ownership of additional Ordinary Shares, such Person, as of such time, shall be deemed an Acquiring Person;

 

(iv)            any such Person who is, as of the close of business on the date hereof, Beneficial Owner of 15 percent or more of the outstanding Ordinary Shares (each such Person, an “Excluded Person”), unless and until such Excluded Person shall acquire after the date hereof, without the prior approval of the Board, Beneficial Ownership of additional Ordinary Shares representing one percent or more of the Ordinary Shares then outstanding (other than any such ownership resulting from (a) the receipt, exercise or vesting of any options or restricted shares, in each case, granted, whether prior to or after the date hereof, to such Excluded Person (or its Affiliates or Associates) under any employee benefit or compensation plan of the Company or any of its Subsidiaries, (b) share purchases by any financial institution (or its Affiliates or Associates) in the ordinary course of its trading activities, (c) adjustments, after the date hereof, to the number of Ordinary Shares issuable upon exchange or conversion of outstanding securities if such adjustments arise in accordance with the terms of agreements or notes outstanding on the date hereof, (d) stock splits, stock dividends or similar transactions, (e) the acquisition of shares not in excess of any shares (as adjusted for stock splits, stock dividends or similar transactions) divested by such Person (or its Affiliates or Associates) after the date hereof or (f) the acquisition of shares as a result of the exercise of rights of first refusal, preemptive rights or other similar arrangements in effect on the date hereof). For the avoidance of doubt, a change in the form of beneficial ownership, such as the exercise of options or exchange or conversion of exchangeable or convertible securities, shall not in itself cause a Person to become an Acquiring Person; and

 

(v)             any Person serving as a depositary or custodian regarding securities of the Company trading on a registered securities exchange.

 

(b)           “Act” shall mean the Securities Act of 1933, as amended.

 

  

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(c)           “Adjustment Shares” shall have the meaning set forth in Section 11(a)(ii) hereof.

 

(d)           “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

 

(e)           “Agreement” shall have the meaning set forth in the preamble to this Agreement.

 

(f)           A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “beneficially own,” any securities:

 

(i)              which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, owns or has the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the satisfaction of one or more conditions (whether or not within the control of such Person), upon compliance with regulatory requirements or otherwise) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, a Depositary Share or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event (as hereinafter defined), or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the Distribution Date (as hereinafter defined) or pursuant to Section 3(a) or Section 22 hereof (the “Original Rights”) or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights; or

 

(ii)             which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding:  (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or

 

(iii)            which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding

 

  

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(whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (f)) or disposing of any voting securities of the Company; provided, however, that any shareholder of the Company, with affiliate(s), associate(s) or other person(s) who may be deemed representatives of it serving as director(s) of the Company, shall not be deemed to beneficially own securities held by other Persons solely as a result of (i) Persons affiliated or otherwise associated with such shareholder serving as directors or taking any action in connection therewith, (ii) discussing the status of its shares with the Company or other shareholders of the Company similarly situated or (iii) voting or acting in a manner similar to other shareholders similarly situated, absent a specific finding by the Board of an express agreement among such shareholders to act in concert with one another as shareholders so as to cause, in the good faith judgment of the Board, each such shareholder to be the Beneficial Owner of the shares held by the other shareholder(s); provided, however, that nothing in this paragraph (f) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of 90 days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of 90 days.

 

(g)           “Board” shall have the meaning set forth in the recitals of this Agreement.

 

(h)           “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

 

(i)           “close of business” on any given date shall mean 5:00 P.M., New York time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.

 

(j)           “Company” shall have the meaning set forth in the preamble to this Agreement.

 

(k)           “Current Market Price” shall have the meaning determined in accordance with Section 11(d)(i) hereof.

 

(l)           “Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(m)           “Depositary Shares” shall mean the American Depositary Shares representing class A ordinary shares of the Company as deposited with the depositary JPMorgan Chase Bank, N.A. in accordance with the deposit agreement, a form of which is filed with the Company’s Form F-6 dated January 7, 2010. Notwithstanding anything in this Agreement to the contrary, until the Distribution Date, reference to Ordinary Shares underlying the Depositary Shares shall be deemed to include any associated rights issued hereunder.

 

  

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(n)           “Distribution Date” shall have the meaning set forth in Section 3(a) hereof.

 

(o)           “Equivalent Preferred Shares” shall have the meaning set forth in Section 11(b) hereof.

 

(p)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(q)           “Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

 

(r)           “Final Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

 

(s)           “NASDAQ” shall mean the National Association of Securities Dealers Automated Quotation System.

 

(t)           “NYSE” shall mean the New York Stock Exchange.

 

(u)           “Ordinary Shares” when used with reference to the Company shall mean the ordinary shares (including class A ordinary shares and class B ordinary shares), par value $0.001 per share, of the Company at the date hereof or any other shares resulting from successive changes or reclassifications of the ordinary shares.  “Ordinary Shares” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person.

 

(v)           “Ordinary Share Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(w)          “Original Rights” shall have the meaning set forth in Section 1(f)(i) hereof.

 

(x)           “Person” shall mean any individual, firm, corporation, partnership, limited liability company, trust, association, syndicate or other equity and includes, without limitation, an unincorporated group of persons who, by formal or informal agreement or arrangement, have embarked on a common purpose or act.

 

(y)           “Preferred Shares” shall mean shares of Series A Junior Participating Preferred Shares, par value $0.001 per share, of the Company, containing terms substantially as set forth in the terms of issue attached as Exhibit C hereto, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Shares authorized to permit the full exercise of the Rights, any other series of preferred shares of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Shares.

 

  

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(z)           “Principal Party” shall have the meaning set forth in Section 13(b) hereof.

 

(aa)         “Purchase Price” shall have the meaning set forth in Section 4(a) hereof.

 

(bb)         “Record Date” shall have the meaning set forth in the recitals of this Agreement.

 

(cc)         “Rights” shall have the meaning set forth in the recitals of this Agreement.

 

(dd)         “Rights Agent” shall have the meaning set forth in the preamble of this Agreement.

 

(ee)         “Rights Certificate” shall have the meaning set forth in Section 3(a) hereof.

 

(ff)          “Rights Issuance Authorization Date” shall have the meaning set forth in the recitals of this Agreement.

 

(gg)         “Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii) hereof.

 

(hh)         “Section 11(a)(ii) Trigger Date” shall mean any event described in Section 11(a)(iii) hereof.

 

(ii)          “Section 13 Event” shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof.

 

(jj)          “Share Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed or amended pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.

 

(kk)         “Spread” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(ll)           “Subsidiary” shall mean, with reference to any Person, any corporation or other entity of which an amount of securities or other ownership interests having ordinary voting power sufficient to elect at least a majority of the directors or other Persons having similar functions of such corporation or other entity are at the time, directly or indirectly, beneficially owned, or otherwise controlled by such Person.

 

(mm)       “Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(nn)         “Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.

 

  

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(oo)         “Trading Day” shall mean a day on which the principal national securities exchange on which the Ordinary Shares or Depositary Shares are listed or admitted to trading is open for the transaction of business or, if the Ordinary Shares and Depositary Shares are not listed or admitted to trading on any national securities exchange, a Business Day.

 

(pp)         “Triggering Event” shall mean any Section 11(a)(ii) Event or any Section 13 Event.

 

Section 2.         Appointment of Rights Agent.  The Company hereby appoints the Rights Agent to act as rights agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Ordinary Shares in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable.

 

Section 3.         Issuance of Rights Certificates.

 

(a)           Until the earlier of (i) the close of business on the tenth Business Day after the Share Acquisition Date (or, if the tenth Business Day after the Share Acquisition Date occurs before the Record Date, the close of business on the Record Date), or (ii) the close of business on the tenth Business Day (or such later date as the Board shall determine) after the date that an offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would become an Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) and (c) of this Section 3) by the certificates for the Ordinary Shares registered in the names of the holders of the Ordinary Shares (which certificates for Ordinary Shares shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying Ordinary Shares (including a transfer to the Company).  As soon as practicable after the Distribution Date, but subject to the following sentence, the Rights Agent will send by first-class, insured, postage-prepaid mail, to each registered holder of the Ordinary Shares as of the close of business on the Distribution Date, at the address of such holder shown in the register of members of the Company, one or more rights certificates, in substantially the form of Exhibit A hereto (the “Rights Certificate(s)”), evidencing one Right for each Ordinary Share so held, subject to adjustment as provided herein.  To the extent that a Triggering Event under Section 11(a)(ii) hereof has also occurred, the Company may implement such procedures, as it deems appropriate in its sole discretion, to minimize the possibility that Rights are received by Persons whose Rights would be void under Section 7(e) hereof.  In the event that an adjustment in the number of Rights per Ordinary Share has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments so that Rights Certificates representing only whole numbers of Rights are distributed (in accordance with Section 14(a) hereof).  As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates.

 

  

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(b)           The Company will make available, as promptly as practicable following the Record Date, a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit B (the “Summary of Rights”) to any holder of Rights who may so request from time to time prior to the Expiration Date.  With respect to certificates for the Ordinary Shares outstanding as of the Record Date, or issued subsequent to the Record Date, unless and until the Distribution Date shall occur, the Rights will be evidenced by such certificates for the Ordinary Shares (or in the absence of certificates, by notations in the register of members) and the registered holders of the Ordinary Shares shall also be the registered holders of the associated Rights.  Until the earlier of the Distribution Date or the Expiration Date, the transfer of any Ordinary Shares in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such Ordinary Shares. Notwithstanding anything to the contrary set forth in this Agreement, upon the effectiveness of a termination pursuant to Section 23 hereof, the Company shall not thereafter issue any additional Rights and, for the avoidance of doubt, no Rights shall be attached to or shall be issued with any Ordinary Shares (including any Ordinary Shares issued pursuant to an exchange) at any time thereafter.

 

(c)           Rights shall be issued in respect of all Ordinary Shares which are issued (whether originally issued or transferred to third parties by wholly owned Subsidiaries of the Company) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date.  Certificates representing such Ordinary Shares shall also be deemed to be certificates for Rights, and shall bear the following legend:

 

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement (as originally executed and as it may be amended from time to time) between IFM Investments Limited (the “Company”) and the Rights Agent thereunder (the “Rights Agent”) dated as of November 17, 2010 (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the office of the Rights Agent.  Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate.  The Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing,  without charge, promptly after receipt of a written request therefor.  Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.

 

With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Ordinary Shares represented by such certificates shall be evidenced by such certificates alone and registered holders of Ordinary Shares shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Ordinary Shares represented by such certificates. In the event that Ordinary Shares are not represented by certificates, references in this Agreement to certificates shall be deemed to refer to the notations in the register of members reflecting ownership of such shares.

 

  

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(d)           Notwithstanding anything to the contrary in this Agreement, the Company will cause any transfer agent for the Ordinary Shares to cooperate with the Rights Agent and to supply the Rights Agent with such information as it reasonably requests in order for it to fulfill its responsibilities under this Agreement.

 

Section 4.         Form of Rights Certificates.

 

(a)           The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage.  Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of one one-hundredths of a Preferred Share as shall be set forth therein at the price set forth therein (such exercise price per one one-hundredth of a share, the “Purchase Price”), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

 

(b)           Any Rights Certificate issued pursuant to Section 3(a), Section 11(a)(i) or Section 22 hereof that represents Rights beneficially owned by:  (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend:

 

The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement).  Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement.

 

Section 5.         Countersignature and Registration.

 

(a)           The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, its Vice Chairman or any

 

  

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Executive Vice President, either manually or by facsimile or .pdf signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile or .pdf signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile or pdf signature and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such person was not such an officer.

 

(b)           Following the Distribution Date, the Rights Agent will keep, or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder.  Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.

 

Section 6.         Transfer, Split-Up, Consolidation and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

 

(a)           Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, consolidated or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a Preferred Share (or, following a Triggering Event, Ordinary Shares, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase.  Any registered holder desiring to transfer, split up, consolidate or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, consolidated or exchanged at the principal office or offices of the Rights Agent designated for such purpose.  Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.  Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested.  The Company may require payment from any holder of a Rights Certificate of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, consolidation or exchange of Rights Certificates.

 

  

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(b)           Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

 

Section 7.         Exercise of Rights; Purchase Price; Expiration Date of Rights.

 

(a)           Subject to Section 7(e) hereof, at any time after the Distribution Date the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-hundredths of a Preferred Share (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, and an amount equal to any tax or charge required to be paid under Section 9(e), at or prior to the earlier of (i) 5:00 P.M., New York time, on November 17, 2013 or such earlier or later date as may be established by the Board prior to the expiration of the Rights (such date, as it may be extended by the Board, the “Final Expiration Date”), or, if earlier, (ii) the time at which the Rights are terminated as provided in Section 23 hereof (the earlier of (i) and (ii) being herein referred to as the “Expiration Date”).

 

(b)           The Purchase Price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right initially shall be $1.00, and shall be subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph (c) below.

 

(c)           Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-hundredth of a Preferred Share (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Sections 7(f) and 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-hundredths of a Preferred Share to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of Preferred Shares issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to

 

  

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comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or, upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate.  The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company.  In the event that the Company is obligated to issue other securities (including Ordinary Shares) of the Company and/or pay cash pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities and/or cash are available for distribution by the Rights Agent, if and when appropriate.  The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole Preferred Shares would be issued.

 

(d)           In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof.

 

(e)           Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise.  The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its Affiliates, Associates or their respective transferees hereunder.

 

(f)           Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner

 

  

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(or former Beneficial Owner) or Affiliates or Associates of such Beneficial Owner as the Company or the Rights Agent shall reasonably request.

 

(g)           A committee of the Board, comprising only directors of the Company who shall have been determined by the Board to be independent under NYSE listing standards, shall review this Agreement at least annually in order to consider whether the maintenance of this Agreement continues to be in the best interests of the Company and its shareholders.  Following each such review, such committee will report its conclusions to the Board, including any recommendation in light thereof as to whether this Agreement should be modified or the Rights should be terminated.

 

Section 8.         Cancellation and Destruction of Rights Certificates.  All Rights Certificates surrendered for the purpose of exercise, transfer, split-up, consolidation or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement.  The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

 

Section 9.         Reservation and Availability of Ordinary Shares and Preferred Shares.

 

(a)           The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares (and, following the occurrence of a Triggering Event, out of its authorized and unissued Ordinary Shares and/or other securities), the number of Preferred Shares (and, following the occurrence of a Triggering Event, Ordinary Shares and/or other securities) that, as provided in this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights.

 

(b)           So long as the Preferred Shares (and, following the occurrence of a Triggering Event, Ordinary Shares and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.

 

(c)           The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting

 

  

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the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the Expiration Date.  The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights.  The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective.  Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension has been rescinded.  In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective.  Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law, or a registration statement shall not have been declared effective.

 

(d)           The Company covenants and agrees, to the extent permitted by applicable law, that it will take all such action as may be necessary to ensure that all one one-hundredths of a Preferred Share (and, following the occurrence of a Triggering Event, Ordinary Shares and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.

 

(e)           The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-hundredths of a Preferred Share (or Ordinary Shares and/or other securities, as the case may be) upon the exercise of Rights.  The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-hundredths of a Preferred Share (or Ordinary Shares and/or other securities, as the case may be) in respect of a name other than that of the registered holder of the Rights Certificates evidencing Rights surrendered for exercise, nor shall the Company be required to issue or deliver any certificates for a number of one one-hundredths of a Preferred Share (or Ordinary Shares and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificates at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.

 

(f)           The Company reserves the right, in lieu of issuing Ordinary Shares to holders of Rights, to deposit Ordinary Shares with a depositary agent and to arrange for the issuance of the appropriate number of Depositary Shares.

 

Section 10.       Preferred Shares Record Date.  Each person in whose name any certificate for a number of one one-hundredths of a Preferred Share (or Ordinary Shares and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes

 

  

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be deemed to have become the registered holder, and entitled to be registered in the register of members as the holder, of such fractional Preferred Shares (or Ordinary Shares and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the register of members or transfer books of the Company are closed, such Person shall be deemed to have become, and entitled to be registered in the register of members as, the registered holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the register of members or transfer books of the Company are open.  Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any meetings or proceedings of the Company, except as provided herein.

 

Section 11.       Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.  The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

 

(a)

 

(i)              In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) consolidate the outstanding Preferred Shares into a smaller number of shares, or (D) issue any shares in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation, amalgamation, scheme of arrangement or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, consolidation or reclassification, and the number and kind of Preferred Shares or Ordinary Shares, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of Preferred Shares or Ordinary Shares, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the register of members or transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, consolidation or reclassification.  If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

 

(ii)             In the event that any Person shall, at any time after the Rights Issuance Authorization Date, become an Acquiring Person, unless the event

 

  

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causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof, then promptly following the occurrence of such event, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-hundredths of a Preferred Share, such number of Ordinary Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50 percent of the Current Market Price (determined pursuant to Section 11(d) hereof) per Ordinary Share on the date of such first occurrence (such number of shares, the “Adjustment Shares”). For the purposes of Section 11(a)(ii), Ordinary Shares shall be deemed to mean the class A ordinary shares of the Company. All other issuances of Ordinary Shares hereunder shall be class A ordinary shares and/or class B ordinary shares, as designated by the Board of Directors.

 

(iii)            In the event that the number of Ordinary Shares which is authorized by the Company’s Amended and Restated Memorandum and Articles of Association, as it may be amended from time to time, but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall (A) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), and (B) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) a reduction in the Purchase Price, provided such reduction is not below the aggregate par value of the Adjustment Shares, (3) Ordinary Shares or other equity securities of the Company (including, without limitation, preferred shares, or units of preferred shares, which the Board has deemed to have essentially the same value or economic rights as Ordinary Shares (such shares being referred to as “Ordinary Share Equivalents”)), (4) debt securities of the Company, or (5) any combination of the foregoing, having an aggregate value equal to the Current Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within 30 days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s right of termination pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price (except for the aggregate par value of the Ordinary Shares), Ordinary Shares (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread.  For purposes of the preceding sentence, the term “Spread” shall mean the excess of (i) the Current Value over (ii) the Purchase Price.  If the Board determines in good faith that it is likely that sufficient additional

 

  

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Ordinary Shares could be authorized for issuance upon exercise in full of the Rights, the 30 day period set forth above may be extended to the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for an increase in the authorized capital of the Company (such 30 day period, as it may be extended, is herein called the “Substitution Period”).  To the extent that the Company determines that action should be taken pursuant to the first and/or third sentences of this Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (2) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such shareholder approval for such increase in the authorized capital of the Company and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof.  In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per share of the Ordinary Shares on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Ordinary Share Equivalent shall be deemed to equal the Current Market Price per share of the Ordinary Shares on such date.

 

(b)           In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them to subscribe for or purchase (for a period expiring within  45 calendar days after such record date) Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (“Equivalent Preferred Shares”)) or securities convertible into Preferred Shares or Equivalent Preferred Shares at a price per Preferred Share or per share of Equivalent Preferred Shares (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Preferred Shares) less than the Current Market Price (as determined pursuant to Section 11(d) hereof) per Preferred Share on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date, plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or Equivalent Preferred Shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of Preferred Shares outstanding on such record date, plus the number of additional Preferred Shares and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible).  In case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights.  Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

  

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(c)           In case the Company shall fix a record date for a distribution to all holders of Preferred Shares (including any such distribution made in connection with a scheme of arrangement, consolidation or merger in which the Company is the continuing or surviving corporation) of cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Shares, but including any dividend payable in shares other than Preferred Shares) or evidences of indebtedness, or of subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price (as determined pursuant to Section 11(d) hereof) per Preferred Share on such record date, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a Preferred Share, and the denominator of which shall be such Current Market Price (as determined pursuant to Section 11(d) hereof) per Preferred Share.  Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed.

 

(d)

 

(i)              Current Market Price per Ordinary Share on any date shall be deemed to be (1) for the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the average of the daily closing prices per such Ordinary Share for the 30 consecutive Trading Days immediately prior to such date, and (2) for purposes of computations made pursuant to Section 11(a)(iii) hereof, the average of the daily closing prices per such Ordinary Share for the ten consecutive Trading Days immediately following such date; provided, that in the event that the Current Market Price per Ordinary Share is determined during a period following the announcement by the issuer of such Ordinary Shares of (A) a dividend or distribution on such Ordinary Shares payable in such Ordinary Shares or securities convertible into such Ordinary Shares (other than the Rights), or (B) any subdivision, consolidation or reclassification of such Ordinary Shares, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, consolidation  or reclassification shall not have occurred prior to the commencement of the requisite 30 Trading Day or ten Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading.  The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported by (w) the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, (x) if the Ordinary Shares are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Ordinary Shares are listed or admitted to trading or, (y) if the Ordinary Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such

 

  

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other system then in use, or, (z) if on any such date the Ordinary Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Ordinary Shares selected by the Board.

 

(ii)             For the purpose of any computation hereunder, if the Ordinary Shares are publicly traded, the “current per share market price” of the Ordinary Shares shall be determined in accordance with the method set forth in Section 11(d)(i), and if the Ordinary Shares are not publicly traded and Depositary Shares are publicly traded, the “current per share market price of the Ordinary Shares shall be determined in accordance with the method set forth in Section 11(d)(i) by ascribing a value to the Ordinary Shares by reference to the trading prices of the Depositary Shares (taking into account the number of Ordinary Shares represented by each Depositary Share). If  neither the Ordinary Shares nor the Depositary Shares are publicly traded, the Current Market Price per share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

(iii)            For the purpose of any computation hereunder, the Current Market Price per Preferred Share shall be determined in the same manner as set forth above for the Ordinary Shares in clause (i) of this Section 11(d).  If the Current Market Price per Preferred Share cannot be determined in the manner provided above or if the Preferred Shares are not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per Preferred Share shall be conclusively deemed to be an amount equal to 100 (as such number may be appropriately adjusted for such events as share subdivisions, share dividends and recapitalizations with respect to the Ordinary Shares occurring after the date of this Agreement) multiplied by the Current Market Price per share of the Ordinary Shares.  If neither the Ordinary Shares, Depositary Shares nor the Preferred Shares are publicly held or so listed or traded, Current Market Price per share of the Preferred Shares shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

(e)           Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of an Ordinary Share or other share or one-millionth of a Preferred Share, as the case may be.  Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date.

 

(f)           If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to

 

  

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adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.

 

(g)           All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

(h)           Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

 

(i)           The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right.  Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.  This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days later than the date of the public announcement.  If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to registered holders of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such registered holders in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment.  Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the registered holders of Rights Certificates on the record date specified in the public announcement.

 

  

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(j)           Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of one one-hundredth of a share which were expressed in the initial Rights Certificates issued hereunder.

 

(k)           Before taking any action that would cause an adjustment reducing the Purchase Price below the then stated value, if any, of the number of one one-hundredths of a Preferred Share issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one one-hundredths of a Preferred Share at such adjusted Purchase Price.

 

(l)           In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-hundredths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.

 

(m)          Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at less than the Current Market Price, (iii) issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, (iv) share dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareholders.

 

(n)           The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (iii) enter into a scheme of arrangement, or agreement in relation thereto, or (iv) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating more than 50 percent of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger, scheme of arrangement or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights

 

  

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or (y) prior to, simultaneously with or immediately after such consolidation, merger, scheme of arrangement or sale, the shareholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates.

 

(o)           The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

 

(p)           Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Issuance Authorization Date and prior to the Distribution Date (i) declare a dividend on the outstanding Ordinary Shares payable in Ordinary Shares, (ii) subdivide the outstanding Ordinary Shares, or (iii) consolidate the outstanding Ordinary Shares into a smaller number of shares, the number of Rights associated with each Ordinary Share then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each Ordinary Share following any such event shall equal the result obtained by multiplying the number of Rights associated with each Ordinary Share immediately prior to such event by a fraction the numerator which shall be the total number of Ordinary Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Ordinary Shares outstanding immediately following the occurrence of such event.

 

Section 12.       Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Shares and the Ordinary Shares, a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing Ordinary Shares) in accordance with Section 24 hereof.  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained.

 

Section 13.       Consolidation, Merger, Scheme of Arrangement or Sale or Transfer of Assets, Cash Flow or Earning Power.

 

(a)           In the event that, following the Share Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, enter into a scheme of arrangement with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation, scheme of arrangement or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, enter into a scheme of arrangement with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation, scheme of arrangement or merger and, in connection with such consolidation, scheme of arrangement or merger, all or part of the outstanding Ordinary Shares shall be

 

  

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cancelled or changed into or exchanged for shares or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets, cash flow or earning power aggregating more than 50 percent of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable Ordinary Shares of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-hundredths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event), and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50 percent of the Current Market Price (determined pursuant to Section 11(d)(i) hereof) per share of the Ordinary Shares of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of Ordinary Shares) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Ordinary Shares thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event.

 

 

(b)           “Principal Party” shall mean:

 

(i)              in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a) hereof, the Person that is the issuer of any securities into which Ordinary Shares of the Company are converted in such scheme of arrangement, merger or consolidation, and if no securities are so issued, the Person that is the other party to such scheme of arrangement, merger or consolidation; and

 

(ii)             in the case of any transaction described in clause (z) of the first sentence of Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions;

 

  

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provided, however, that in the case of either (b)(i) or (b)(ii), (1) if the Ordinary Shares of such Person are not at such time and have not been continuously over the preceding 12 month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Ordinary Shares of which are and have been so registered, “Principal Party” shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Ordinary Shares of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the Ordinary Shares having the greatest aggregate market value.

 

(c)           The Company shall not consummate any such consolidation, scheme of arrangement, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized Ordinary Shares which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, scheme of arrangement, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will

 

(i)              prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date;

 

(ii)             take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and

 

(iii)            will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act.

 

The provisions of this Section 13 shall similarly apply to successive schemes of arrangement  or mergers or consolidations or sales or other transfers.  In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).

 

Section 14.                        Fractional Rights and Fractional Shares.

 

(a)           The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights

 

  

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Certificates which evidence fractional Rights.  Upon the Distribution Date, after aggregating the fractional Rights of each individual shareholder into whole Rights, any remaining fractions that do not equal a whole Right when aggregated, and which would otherwise be issuable, shall be cancelled without consideration.

 

(b)           The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share).  Any such fractions of Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share shall be cancelled without consideration.

 

(c)           Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of Ordinary Shares upon exercise of the Rights or to distribute certificates which evidence fractions of Ordinary Shares.  Any such fractions of Ordinary Shares shall be cancelled without consideration.

 

(d)           The holder of a Right by the acceptance of the Rights expressly waives such holder’s right to receive any fractional Rights or any fractional shares upon exercise of a Right.

 

Section 15.                        Rights of Action.  All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Ordinary Shares); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Ordinary Shares), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Ordinary Shares), may, in the holder’s own behalf and for the holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, the holder’s right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.

 

Section 16.                        Agreement of Rights Holders.  Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

 

(a)           prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Ordinary Shares or Depositary Shares representing such Ordinary Shares;

 

(b)           after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of

 

  

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the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed;

 

(c)           subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Ordinary Shares certificate (or, in the absence of such certificate, a notation in the register of members in respect of ownership of Ordinary Shares)) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Ordinary Shares certificate (or notices provided to holders of Ordinary Shares as recorded in the register of members) made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and

 

(d)           notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.

 

Section 17.      Rights Certificate Holder Not Deemed a Shareholder.  No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-hundredths of a Preferred Share or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.

 

Section 18.       Concerning the Rights Agent.

 

(a)           The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for any action taken or omitted by the Rights Agent in connection with the acceptance and administration of this

 

  

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Agreement, including the costs and expenses of defending against any claim of liability in the premises.

 

(b)           The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Ordinary Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

 

Section 19.       Merger or Consolidation or Change of Name of Rights Agent.

 

(a)           Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the corporate trust, share transfer or other shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

 

(b)           In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

 

Section 20.       Duties of Rights Agent.  The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:

 

(a)           The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

 

  

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(b)           Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, the Vice Chairman, any Executive Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

 

(c)           The Rights Agent shall be liable hereunder only for its and its directors’, officers’, employees’, affiliates’, agents’, advisors’, and representatives’ own negligence, bad faith or willful misconduct.

 

(d)           The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.

 

(e)           The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Ordinary Shares or Preferred Shares to be issued pursuant to this Agreement or any Rights Certificate or as to whether any Ordinary Shares or Preferred Shares will, when so issued, be validly authorized and issued, fully paid and nonassessable.

 

(f)           The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

 

(g)           The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer.

 

  

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(h)           The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.

 

(i)           The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct; provided, however, reasonable care was exercised in the selection and continued employment thereof.

 

(j)           No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder (other than internal costs incurred by the Rights Agent in providing services to the Company in the ordinary course of its business as Rights Agent) or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

 

(k)           If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

 

Section 21.       Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company, and to each transfer agent of the Ordinary Shares and Preferred Shares, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first-class mail.  The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Ordinary Shares and Preferred Shares, by registered or certified mail, and, if such removal occurs after the Distribution Date, to the holders of the Rights Certificates by first-class mail.  If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized and doing business under the laws of the United States or of any other state thereof, in good standing, and which is authorized under such laws to exercise

 

  

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corporate trust, share transfer or shareholder services powers or (b) an affiliate of a Person described in clause (a) of this sentence.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent under this Agreement without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Ordinary Shares and the Preferred Shares, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates.  Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

Section 22.       Issuance of New Rights Certificates.  Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance or sale of Ordinary Shares following the Distribution Date and prior to the termination or expiration of the Rights, the Company (a) shall, with respect to Ordinary Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company (except as may otherwise be provided in the instrument(s) governing such securities), and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

 

Section 23.       Termination.

 

(a)           The Board may, at its option, at any time prior to the earlier of (i) the close of business on the tenth Business Day following the Share Acquisition Date (or, if the Share Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth Business Day following the Record Date), or (ii) the Final Expiration Date, terminate all but not less than all of the then outstanding Rights for no consideration or amend this Agreement to change the Final Expiration Date to another date, including without limitation, an earlier date.  Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company’s right of termination hereunder has expired.

 

  

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(b)           Immediately upon the action of the Board ordering the termination of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate.  Promptly after the action of the Board ordering the termination of the Rights, the Company shall give notice of such termination to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Ordinary Shares.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.

 

Section 24.       Notice of Certain Events.

 

(a)           In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in shares of any class to the holders of Preferred Shares or to make any other distribution to the holders of Preferred Shares (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), or (iv) to effect any consolidation, scheme of arrangement or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50 percent of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such share dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, scheme of arrangement, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Preferred Shares, whichever shall be the earlier.

 

(b)           In the event that any Section 11(a)(ii) Event shall occur, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Shares shall be deemed thereafter to refer to Ordinary Shares and/or, if appropriate, other securities issuable upon exercise of the Rights.

 

  

31

  

Section 25.       Notices.  Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent by the Company) as follows:

 

 

IFM Investments Limited

26/A, East Wing, Hanwei Plaza

No. 7 Guanghua Road, Chaoyang District

Beijing 100004, People’s Republic of China

Attention:  Corporate Secretary

 

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

 

American Stock Transfer & Trust Company, L.L.C.

6201 15th Avenue

Brooklyn, NY 11219

Attention:  General Counsel

 

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing Ordinary Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

 

Section 26.       Supplements and Amendments.  Prior to the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing Ordinary Shares.  From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, (iv) to amend this Agreement in accordance with Section 23(a) hereof or (v) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person).  Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything herein to the contrary, this Agreement may not be amended (other than pursuant to clauses (i) or (ii) of the preceding sentence) at a time when the Rights are not terminable.

 

  

32

  

Section 27.       Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

 

Section 28.       Determinations and Actions by the Board of Directors, etc.  For all purposes of this Agreement, any calculation of the number of Ordinary Shares or any other class of shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Ordinary Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.  The Board  shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board  or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to terminate or not terminate the Rights or to amend the Agreement).  All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board  in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board, or any of the directors on the Board to any liability to the holders of the Rights.

 

Section 29.       Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Ordinary Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Ordinary Shares).

 

Section 30.       Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of termination set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth Business Day following the date of such determination by the Board.  Without limiting the foregoing, if any provision requiring a specific group of directors of the Company to act is held by any court of competent jurisdiction or other authority to be invalid, void or unenforceable, such determination shall then be made by the Board in accordance with applicable law and the Company’s Amended and Restated Articles of Association.

 

  

33

  

Section 31.       Governing Law.  This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of New York and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State without regard for its rules regarding conflict of laws.

 

Section 32.       Counterparts.  This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

Section 33.       Descriptive Headings.  Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

 

  

34

  

 

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

 

	 	
IFM Investments Limited

	 	  
	 	
By

	
 /s/ Donald Zhang

	  
	 	  	
Name: Donald Zhang

	 	  	
Title:  Chairman and CEO

	 	  
	 	  
	 	
American Stock Transfer & Trust Company, L.L.C.

	 	  
	 	
By

	
 /s/ Herbert J. Lemmer

	  
	 	  	
Name: Herbert J. Lemmer

	 	  	
Title:  Vice President

  

35

  

 

Exhibit A

 

 

[Form of Rights Certificate]

 

	
Certificate No. R-

	
________ Rights

 

NOT EXERCISABLE AFTER NOVEMBER 17, 2013 OR SUCH EARLIER DATE AS THE RIGHTS ARE TERMINATED.  THE RIGHTS ARE SUBJECT TO TERMINATION AT THE OPTION OF THE COMPANY FOR NO CONSIDERATION ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.  [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).  ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1

 

Rights Certificate

 

IFM Investments Limited

 

This certifies that ______________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of November 17, 2010 (the “Rights Agreement”), between IFM Investments Limited, a Cayman Islands company (the “Company”), and American Stock Transfer & Trust Company, L.L.C., a New York limited liability trust company (the “Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M. (New York time) on November 17, 2013 or the Rights are earlier terminated, at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series A Junior Participating Preferred Shares (the “Preferred Shares”) of the Company, at a purchase price of $1.00 per one one-hundredth of a share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed.  The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of November 17, 2010, based on the Preferred Shares as constituted at such date.  The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole Preferred Shares will be issued.  Capitalized

___________________________

  

	
1

	
The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentence.

 

  

A-1

  

 

terms used in this Rights Certificate without definition shall have the meanings ascribed to them in the Rights Agreement.

 

Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.

 

As provided in the Rights Agreement, the Purchase Price and the number and kind of Preferred Shares or other securities, which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events.

 

This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent.

 

This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-hundredths of a Preferred Share as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase.  If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be terminated by the Company at its option for no consideration at any time prior to the earlier of the close of business on (i) the tenth Business Day following the Share Acquisition Date, and (ii) the Final Expiration Date.

 

No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts). The Company, at its election, may require that a number of Rights be exercised so that only whole Preferred Shares would be issued.

 

  

A-2

  

 

No holder of this Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give consent to or withhold consent from any corporate action, or, to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.

 

This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

 

  

A-3

  

 

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.

 

 

Dated as of ________________, 20__

 

	
ATTEST:

	  	
IFM INVESTMENTS LIMITED

	  	  	  
	  	  	
By

	  
	
Secretary

	  	  	
Title:

	  	  	  
	  	  	  
	
Countersigned:

	  	  
	  	  	  
	
AMERICAN STOCK TRANSFER & TRUST COMPANY, L.L.C.

	  	  
	  	  	  
	
By

	  	  	  
	  	
Authorized Signature

	  	  

 

 

  

A-4

  

 

[Form of Reverse Side of Rights Certificate]

 

 

FORM OF ASSIGNMENT

 

 

(To be executed by the registered holder if such

 

 

holder desires to transfer the Rights Certificate.)

 

 

FOR VALUE RECEIVED ____________________________________ hereby sells, assigns and transfers unto ________________________________________________________________________________

 

 

(Please print name and address of transferee)

 

 

 

this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint __________________ Attorney, to transfer the within Rights Certificate on the books of the within named Company, with full power of substitution.

Dated: __________________,__

	  	  	  
	  	  	
Signature

 

Signature Guaranteed:

 

  

A-5

  

 

Certificate

 

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1)  this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

 

(2)  after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

	
Dated: _____________,_____

	  	  
	  	  	
Signature

	  	  	  
	
Signature Guaranteed:

	  	  
	  	  	  

  

A-6

  

 

NOTICE

 

 

The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

  

A-7

  

 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise Rights represented by the Rights Certificate.)

 

 

To:  IFM Investments Limted

 

The undersigned hereby irrevocably elects to exercise __________ Rights represented by this Rights Certificate to purchase the Preferred Shares issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to:

 

Please insert social security

or other identifying number

 

	  
	
(Please print name and address)

 

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:

 

 

Please insert social security

or other identifying number

 

	  
	
(Please print name and address)

 

	  

 

Dated: __________________,__

 

 

 

	  	  	  
	  	  	
Signature

 

 

Signature Guaranteed:

 

  

A-8

  

 

Certificate

 

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1)  the Rights evidenced by this Rights Certificate [  ] are [  ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

 

(2)  after due inquiry and to the best knowledge of the undersigned, it [  ] did [  ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

	
Dated: _____________,_____

	  	  
	  	  	
Signature

	  	  	  
	
Signature Guaranteed:

	  	  
	  	  	  

  

A-9

  

 

NOTICE

 

 

The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

  

A-10

  

 

Exhibit B

 

FORM OF

 

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED SHARES

 

On November 17, 2010, the Board of Directors (the “Board”) of IFM Investments Limited (the “Company”) authorized the issuance of one right (a “Right”) for each outstanding ordinary share, par value $0.001 per share, of the Company (the “Ordinary Shares”), to shareholders as recorded in the register of members at the close of business on November 29, 2010 (the “Record Date”).  Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-hundredth of a share (a “Unit”) of Series A Junior Participating Preferred Shares, par value $0.001 per share (the “Series A Preferred Shares”) at a purchase price of $1.00 per Unit, subject to adjustment (the “Purchase Price”).  The description and terms of the Rights are set forth in a Rights Agreement (the “Rights Agreement”) between the Company and American Stock Transfer & Trust Company, L.L.C., as Rights Agent.

 

The Company has listed on the NYSE American Depositary Shares representing class A ordinary shares of the Company as deposited with the depositary JPMorgan Chase Bank, N.A. (“Depositary Shares”).  One Depositary Share represents 15 Ordinary Shares. Until the Distribution Date, reference to Ordinary Shares underlying the Depositary Shares shall be deemed to include any associated rights issued under the Rights Agreement.

 

In accordance with the Rights Agreement, a committee of independent directors will review no less frequently than annually that maintenance of the Rights Agreement continues to be in the best interest of our Company and its shareholder.

 

Rights Certificates; Exercise Period.

 

Initially, the Rights will be attached to all Ordinary Share certificates representing shares then outstanding, and no separate rights certificates (“Rights Certificates”) will be distributed.  Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Ordinary Shares and a distribution date (“Distribution Date”) will occur upon the earlier of (i) 10 Business Days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired beneficial ownership of 15% or more of the outstanding Ordinary Shares (the “Share Acquisition Date”), other than as a result of (x) repurchases of shares by the Company and (y) certain inadvertent actions by institutional or certain other shareholders as described in the Rights Agreement, and (ii) 10 Business Days (or such later date as the Board shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person; provided that a person will not be considered an Acquiring Person if at the date of the Rights Agreement such person, or group of affiliated or associated persons, beneficially owns 15% or more of the outstanding Ordinary Shares (an “Excluded Person), unless and until such Excluded Person acquires (subject to certain exceptions set forth in the Rights Agreement) an additional 1% or more of the Ordinary Shares without the Board’s approval.  Until the Distribution Date, (i) the Rights will be evidenced by the Ordinary Shares certificates (or, in the

 

  

B-1

  

 

absence of share certificates by the notations in the register of members) and will be transferred with and only with such Ordinary Shares, (ii) new Ordinary Share certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for Ordinary Shares outstanding will also constitute the transfer of the Rights associated with the Ordinary Shares represented by such certificates.  Pursuant to the Rights Agreement, the Company reserves the right to require prior to the occurrence of a Triggering Event (as defined below) that, upon any exercise of Rights, a number of Rights be exercised so that only whole Preferred Shares will be issued.

 

The Rights are not exercisable until the Distribution Date and will expire at 5:00 P.M. (New York Time) on November 17, 2013, unless such date is extended or the Rights are earlier terminated.

 

As soon as practicable after the Distribution Date, Rights Certificates will be mailed to registered holders of the Ordinary Shares as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Rights.  Except as otherwise determined by the Board, only Ordinary Shares issued prior to the Distribution Date will be issued Rights.

 

Flip-in Trigger.

 

In the event that a person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise, class A Ordinary Shares (or, in certain circumstances, cash or other securities of the Company) having a value equal to two times the exercise price of the Right. Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void.  However, Rights are not exercisable following the occurrence of the event set forth above until such time as the Rights are no longer terminable by the Company as set forth below.

 

For example, at an exercise price of $1.00 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $2.00 worth of Ordinary Shares (or other consideration, as noted above) for $1.00.  Assuming that the Ordinary Shares had a per share value of $5.00 at such time, the holder of each valid Right would be entitled to purchase  2 Ordinary Shares for $5.00.

Flip-over Trigger.

 

 

In the event that, at any time following the Share Acquisition Date, (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation, (ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Ordinary Shares of the Company are changed or exchanged, or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have the right to receive, upon

 

  

B-2

  

 

exercise, ordinary shares (or capital stock, as applicable) of the acquiring company having a value equal to two times the exercise price of the Right.  The events set forth in this paragraph and in the second preceding paragraph are referred to as the “Triggering Events.”

 

Equitable Adjustments.

 

The Purchase Price payable, and the number of Units of Preferred Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a share dividend on, or a subdivision, consolidation or reclassification of, the Preferred Shares, (ii) if holders of the Preferred Shares are granted certain rights or warrants to subscribe for Preferred Shares or convertible securities at less than the current market price of the Preferred Shares, or (iii) upon the distribution to holders of the Preferred Shares of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).

 

With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price.  No fractional Units will be issued.

 

Termination of Rights.

 

At any time until ten Business Days following the Share Acquisition Date, the Company may terminate the Rights in whole, but not in part, for no consideration.  Immediately upon the action of the Board ordering termination of the Rights, the Rights will terminate.

 

Amendment of Rights.

 

Any of the provisions of the Rights Agreement may be amended by the Board prior to the Distribution Date.  After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of Rights, to shorten or lengthen any time period under the Rights Agreement, or, in limited circumstances, to terminate the Rights.  The foregoing notwithstanding, no amendment  may be made at such time as the Rights are not terminable, except to cure any ambiguity or correct or supplement any provision contained in the Rights Agreement which may be defective or inconsistent with any other provision therein.

 

Miscellaneous.

 

Until a Right is exercised, the holder thereof, as such, will have no separate rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends in respect of the Rights.  While the distribution of the Rights will not be taxable to shareholders or to the Company, shareholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Ordinary Shares (or other consideration) of the Company or for ordinary shares of the acquiring company as set forth above.

 

A copy of the Rights Agreement has been or will be filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A or amendment to

 

  

B-3

  

 

such Form or a Current Report on Form 6-K.  A copy of the Rights Agreement is available free of charge from the Rights Agent.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference.

 

  

B-4

  

 

Exhibit C

 

FORM OF

CERTIFICATE OF DESIGNATION, PREFERENCES AND

RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED SHARES

 

Of

 

IFM INVESTMENTS LTD

 

(the “Company”)

 

 

Pursuant to Article 12 of the Amended and Restated Articles of Association of the Company (the “Articles”), the following resolutions were duly adopted at a meeting of the Board of Directors of the Company held on November 17, 2010:

 

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Company (the “Board”) in accordance with the provisions of the Articles, a series of preferred shares of the Company be and it hereby is created, and that the designation and amount thereof and the voting rights, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:

 

Section 1.         Designation and Amount.  The shares of such series shall be designated as “Series A Junior Participating Preferred Shares” (“Series A Preferred Shares”) and the number of shares constituting such series shall be 15 million.  Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of Series A Preferred Shares to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the exercise of any options, rights or warrants issuable upon conversion of any outstanding securities issued by the Company convertible into Series A Preferred Shares.

 

Section 2.         Dividends and Distributions.

 

(A)           Subject to the prior and superior rights of the holders of any series of preferred shares ranking prior and superior to the Series A Preferred Shares with respect to dividends, the holders of Series A Preferred Shares, in preference to the holders of ordinary shares, par value $0.001 per share, of the Company (“Ordinary Shares”), and of any other junior shares, shall be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Shares, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.10 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in Ordinary Shares or a subdivision of the outstanding Ordinary Shares (by reclassification or redesignation or

 

  

C-1

  

 

otherwise), declared on the Ordinary Shares since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Preferred Shares.  In the event the Company shall at any time after  November 17, 2010 (the “Rights Issuance Authorization Date”) (i) declare any dividend on Ordinary Shares payable in Ordinary Shares, (ii) subdivide the outstanding Ordinary Shares, or (iii) combine the outstanding Ordinary Shares into a smaller number of shares, then in each such case the amount to which holders of Series A Preferred Shares were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Ordinary Shares outstanding immediately after such event and the denominator of which is the number of Ordinary Shares that were outstanding immediately prior to such event.

 

(B)           The Company shall declare a dividend or distribution on the Series A Preferred Shares as provided in Paragraph (A) above immediately after it declares a dividend or distribution on the Ordinary Shares (other than a dividend payable in Ordinary Shares); provided that, in the event no dividend or distribution shall have been declared on the Ordinary Shares during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Shares shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

 

(C)           Dividends shall begin to accrue and be cumulative on outstanding Series A Preferred Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such Series A Preferred Shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series A Preferred Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board may fix a record date for the determination of holders of Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than thirty (30) days prior to the date fixed for the payment thereof.

 

Section 3.         Voting Rights.  The holders of Series A Preferred Shares shall have the following voting rights:

 

(A)           Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Shares shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the Shareholders of the Company.  In the event the Company shall at any time after the Rights Issuance Authorization Date (i) declare any dividend on Ordinary Shares payable in Ordinary Shares, (ii) subdivide the outstanding Ordinary Shares, or (iii) combine the outstanding Ordinary Shares into a smaller number of shares, then in each such case the number of votes per share to which holders of Series A Preferred Shares were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the

 

  

C-2

  

 

number of Ordinary Shares outstanding immediately after such event and the denominator of which is the number of Ordinary Shares that were outstanding immediately prior to such event.

 

(B)           Except as otherwise provided herein or by law, the holders of Series A Preferred Shares and the holders of Ordinary Shares entitled to vote shall vote together as one class on all matters submitted to a vote of Shareholders of the Company.

 

(C)           Except as set forth herein, holders of Series A Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Ordinary Shares entitled to vote as set forth herein) for taking any corporate action save as otherwise provided by law.

 

Section 4.         Certain Restrictions.

 

(A)           Whenever quarterly dividends or other dividends or distributions payable on the Preferred Shares as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on Series A Preferred Shares outstanding shall have been paid in full, the Company shall not

 

(i)         declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares  ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares;

 

(ii)        declare or pay dividends on or make any other distributions on any shares  ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Shares, except dividends paid ratably on the Series A Preferred Shares and all such parity Shares on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

 

(iii)       redeem or purchase or otherwise acquire for consideration any shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Preferred Shares, provided that the Company may at any time redeem, purchase or otherwise acquire any shares ranking in parity in exchange for any shares of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Preferred Shares; or

 

(iv)       purchase or otherwise acquire for consideration any  Series A Preferred Shares, or any shares  ranking on a parity with the Series A Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

 

(B)           The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares  of the Company unless the Company could,

 

  

C-3

  

 

under Paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

Section 5.         Reacquired Shares.  Any Series A Preferred Shares purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled  upon the acquisition thereof.  All such shares shall upon their cancellation become authorized but unissued preferred shares and may be reissued as part of a new series of preferred shares to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth herein.

 

Section 6.         Liquidation, Dissolution or Winding Up.

 

(A)           Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of any shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares unless, prior thereto, the holders of Series A Preferred Shares shall have received an amount equal to $100 per share of Series A Preferred Shares, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of Series A Preferred Shares unless, prior thereto, the holders of Ordinary Shares shall have received an amount per share (the “Ordinary Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as Shares splits, Shares dividends and recapitalizations with respect to the Ordinary Shares) (such number in clause (ii), the “Adjustment Number”).  Following the payment of the full amount of the Series A Liquidation Preference and the Ordinary Adjustment in respect of all outstanding Series A Preferred Shares and Ordinary Shares, respectively, holders of  Series A Preferred Shares and holders of Ordinary Shares shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such preferred shares and Ordinary Shares, on a per share basis, respectively.

 

(B)           In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred shares, if any, which rank on a parity with the Series A Preferred Shares, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences.  In the event, however, that there are not sufficient assets available to permit payment in full of the Ordinary Adjustment, then such remaining assets shall be distributed ratably to the holders of Ordinary Shares.

 

(C)           In the event the Company shall at any time after the Rights Issuance Authorization Date (i) declare any dividend on Ordinary Shares payable in Ordinary Shares, (ii) subdivide the outstanding Ordinary Shares, or (iii) combine the outstanding Ordinary Shares into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of Ordinary Shares outstanding immediately after such event

 

  

C-4

  

 

and the denominator of which is the number of Ordinary Shares that were outstanding immediately prior to such event.

 

Section 7.         Consolidation, Merger, etc.  In case the Company shall enter into any consolidation, merger, combination, scheme of arrangement or other transaction in which the Ordinary Shares are cancelled or exchanged for or changed into other Shares or securities, cash and/or any other property, then in any such case the Series A Preferred Shares shall at the same time be similarly cancelled or exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of Shares, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Ordinary Shares is changed or exchanged.  In the event the Company shall at any time after the Rights Issuance Authorization Date (i) declare any dividend on Ordinary Shares payable in Ordinary Shares, (ii) subdivide the outstanding Ordinary Shares, or (iii) combine the outstanding Ordinary Shares into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series A Preferred Shares shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Ordinary Shares outstanding immediately after such event and the denominator of which is the number of Ordinary Shares that were outstanding immediately prior to such event.

 

Section 8.         No Redemption.  The Preferred Shares shall not be redeemable.

 

Section 9.         Ranking.  The Preferred Shares shall rank junior to all other series of the Company’s preferred shares as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.  No special vote of the holders of Series A Preferred Shares shall be required to authorize any other series of preferred shares, irrespective of the ranking of these shares.

 

Section 10.       Amendment.  At any time when any Series A Preferred Shares are outstanding, this Certificate of Designation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Preferred Shares so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding Preferred Shares, voting separately as a class.

 

Section 11.       Fractional Shares.  Series A Preferred Shares may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Shares.

 

IN WITNESS WHEREOF, this Certificate and has been executed this 17 day of November, 2010.

 

	  	  	/s/ Donald Zhang
	  	  	
Name: Donald Zhang

Title: Chairman and CEO

 

 

 

C-5exhibit10-1.htm

 

Exhibit 10.1

 

 

Execution Copy

 

Term Loan Agreement

 

 

Dated as of

 

November 16, 2010

 

 

among

 

 

VANGUARD NATURAL GAS, LLC,

 

as Borrower,

 

 

BNP PARIBAS,

 

as Administrative Agent,

 

 

and

 

 

The Lenders Party Hereto

 

 

Sole Lead Arranger and Sole Bookrunner

 

 

BNP Paribas Securities Corp.

 

Syndication Agent

 

 

Citibank, N.A.

 

Co-Documentation Agents

 

 

Credit Agricole Corporate and Investment Bank

 

Royal Bank of Canada

 

 

 

  

  

  

TABLE OF CONTENTS

 

  

Page

 

ARTICLE I

 

 

Definitions and Accounting Matters

 

	
  

	
Section 1.01.

	
Terms Defined Above... 

	
1

	
  

	
Section 1.02.

	
Certain Defined Terms.. 

	
1

	
  

	
Section 1.03.

	
Types of Loans and Borrowings.. 

	
21

	
  

	
Section 1.04.

	
Terms Generally; Rules of Construction.. 

	
21

	
  

	
Section 1.05.

	
Accounting Terms and Determinations; GAAP.. 

	
22

 

ARTICLE II

 

 

The Credits

 

	
  

	
Section 2.01.

	
Commitments... 

	
22

	
  

	
Section 2.02.

	
Loans and Borrowings. 

	
22

	
  

	
Section 2.03.

	
Request for Borrowing.. 

	
23

	
  

	
Section 2.04.

	
Interest Elections. 

	
24

	
  

	
Section 2.05.

	
Funding of Borrowings. 

	
25

	
  

	
Section 2.06.

	
Termination and Reduction of Commitments. 

	
26

	
  

	
Section 2.07.

	
Reserved. 

	
26

	
  

	
Section 2.08.

	
Reserved. 

	
26

	
  

	
Section 2.09.

	
Collateral. 

	
26

 

ARTICLE III

 

 

Payments of Principal and Interest; Prepayments; Fees

 

	
  

	
Section 3.01.

	
Repayment of Loans... 

	
28

	
  

	
Section 3.02.

	
Interest. 

	
28

	
  

	
Section 3.03.

	
Alternate Rate of Interest.. 

	
29

	
  

	
Section 3.04.

	
Prepayments. 

	
29

	
  

	
Section 3.05.

	
Fees. 

	
30

 

ARTICLE IV

 

 

Payments; Pro Rata Treatment; Sharing of Set-offs

 

	
  

	
Section 4.01.

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

	
31

	
  

	
Section 4.02.

	
Presumption of Payment by the Borrower... 

	
32

	
  

	
Section 4.03.

	
Certain Deductions by the Administrative Agent.. 

	
32

	
  

	
Section 4.04.

	
Disposition of Proceeds.. 

	
32

 

 

  

  

  

ARTICLE V

 

 

Increased Costs; Break Funding Payments; Taxes; Illegality

 

	
  

	
Section 5.01.

	
Increased Costs. 

	
32

	
  

	
Section 5.02.

	
Break Funding Payments... 

	
34

	
  

	
Section 5.03.

	
Taxes. 

	
34

	
  

	
Section 5.04.

	
Mitigation Obligations; Replacement of Lenders. 

	
36

	
  

	
Section 5.05.

	
Illegality.. 

	
37

 

ARTICLE VI

 

 

Conditions Precedent

 

	
  

	
Section 6.01.

	
Effectiveness.. 

	
37

	
  

	
Section 6.02.

	
Funding.. 

	
38

	
  

	
Section 6.03.

	
Additional Funding Conditions.. 

	
41

 

ARTICLE VII

 

 

Representations and Warranties

 

	
  

	
Section 7.01.

	
Organization; Powers... 

	
42

	
  

	
Section 7.02.

	
Authority; Enforceability... 

	
42

	
  

	
Section 7.03.

	
Approvals; No Conflicts... 

	
42

	
  

	
Section 7.04.

	
Financial Condition; No Material Adverse Change. 

	
43

	
  

	
Section 7.05.

	
Litigation. 

	
43

	
  

	
Section 7.06.

	
Environmental Matters.. 

	
44

	
  

	
Section 7.07.

	
Compliance with the Laws and Agreements; No Defaults. 

	
45

	
  

	
Section 7.08.

	
Investment Company Act... 

	
45

	
  

	
Section 7.09.

	
Taxes... 

	
45

	
  

	
Section 7.10.

	
ERISA. 

	
45

	
  

	
Section 7.11.

	
Disclosure; No Material Misstatements... 

	
46

	
  

	
Section 7.12.

	
Insurance... 

	
47

	
  

	
Section 7.13.

	
Restriction on Liens... 

	
47

	
  

	
Section 7.14.

	
Subsidiaries... 

	
47

	
  

	
Section 7.15.

	
Location of Business and Offices... 

	
48

	
  

	
Section 7.16.

	
Properties; Titles, Etc. 

	
48

	
  

	
Section 7.17.

	
Maintenance of Properties... 

	
49

	
  

	
Section 7.18.

	
Gas Imbalances, Prepayments... 

	
50

	
  

	
Section 7.19.

	
Marketing of Production... 

	
50

	
  

	
Section 7.20.

	
Swap Agreements..

	
50

	
  

	
Section 7.21.

	
Use of Loans... 

	
50

	
  

	
Section 7.22.

	
Solvency... 

	
50

	
  

	
Section 7.23.

	
Sanctioned Persons... 

	
51

	
  

	
Section 7.24.

	
Security Instruments... 

	
51

 

ARTICLE VIII

 

 

Affirmative Covenants

 

	
  

	
Section 8.01.

	
Financial Statements; Other Information.. 

	
52

	
  

	
Section 8.02.

	
Notices of Material Events.. 

	
55

	
  

	
Section 8.03.

	
Existence; Conduct of Business... 

	
55

	
  

	
Section 8.04.

	
Payment of Obligations... 

	
56

	
  

	
Section 8.05.

	
Performance of Obligations under Loan Documents.. 

	
56

	
  

	
Section 8.06.

	
Operation and Maintenance of Properties.. 

	
56

	
  

	
Section 8.07.

	
Insurance... 

	
57

	
  

	
Section 8.08.

	
Books and Records; Inspection Rights... 

	
57

	
  

	
Section 8.09.

	
Compliance with Laws... 

	
58

	
  

	
Section 8.10.

	
Environmental Matters. 

	
58

	
  

	
Section 8.11.

	
Further Assurances. 

	
59

	
  

	
Section 8.12.

	
Reserve Reports. 

	
59

	
  

	
Section 8.13.

	
Title Information. 

	
60

	
  

	
Section 8.14.

	
Additional Collateral; Additional Guarantors. 

	
61

	
  

	
Section 8.15.

	
ERISA Compliance... 

	
62

	
  

	
Section 8.16.

	
Reserved. 

	
63

	
  

	
Section 8.17.

	
Revolver Agent as Principal Depository.. 

	
63

	
  

	
Section 8.18.

	
Chief Financial Officer... 

	
63

 

 

  

  

  

ARTICLE IX

 

 

Negative Covenants

 

	
  

	
Section 9.01.

	
Financial Covenants. 

	
63

	
  

	
Section 9.02.

	
Debt.. 

	
64

	
  

	
Section 9.03.

	
Liens.. 

	
64

	
  

	
Section 9.04.

	
Dividends, Distributions and Redemptions.. 

	
65

	
  

	
Section 9.05.

	
Investments, Loans and Advances.. 

	
65

	
  

	
Section 9.06.

	
Nature of Business; International Operations... 

	
67

	
  

	
Section 9.07.

	
Limitation on Leases... 

	
67

	
  

	
Section 9.08.

	
Proceeds of Notes... 

	
67

	
  

	
Section 9.09.

	
ERISA Compliance.. 

	
67

	
  

	
Section 9.10.

	
Sale or Discount of Receivables... 

	
69

	
  

	
Section 9.11.

	
Mergers, Etc... 

	
69

	
  

	
Section 9.12.

	
Sale of Properties.. 

	
69

	
  

	
Section 9.13.

	
Environmental Matters... 

	
69

	
  

	
Section 9.14.

	
Transactions with Affiliates... 

	
69

	
  

	
Section 9.15.

	
Subsidiaries... 

	
70

	
  

	
Section 9.16.

	
Negative Pledge Agreements; Dividend Restrictions... 

	
70

	
  

	
Section 9.17.

	
Gas Imbalances, Take-or-Pay or Other Prepayments.. 

	
70

	
  

	
Section 9.18.

	
Swap Agreements.. 

	
70

	
  

	
Section 9.19.

	
Marketing Activities... 

	
71

 

ARTICLE X

 

 

Events of Default; Remedies

 

	
  

	
Section 10.01.

	
Events of Default.. 

	
71

	
  

	
Section 10.02.

	
Remedies. 

	
74

 

ARTICLE XI

 

 

The Agents

 

	
  

	
Section 11.01.

	
Appointment; Powers.. 

	
75

	
  

	
Section 11.02.

	
Duties and Obligations of Administrative Agent... 

	
75

	
  

	
Section 11.03.

	
Action by Administrative Agent... 

	
76

	
  

	
Section 11.04.

	
Reliance by Administrative Agent... 

	
77

	
  

	
Section 11.05.

	
Subagents... 

	
77

	
  

	
Section 11.06.

	
Resignation or Removal of Administrative Agent... 

	
77

	
  

	
Section 11.07.

	
Agents as Lenders... 

	
78

	
  

	
Section 11.08.

	
No Reliance. 

	
78

	
  

	
Section 11.09.

	
Administrative Agent May File Proofs of Claim.. 

	
79

	
  

	
Section 11.10.

	
Authority of Administrative Agent to Release Collateral and Liens... 

	
80

	
  

	
Section 11.11.

	
The Arranger, Bookrunner, Etc.. 

	
80

 

 

  

  

  

ARTICLE XII

 

 

Miscellaneous

 

	
  

	
Section 12.01.

	
Notices.

	
80

	
  

	
Section 12.02.

	
Waivers; Amendments. 

	
81

	
  

	
Section 12.03.

	
Expenses, Indemnity; Damage Waiver. 

	
83

	
  

	
Section 12.04.

	
Successors and Assigns. 

	
85

	
  

	
Section 12.05.

	
Survival; Revival; Reinstatement. 

	
88

	
  

	
Section 12.06.

	
Counterparts; Integration; Effectiveness. 

	
88

	
  

	
Section 12.07.

	
Severability... 

	
89

	
  

	
Section 12.08.

	
Right of Setoff... 

	
89

	
  

	
Section 12.09.

	
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS; WAIVER OF JURY TRIAL. 

	
90

	
  

	
Section 12.10.

	
Headings... 

	
91

	
  

	
Section 12.11.

	
Confidentiality.. 

	
91

	
  

	
Section 12.12.

	
Interest Rate Limitation... 

	
91

	
  

	
Section 12.13.

	
EXCULPATION PROVISIONS.. 

	
92

	
  

	
Section 12.14.

	
Reserved. 

	
93

	
  

	
Section 12.15.

	
No Third Party Beneficiaries... 

	
93

	
  

	
Section 12.16.

	
USA Patriot Act Notice... 

	
93

	
  

	
Section 12.17.

	
Concerning the Intercreditor Agreement..

	
93

 

 

  

  

  

ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I                                List of Maximum Credit Amounts

Exhibit A                             Form of Note

Exhibit B                              Form of Borrowing Request

Exhibit C                              Form of Interest Election Request

Exhibit D                              Form of Compliance Certificate

Exhibit E                              Security Instruments

Exhibit F                              Form of Assignment and Assumption

Exhibit G                             Form of Lien Subordination and Intercreditor Agreement

Schedule 7.05                                           Litigation

Schedule 7.06                                           Environmental

Schedule 7.12                                           Insurance

Schedule 7.14                                           Subsidiaries and Partnerships

Schedule 7.18                                           Gas Imbalances

Schedule 7.19                                           Marketing Contracts

Schedule 7.20                                           Current Swap Agreements

Schedule 7.24                                           Mortgage Filing Offices

Schedule 9.03                                           Existing Liens

Schedule 9.05                                           Investments

  

  

  

THIS TERM LOAN AGREEMENT dated as of November 16, 2010, is among VANGUARD NATURAL GAS, LLC, a limited liability company duly formed and existing under the laws of the Commonwealth of Kentucky (the “Borrower”); each of the Lenders from time to time party hereto; and BNP Paribas (in its individual capacity, “BNPP”), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”).

 

R E C I T A L S

 

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 hereby agree as follows:

 

ARTICLE I                      

 

Definitions and Accounting Matters

 

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

 

Section 1.02. Certain Defined Terms.  As used in this Agreement, the following terms have the meanings specified below:

 

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

 

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

 

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

 

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

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

 

“Agreement” means this Term Loan Agreement, as the same may from time to time be amended, modified, supplemented or restated.

 

  

1

  

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater 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 Adjusted LIBO Rate (based on an Interest Period of 30 days) in effect on such day plus 2%.  Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

 

“Applicable Margin” means, for any day, (a) with respect to any ABR Loan, 6.50% per annum, and (ii) with respect to any Eurodollar Loan, 5.50% per annum.

 

“Applicable Percentage” means, with respect to any Lender, (i) prior to the Effective Date, the percentage of the Commitments represented by such Lender’s Commitment as such percentage is set forth on Annex I, and (ii) on and after the Effective Date, the percentage of the Loans represented by such Lender’s Loan.

 

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender, or (b) any other Person engaged in the business of writing Swap Agreements whose long term senior unsecured debt rating is A-/A3 by S&P or Moody’s (or their equivalent) or higher and that is acceptable to the Administrative Agent, or (c) any other Person from time to time approved by the Majority Lenders.

 

“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) DeGolyer and MacNaughton, and (d) any other independent petroleum engineers acceptable to the Administrative Agent.

“Arranger” means BNP Paribas Securities Corp., in its capacities as the sole lead arranger and sole bookrunner.

 

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

 

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

 

“Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

 

“Borrowing Request” means the request by the Borrower for the Borrowing of the term Loans on the Effective Date in accordance with Section 2.03.

 

  

2

  

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Dallas, Texas are authorized or required by law to remain closed; and if such day relates to a Borrowing or continuation of, a payment or prepayment of principal of or interest on, or a 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 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.

 

“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 of its Subsidiaries having a fair market value in excess of $2,000,000.

 

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) of Equity Interests representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, or (b) occupation of a majority of those seats (other than vacant seats) on the board of managers of Borrower by Persons who were neither (i) nominated by the board of managers of the Borrower nor (ii) appointed by managers so nominated.

 

“Change in Law” means (a) the adoption of any law, rule, regulation or treaty after the date of this Agreement, (b) any change in any law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 5.01(b)), by any lending office of such Lender or by such Lender’s holding company, (if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

 

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

 

“Commitment” means, with respect to each Lender, the commitment of such Lender to make the term Loan hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.06 and (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b), and “Commitments” means the aggregate amount of the Commitments of all of the Lenders.

 

  

3

  

“Consolidated Interest Coverage Ratio” means, as of any date of determination, for the Borrower, the Consolidated Subsidiaries and Vanguard Resources on a consolidated basis, the ratio of (a) EBITDA for each four consecutive fiscal quarter period, less the aggregate amount of cash used to purchase Equity Interests of Vanguard Resources for the twelve month period ending on the last day of such fiscal quarter, to (b) Interest Expense for such twelve month period.

 

“Consolidated Leverage Ratio” means, as of any date of determination, for the Borrower, the Consolidated Subsidiaries and Vanguard Resources on a consolidated basis, the ratio of (a) Total Debt as of such date to (b) EBITDA for each four consecutive fiscal quarter period ending on and after September 30, 2010.  For purposes of calculating the Consolidated Leverage Ratio at any date, EBITDA shall be calculated on a pro forma basis (as certified by the Borrower to the Administrative Agent and as approved by the Administrative Agent) assuming that all acquisitions made, and all dispositions completed, during the four consecutive fiscal quarters then most recently ended have been made on the first day of such period (but without any adjustment for projected cost savings or other synergies).

 

“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.

 

“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.  For the purposes of this definition, and without limiting the generality of the foregoing, any Person that owns directly or indirectly 10% or more of the Equity Interests having ordinary voting power for the election of the managers or other governing body of a Person will be deemed to “control” such other Person.  “Controlling” and “Controlled” have meanings correlative thereto.

 

“Debt” means, for any Person, the sum of the following (without duplication):  (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services; (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others; (i) obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business; (j) obligations to pay for goods or services even if such goods or services are not actually received or utilized by such Person; (k) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment.  The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

 

  

4

  

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

 

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder unless such failure has been cured, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute unless such failure has been cured, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

 

“Denbury” means Denbury Resources, Inc., a Delaware corporation.

 

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in the case of each of the foregoing, on or prior to the date that is after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans or other obligations hereunder outstanding and all of the Commitments are terminated.

 

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

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia.

 

“EBITDA” means, for any twelve-month period (except as otherwise expressly provided) ending on the last day of any fiscal quarter, consolidated net income, excluding any non-cash revenue or expense associated with Swap Agreements resulting from FAS 133, plus without duplication and to the extent deducted from revenues in determining consolidated net income, the sum of (a) the aggregate amount of consolidated Interest Expense for such period, (b) the aggregate amount of income tax expense for such period, (c) all amounts attributable to depletion, depreciation and amortization for such period, (d) all other non-cash charges, all determined on a consolidated basis with respect to Borrower, the Consolidated Subsidiaries and Vanguard Resources in accordance with GAAP, using the results of the twelve-month period ending with that reporting period (except as otherwise herein provided), and (e) on an annualized basis, pro forma cash distributions by ENP and ENP GP to Borrower with respect to the ENP Interests.

 

  

5

  

“Effective Date” means the date on which the conditions specified in Section 6.02 are satisfied (or waived in accordance with Section 12.02), to occur not later than December 31, 2010.

 

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, and (ii) unless an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

 

“Encore GP Holdings” means Encore Partners GP Holdings LLC, a Delaware limited liability company, an Affiliate of Denbury.

 

“Encore LP Holdings” means Encore Operating LP Holdings LLC, a Delaware limited liability company, an Affiliate of Denbury.

 

“Encore Operating” means Encore Operating LP, a Delaware limited partnership, an Affiliate of Denbury.

 

“ENP” means Encore Energy Partners LP, a publicly traded Delaware limited partnership.

 

“ENP Acquisition” means the acquisition by Borrower of all outstanding ENP General Partner Units from Encore GP Holdings, approximately forty-six percent (46%) of the outstanding ENP Common Units from Encore LP Holdings and Encore Operating, and all of the ENP GP LLC Member Interests from Encore GP Holdings pursuant to the ENP Acquisition Documents.

 

“ENP Acquisition Agreement” means that certain Purchase Agreement of even date herewith by and among Denbury, Encore GP Holdings, Encore LP Holdings and Encore Operating, as selling parties, and the Borrower, as buyer.

 

“ENP Acquisition Documents” means the ENP Acquisition Agreement and all agreements, assignments, bills of sale, certificates or other documents and instruments now or hereafter executed and delivered by and between Borrower and/or the Selling Parties pursuant to the ENP Acquisition Agreement or in connection with the ENP Acquisition.

 

“ENP Common Units” means the common units issued by ENP representing limited partner interests in ENP.

 

  

6

  

“ENP Credit Agreement” means that certain Amended and Restated Credit Agreement dated March 7, 2007 among ENP Operating as borrower, ENP as a guarantor, Bank of America, N.A., as administrative agent, and the lenders named therein, as from time to time amended, supplemented or restated.

 

“ENP Credit Facility Availability” means, at any time, the difference of (i) the “Borrowing Base” (as defined in the ENP Credit Agreement) at such time minus (ii) the “Total Outstandings” (as defined in the ENP Credit Agreement) at such time.

 

“ENP General Partner Units” means the general partner units issued by ENP representing general partner interests issued by ENP.

 

“ENP GP” means Encore Energy Partners GP LLC, a Delaware limited liability company, the general partner of ENP.

 

“ENP GP LLC Agreement” means the Limited Liability Company Agreement of ENP GP dated as of February 13, 2007 and as in effect on the Effective Date.

 

“ENP GP LLC Member Interests” means the membership interests issued by ENP GP.

 

“ENP Interests” means collectively, the ENP General Partner Units, the ENP Common Units and the ENP GP LLC Member Interests, all rights, titles and interests with respect thereto, and all proceeds thereof.

 

“ENP Interests Pledge Agreement” means a pledge agreement in form and substance satisfactory to the Administrative Agent to be entered into on the Effective Date pursuant to which the ENP Interests are pledged to the Administrative Agent for the ratable benefit of the Lenders to secure the payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time.

 

“ENP Material Adverse Effect” has the meaning assigned such term in Section 6.02(p).

 

“ENP Material Indebtedness” means Debt of any one or more of ENP and the ENP Restricted Subsidiaries in an aggregate principal amount exceeding $15,000,000.

 

“ENP Operating” means Encore Energy Partners Operating LLC, a Delaware limited liability company, a wholly-owned Subsidiary of ENP.

 

“ENP Partnership Agreement” means that certain Second Amended and Restated Agreement of Limited Partnership of the ENP dated as of September 17, 2007 and as in effect as of the Effective Date.

 

“ENP Restricted Subsidiary” means ENP Operating and each other “Restricted Subsidiary” as such term is defined in the ENP Credit Agreement.

 

“Environmental Laws” means any and all Governmental Requirements relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.

 

  

7

  

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.

 

“Equity Offering” means a public offering of the Equity Interests of Vanguard Resources, or any of its Affiliates which will result in proceeds of such public offering being made available to the Borrower.

 

“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.

 

“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 such term in Section 10.01.

 

  

8

  

“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 established and 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 established and maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been established and 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 established and 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 Subsidiary or materially impair the value of such Property subject thereto; (e) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by Borrower or any of its 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 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, which 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 Subsidiary or materially impair the value of such Property subject thereto; (g) minor defects and irregularities in title to any Property which do not secure any monetary obligations and which in the aggregate do not materially impair use of such Property for the purposes for which such Property is held by the Borrower and any Subsidiary or materially impair the value of such Property subject thereto; (h) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business and (i) 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 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 imposed on (or measured by) its net income by the United States of America or such other jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower or any Guarantor is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 5.04(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 5.03(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c).

 

  

9

  

“FAS 133” means Statement of Financial Accounting Standard 133 (and any statements replacing, modifying or superseding such statement) adopted by the Financial Accounting Standards Board.

 

“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.

 

“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 Borrower.

 

“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 Subsidiary that is not a Domestic Subsidiary.

 

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time subject to the terms and conditions set forth in Section 1.05.

 

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supranational bodies such as the European Union or the European Central Bank) over the Borrower, any Subsidiary, any of their Properties, any Agent or any Lender.

 

  

10

  

“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) NRC until released as provided in Section  2.09(c), (b) all Subsidiaries of the Borrower, and (c) each other Subsidiary that guarantees the Indebtedness pursuant to Section 8.14(b).

 

“Guaranty Agreement” means an agreement executed by the Guarantors in form and substance satisfactory to the Administrative Agent, unconditionally guarantying on a joint and several basis, payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time.

 

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

 

“Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases (excluding coal and timber), 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 other indicated herein, each reference to the term “Hydrocarbon Interests” shall mean Hydrocarbon Interests of the Borrower and its Subsidiaries.

 

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or separated therefrom.  Unless otherwise indicated herein, each reference to the term “Hydrocarbons” shall mean Hydrocarbons of the Borrower and its Subsidiaries.

 

“Indebtedness” means any and all amounts owing or to be owing by the Borrower, any Subsidiary 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 or any Lender under any Loan Document; and (b) all renewals, extensions and/or rearrangements of any of the above.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

  

11

  

“Initial Reserve Report” means the report of Netherland, Sewell & Associates, Inc., with respect to certain Oil and Gas Properties of the Borrower and its Subsidiaries as of July 1, 2010.

 

“Intercreditor Agreement” means that certain Lien Subordination and Intercreditor Agreement among Administrative Agent, Revolver Agent and the Borrower and its Subsidiaries, substantially in the form of Exhibit G attached hereto.

 

“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.04.

 

“Interest Expense” means, for any period, the sum (determined without duplication) of the aggregate gross interest expense of the Borrower, the Consolidated Subsidiaries and Vanguard Resources 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, minus (i) the portion of any payments or accruals under Synthetic Leases allocable to interest expense, (ii) any imputed interest pursuant to asset retirement obligations whether or not the same constitutes interest expense under GAAP; and (iii) the non-cash amortized portion of deferred financing costs.

 

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

 

“Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (b) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.  Interest shall accrue from and including the first day of an Interest Period to but excluding the last day 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.

 

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

 

  

12

  

“Lenders” means the Persons listed on Annex I and any Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party.

 

“Lewis Energy Acquisition Agreements” means (a) that certain Asset Purchase and Sale Agreement between Segundo Navarro Drilling, Ltd., an affiliate of Lewis Energy Group, L.P., as seller and Vanguard Permian, LLC and Vanguard Natural Resources, LLC, as buyers, dated as of July 18, 2008, and all modifications and amendments thereof, and (b) that certain Purchase and Sale Agreement between Segundo Navarro Drilling, Ltd., an affiliate of Lewis Energy Group, L.P., as seller, and Vanguard Permian and Vanguard Resources, as buyers, dated as of July 17, 2009, and all modifications and amendments thereof.

 

“Lewis Energy Properties” means the properties acquired by Vanguard Permian pursuant to the Lewis Energy Acquisition Agreements and all agreements, assignments, deeds, conveyances, certificates or other documents and instruments now or hereafter executed and delivered by and between Vanguard Permian and/or Vanguard Resources, as buyers, and/or any member of the seller pursuant to the Lewis Energy Acquisition Agreements or in connection with the transactions contemplated by the Lewis Energy Acquisition Agreements.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate 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 Business Days prior to the commencement of such Interest Period.

 

  

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“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Oil and Gas Properties.  The term “Lien” shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations. For the purposes of this Agreement, the Borrower and its Subsidiaries, as applicable, 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 Intercreditor Agreement and the Security Instruments and all other agreements, instruments, consents and certificates heretofore or hereafter executed and delivered by the Borrower or any of its Affiliates in connection with this Agreement.

 

“Loan Parties” means, collectively, the Borrower and each Person (other than the Administrative Agent or any Lender) executing a Loan Document.

 

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

 

“Majority Lenders” means, (i) at any time prior to the Effective Date, Lenders having Commitments representing more than 50% of the Commitments at such time (without regard to any sale by a Lender of a participation in any Commitment under Section 12.04(c)); provided that such Commitment of any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders, and (ii) at any time on or after the Effective Date, Lenders having Loans representing more than 50% of the Loans outstanding  (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided that the Loans of any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders.

 

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

 

“Material Gas Imbalance” means, with respect to all gas balancing agreements to which the Borrower or any Subsidiary is a party or by which any mineral interest owned by the Borrower or any Subsidiary is bound, a net gas imbalance to the Borrower or any Subsidiary, individually or taken as a whole in excess of $2,000,000.  Gas imbalances will be determined based on written agreements, if any, specifying the method of calculation thereof, or, alternatively, if no such agreements are in existence, gas imbalances will be calculated by multiplying (x) the volume of gas imbalance as of the date of calculation (expressed in thousand cubic feet) by (y) the heating value in btu’s per thousand cubic feet, times the Henry Hub average daily spot price for the month immediately preceding the date of calculation.

 

  

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“Material Indebtedness” means Debt (other than the Loans) of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $2,000,000.

 

“Maturity Date” means the earlier of (i) the first anniversary of the Effective Date; and (ii) the date following both the completion of Borrower’s merger with ENP and Borrower’s execution and delivery of a new or amended and restated revolving credit facility replacing the Revolver.

 

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

 

“Mortgaged Property” means any Property owned by the Borrower or any Guarantor which is subject to the Liens existing and to exist under the terms of the Security Instruments.

 

“Mortgages” means the mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, assignments of proceeds of production, security documents and the like (including all amendments, modifications and supplements thereto) delivered pursuant to this Agreement in order to grant Liens in Oil and Gas Properties of the Borrower and its Subsidiaries.

 

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

 

“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.

 

“NRC” means Nami Resources Company L.L.C., a Kentucky limited liability company.

 

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

 

  

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“Organizational Documents” mean, (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.

 

“Original Second Amendment to Credit Agreement” means that certain Second Amendment to Credit Agreement dated as of April 13, 2007, among the Borrower and Citibank, N.A., as Administrative Agent, and Citibank, N.A. and BNP Paribas as Lenders.

 

“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.

 

“Participant” has the meaning set forth in Section 12.04(c)(i).

 

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

 

“PDNP” means (a) those Proved Reserves expected to be produced from existing completion intervals in existing wells, but due to pending pipeline connections, regulatory agency considerations, or other mechanical or contractual requirements, Hydrocarbon sales have not yet commenced or have been interrupted, and (b) other non-producing Proved Reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making such oil and gas available for production should be moderate when compared to the cost of a new well.

 

  

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

 

“Plan” means any employee pension benefit plan, as defined in section 3(2) of ERISA, which (a) is currently or hereafter sponsored, maintained or contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time during the six calendar years preceding the date hereof, sponsored, maintained or contributed to by the Borrower or a Subsidiary or an ERISA Affiliate.

 

“Prime Rate” means the rate of interest per annum publicly announced from time to time by BNPP as its prime rate for loans in dollars; 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 BNPP as a general reference rate of interest, taking into account such factors as BNPP may deem appropriate; it being understood that many of BNPP’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 BNPP may make various commercial or other loans at rates of interest having no relationship to such rate.

 

“Production Payment” has the meaning assigned such term in Section 7.16(f).

 

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and contract rights.

 

“Proved Reserves” means those recoverable Hydrocarbons that have been estimated with reasonable certainty, as demonstrated by geological and engineering data, to be economically recoverable from the Oil and Gas Properties by existing producing methods under existing economic conditions.

 

“PUD” means economically recoverable Proved Reserves estimated to exist in proved reservoirs which will be recovered from wells to be drilled in the future.  Reserves in undrilled areas are included in proved reserved estimates if they are considered proved by geologic analysis of the current well information.

 

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

 

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

 

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

 

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

 

  

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

 

“Reserve Report” means the Initial Reserve Report and each other report, in form and substance satisfactory to the Administrative Agent, setting forth, as of each December 31st or June 30th  the oil and gas reserves attributable to the Oil and Gas Properties of the Borrower and the Subsidiaries, together with a projection of the rate of production and future net income, taxes, operating expenses and Capital Expenditures with respect thereto as of such date, based upon the economic and pricing assumptions consistent with the Administrative Agent’s lending requirements at the time.

 

“Responsible Officer” means, as to any Person, the chief executive officer, the president, any Financial Officer or any vice president of such Person.  Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower.

 

“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.

 

“Revolver” means that certain Second Amended and Restated Credit Agreement dated as August 31, 2009 by and among Borrower, Revolver Agent and the lenders named therein, as from time to time amended, supplemented or restated.

 

“Revolver Agent” means Citibank, N.A., as administrative agent for the lenders under the Revolver.

 

“Revolver Aggregate Maximum Credit Amounts” means the “Aggregate Maximum Credit Amounts” as such term is defined in the Revolver.

 

“Revolver Availability” means, at any time, the difference of (i) the Revolver Borrowing Base in effect at such time minus (ii) the Revolver Revolving Credit Exposure at such time.

 

“Revolver Borrowing Base” means the “Borrowing Base” as such term is defined in the Revolver.

 

“Revolver Indebtedness” means the “Indebtedness” as such term is defined in the Revolver.

 

“Revolver Revolving Credit Exposure” means the “Revolving Credit Exposure” as such term is defined in the Revolver.

 

“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.

 

  

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

 

“Security Instruments” means the ENP Interests Pledge Agreement, the Guaranty Agreements, the Subsidiary Pledge Agreements, the Mortgages, and other agreements, instruments or certificates described or referred to in Exhibit E, and any and all other agreements, instruments, consents or certificates now or hereafter executed and delivered by the Borrower or any other Person in connection with, or as security for or to guarantee the payment or performance of the Indebtedness, the Notes, or this Agreement, as such agreements may be amended, modified, supplemented or restated from time to time.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject, with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

“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, board of managers 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 the Borrower or one or more of its Subsidiaries and (b) any partnership of which the Borrower or any of its Subsidiaries is a general partner; provided, however, the term “Subsidiary” shall not include ENP, ENP GP, ENP Operating or any of their respective subsidiaries.  Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the Borrower.

 

“Subsidiary Pledge Agreements” means one or more pledge agreements in form and substance satisfactory to the Administrative Agent pursuant to which the Equity Interests of a Subsidiary are pledged to the Administrative Agent for the ratable benefit of the Lenders to secure the payment of the Indebtedness, as such agreements may be amended, modified or supplemented from time to time.

 

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option (whereby the aggregate position for options creates an obligation for Borrower) 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, managers, officers, employees or consultants of Borrower or the Subsidiaries shall be a Swap Agreement.

 

  

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“Swap Termination Value” means, in respect of any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Agreements, (a) for any date on or after the date such Swap Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Agreements, as determined by the counterparties to such Swap Agreements.

 

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

 

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

 

“TEC” means Trust Energy Company, a Kentucky limited liability company.

 

“Total Debt” means, at any date, all Debt of the Borrower, the Consolidated Subsidiaries and Vanguard Resources on a consolidated basis, excluding (i) non-cash obligations under FAS 133 and (ii) accounts payable and other accrued liabilities (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business which are not greater than sixty (60) days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves are maintained in accordance with GAAP.

 

“Transactions” means, with respect to (a) the Borrower, the execution, delivery and performance by the Borrower of this Agreement, and each other Loan Document to which it is a party, the borrowing of Loans, the use of the proceeds thereof, and the grant of Liens by the Borrower on Mortgaged Properties, the ENP Common Units, the ENP GP LLC Member Interests and other Properties pursuant to the Security Instruments and (b) each Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the Indebtedness and the other obligations under the Guaranty Agreement by such Guarantor and such Guarantor’s grant of the security interests and provision of collateral under the Security Instruments, and the grant of Liens by such Guarantor on Mortgaged Properties and other Properties pursuant to the Security Instruments, including without limitation the grant of Liens by ENP GP on the ENP General Partner Units pursuant to the ENP Interests Pledge Agreement.

 

  

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“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.

 

“Vanguard Permian” means Vanguard Permian, LLC, a Delaware limited liability company.

 

“Vanguard Resources” means Vanguard Natural Resources, LLC, a Delaware limited liability company.

 

“Wholly-Owned Subsidiary” means (a) any Subsidiary of which all of the outstanding Equity Interests, 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) if permitted by this Agreement, any Subsidiary that is organized in a foreign jurisdiction and is required by the applicable laws and regulations of such foreign jurisdiction to be partially owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction, provided that 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.

 

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

 

Section 1.04. Terms Generally; Rules of Construction.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” 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) except as otherwise specified herein, with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including”, (f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement and (g) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including, cash, securities, accounts and contract rights.  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.

 

  

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Section 1.05. Accounting Terms and Determinations; GAAP.  Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the Financial Statements except for changes in which the 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 and relying upon the representations and warranties herein set forth, each Lender severally agrees to make a single term Loan to the Borrower on the Effective Date in an aggregate principal amount that will not result in (a) such Lender’s Loan exceeding such Lender’s Commitment or (b) the total Loans exceeding the total Commitments.  The Borrower may not borrow, repay in whole or part and reborrow the Loans.

 

Section 2.02. Loans and Borrowings.

 

(a) Borrowings; Several Obligations.  The term Loans shall be made on the Effective Date 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, the term Loan 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 $500,000 and not less than $2,500,000.  At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $1,000,000.  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 eight 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.

 

  

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(d) Notes.  The Loans made by each 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, or (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, payable to the order of such Lender in a principal amount equal to its Commitment (or, following the Effective Date, its Loan) 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 2.06, Section 12.04(b) or otherwise), 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 (or at the option of each Lender, a modification of the existing Note payable to the order of such Lender) in a principal amount equal to its Commitment (or, following the Effective Date, its Loan) 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, 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. Request for Borrowing.  To request the Borrowing of the term Loans, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Dallas, Texas time, three Business Days before the Effective Date or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., Dallas, Texas time, on the Effective Date.  Such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower.  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 Effective Date of such Borrowing, which shall be a Business Day;

 

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

 

  

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

 

(v) the amount of the then effective Commitments; and

 

(vi) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05.

 

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.  The Borrowing Request shall constitute a representation that the amount of the requested Borrowing does not 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. Interest Elections.

 

(a) Conversion and Continuance.  Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.04.  The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

 

(b) Interest Election Requests.  To make an election pursuant to this Section 2.04, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election.  Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in substantially the form of Exhibit C and signed by the Borrower.

 

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

 

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall be specified for each resulting Borrowing);

 

  

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

 

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

 

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

 

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

 

(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 2.05. Funding of Borrowings.

 

(a) Funding by Lenders.  Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Dallas, Texas time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders.  The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

 

(b) Presumption of Funding by the Lenders.  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.05(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of the Borrower, the interest rate applicable to ABR Loans.  If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid 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.

 

  

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(c) 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 2.06. Termination and Reduction of Commitments.

 

(a) Scheduled Termination of Commitments.  Unless previously terminated, the Commitments shall terminate on the Effective Date.

 

(b) Optional Termination and Reduction of Commitments.

 

(i) The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that each reduction of the Commitments shall be in an amount that is an integral multiple of $5,000,000 and not less than $10,000,000.

 

(ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under Section 2.06(b)(i) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof.  Each notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable.  Any termination or reduction of the Commitments shall be permanent and may not be reinstated.  Each reduction of the Commitments shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.

 

Section 2.07. Reserved.

 

Section 2.08. Reserved.

 

Section 2.09. Collateral.

 

(a) Mortgaged Property.  The payment and performance of the Notes and all of the other Indebtedness hereunder and under the Loan Documents shall be secured by a first and superior Lien against the entire interest of the Borrower and each Subsidiary and NRC in substantially all of their Oil and Gas Properties (subordinate and subject only to Liens thereon securing the Revolver Indebtedness as provided in the Intercreditor Agreement), pursuant to the terms of one or more Mortgages in favor of the Administrative Agent for the ratable benefit of the Lenders, which Mortgages shall be satisfactory in form and substance to the Administrative Agent.

 

  

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(b) Guarantees and Pledges of Equity Interests (other than ENP Interests).  The payment and performance of the Notes and all of the other Indebtedness hereunder and under the Loan Documents (A) shall be unconditionally guaranteed by each Subsidiary pursuant to one or more Guaranty Agreements, and (B) shall be secured by a first priority Lien against the Equity Interests of each Subsidiary other than ENP or ENP GP (subordinate and subject only to Liens thereon securing the Revolver Indebtedness as provided in the Intercreditor Agreement) pursuant to a Subsidiary Pledge Agreement.  Reference is made to Section 8.14 of this Agreement for further provisions with respect to additional Guarantors and additional collateral.

 

(c) Release of 60% Interest in Asher PUD Properties.  The Administrative Agent shall release its lien against a 60% interest in the Asher PUD Properties and shall release NRC from its Guaranty Agreement upon the occurrence of all of the following:  (i) receipt of consent from Asher Land and Mineral, Ltd. and the recorded assignment of the Asher PD Properties and the Asher PUD Properties by NRC to TEC; (ii) receipt of supplemental Mortgages or other documents executed by TEC as the Administrative Agent may require to confirm that the Lien granted by NRC against the Asher PD Properties and the remaining 40% interest in the Asher PUD Properties continues to secure all of the Indebtedness of Borrower hereunder following transfer of title to such properties to TEC; (iii) payment of all expenses of the Administrative Agent in connection with such release, including without limitation, the expenses and reasonable fees of counsel for the Administrative Agent; and (iv) no Default shall then be continuing.  The terms “Asher PD Properties” and “Asher PUD Properties” as used in the preceding sentence have the same meanings as provided in the Original Second Amendment to Credit Agreement.

 

(d) Release of Lien Against Development Leases.  All of the Lewis Energy Properties are encumbered by Mortgages and constitute Mortgage Property.  Vanguard Permian is required by Section 7.14 of the Lewis Energy Acquisition Agreement dated July 17, 2009 and Section 7.16 of the Lewis Energy Acquisition Agreement dated July 18, 2008 to reconvey to the seller thereunder certain of the Lewis Energy Properties consisting of unearned acreage remaining in any Development Leases (as therein defined) upon the occurrence of the conditions therein specified.  Further, in certain circumstances under Section 7.11 of the Lewis Energy Acquisition Agreement dated July 18, 2008, Vanguard Permian is required to convey to seller a portion of certain Lewis Energy Properties.  Upon receipt of a certificate of a Responsible Officer of Vanguard Permian acceptable to the Administrative Agent to the effect that all conditions to delivery of a release have been satisfied and regardless of whether a Default has then occurred and is then continuing, the Administrative Agent shall release the Mortgage against (a) any remaining unearned acreage at such time Vanguard Permian is obligated to complete such reconveyance in accordance with the provisions of Section 7.14 of the Lewis Energy Acquisition Agreement dated July 17, 2009, (b) any remaining unearned acreage at such time Vanguard Permian is obligated to complete such reconveyance in accordance with the provisions of Section 7.16 of the Lewis Energy Acquisition Agreement dated July 18, 2008, and (c) interests required to be conveyed by Vanguard Permian under Section 7.11 of the Lewis Energy Acquisition Agreement dated July 18, 2008.

 

  

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(e) Pledge of ENP Interests.  The payment and performance of the Notes and all of the other Indebtedness hereunder and under the Loan Documents shall be secured by a first and superior Lien against the ENP Interests (senior and superior to any Liens thereon securing the Revolver Indebtedness as provided in the Intercreditor Agreement) pursuant to the ENP Interests Pledge Agreement.  Reference is made to Section 8.14 of this Agreement for further provisions with respect to additional ENP Interests.

 

ARTICLE III                                

 

Payments of Principal and Interest; Prepayments; Fees

 

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

 

Section 3.02. Interest.

 

(a) ABR Loans.  The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

 

(b) Eurodollar Loans.  The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

 

(c) Post-Default Rate.  Notwithstanding the foregoing, if an Event of Default has occurred and is continuing, or if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not paid when due, whether at stated maturity, upon acceleration or otherwise, then all Loans outstanding, in the case of an Event of Default, and such overdue amount, in the case of a failure to pay amounts when due, shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans as provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.

 

(d) Interest Payment Dates.  Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and on the Maturity Date; provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable on demand, (ii)  in the event of any repayment or prepayment of any Loan (other than an optional prepayment of an ABR Loan prior to the Maturity Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

 

(e) Interest Rate Computations.  All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  The applicable 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.

 

  

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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 telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (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 shall be deemed to be a request for an ABR Borrowing), 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 by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Dallas, Texas time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m. Dallas, Texas time, one Business Day before the date of prepayment.  Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid.  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 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.

 

  

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(c) Mandatory Prepayments.

 

(i) If at any time the fair market value of all ENP Common Units pledged to the Administrative Agent to secure the Indebtedness pursuant to the ENP Interests Pledge Agreement, determined based on the NYSE quoted price therefor as of the end of any NYSE trading day, shall be less than 125% of the outstanding principal amount of the Loans, then the Borrower shall, within one Business Day thereafter, prepay the Loans in an amount such that, after giving effect to such prepayment, the fair market value of all ENP Common Units pledged to the Administrative Agent to secure the Indebtedness pursuant to the ENP Interests Pledge Agreement shall exceed 135% of the outstanding principal amount of the Loans.

 

(ii) Except as expressly permitted by Section 9.12, if the Borrower shall sell any ENP Interests, then the Borrower shall contemporaneous therewith repay the Loans in an aggregate principal amount equal to the net proceeds thereof, all as provided in and subject to the terms of the Intercreditor Agreement.

 

(iii) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first, ratably to any ABR Borrowings then outstanding, and, second, to any Eurodollar Borrowings then outstanding, and if more than one Eurodollar Borrowing is then outstanding, to each such Eurodollar Borrowing in order of priority beginning with the Eurodollar Borrowing with the least number of days 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.

 

(iv) 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) Reserved.

 

(b) Reserved.

 

(c) Loan Origination Fees.  The Borrower shall pay to the Administrative Agent, for the account of each Lender, on the date hereof a loan origination fee as agreed to among the Borrower, Administrative Agent and Lenders.

 

(d) 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.

 

  

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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 of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon, New York City 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 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, interest and fees then due hereunder, such funds shall be applied 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.

 

(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 resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall notify the Administrative Agent of such fact and purchase (for cash at face value) participations in the Loans 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; 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 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.

 

  

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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 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, the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

Section 4.03. Certain Deductions by the Administrative Agent.  If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(a) 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 benefit of the Lenders of all of the Borrower’s or each Guarantor’s interest in and to production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property.  The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Indebtedness 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 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 Subsidiaries.

 

ARTICLE V                                

 

Increased Costs; Break Funding Payments; Taxes; Illegality

 

Section 5.01. Increased Costs.

 

(a) Eurodollar Changes in Law.  If any Change in Law shall:

 

(i) impose, modify or deem applicable any reserve, special deposit, 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);

 

  

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(ii) subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any participation in any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 5.03 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender); or

 

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

 

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.

 

(b) Capital Requirements.  If any Lender 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 capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender, such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

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

 

(d) Effect of Failure or Delay in Requesting Compensation.  Failure or delay on the part of any Lender to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section 5.01 for any increased costs or reductions incurred more than 270 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then such period of retroactivity shall be added to such 270 day period for the purpose of determining the earliest such cost or reduction which may be compensated.

 

  

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(e) Protection Absolute.  The protection of this Section shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the Change in Law that shall have occurred or been imposed.

 

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 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 for any Indemnified Taxes or Other Taxes; provided that if the Borrower or any Guarantor shall be required 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 or Lender (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.

 

(c) Indemnification by the Borrower.  The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower or any Guarantor hereunder or any other Loan Document (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 or a Lender 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.

 

  

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(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) Foreign Lenders.  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, 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 resident for tax purposes in the United States of America, 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:

 

(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

 

(ii) duly completed copies of Internal Revenue Service Form W-8ECI,

 

(iii) 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  Internal Revenue Service Form W-8BEN, or

 

  

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(iv) 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.

 

(f) Treatment of Certain 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, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 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, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent or  such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.  This paragraph 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 that it deems confidential) to the Borrower or any other Person.

 

Section 5.04. Mitigation Obligations; Replacement of Lenders.

 

(a) Designation of Different Lending Office.  If any Lender requests compensation under Section 5.01, or gives a notice pursuant to Section 5.05, 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, or (iii) any Lender is a Defaulting Lender hereunder, 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, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, 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) (iii) in the case of any such assignment resulting from a claim for compensation under Section 5.01 or payments required to be made pursuant to Section 5.03, such assignment will result in a reduction in such compensation or payments thereafter, and (iv) such assignment does not conflict with the applicable law.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such  assignment and delegation cease to apply.

 

  

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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. Effectiveness.  This Agreement shall become effective as of the date hereof upon satisfaction of each of the following conditions (or waived in accordance with Section 12.02):

 

(a) The Administrative Agent shall have received 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 fees and expenses of Thompson & Knight LLP, counsel to the Administrative Agent).

 

(b) The Administrative Agent shall have received a certificate of the Secretary, an Assistant Secretary or other duly authorized officer satisfactory to the Administrative Agent of the Borrower (or the managing member thereof) setting forth (i) resolutions of its board of directors or board of managers (or equivalent body) or its managing member authorizing the execution, delivery and performance of the Loan Documents to which each is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (ii) the officers of the Borrower (or any managing member thereof) (y) who are authorized to sign the Loan Documents to which the Borrower is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the articles or certificate of incorporation and bylaws or certificate of formation and partnership agreement or certificate of formation and limited liability company agreement (as the case may be) of the Borrower, certified as being true and complete.  The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Borrower to the contrary.

 

  

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(c) The Administrative Agent shall have received certificates of the appropriate State agencies with respect to the existence, qualification and good standing of the Borrower.

 

(d) The Administrative Agent shall have received from each party hereto counterparts (in such number as may be requested by the Administrative Agent) of this Agreement signed on behalf of such party.

 

(e) The Lenders shall have received the financial statements referred to in Section 7.04(a) and the Initial Reserve Report, each in form and substance reasonably satisfactory to the Administrative Agent.

 

(f) The Administrative Agent shall have received a copy of an amendment to the Revolver, in form and substance reasonably satisfactory to the Administrative Agent, in full force and effect as of the date hereof, permitting the Transactions and the ENP Acquisition, consenting to the Intercreditor Agreement, and amending the financial covenants and events of default under the Revolver to be consistent with the financial covenants and events of default hereunder.

 

(g) The Administrative Agent shall have received a detailed plan, with timetable, in form and substance satisfactory to the Administrative Agent in all respects, with respect to Borrower’s planned merger of ENP with and into Borrower or one of its subsidiaries, including action steps with respect to required filings with Governmental Authorities, which plan shall provide for such merger of ENP with and into Borrower or one of its Subsidiaries by not later than eleven months following the Effective Date.

 

Section 6.02. Funding.  The obligations of the Lenders to make their term Loans on the Effective Date is subject to the satisfaction of the following conditions:

 

(a) The Administrative Agent shall have received 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 fees and expenses of Thompson & Knight LLP, counsel to the Administrative Agent).

 

(b) The Administrative Agent shall have received a certificate of the Secretary, an Assistant Secretary or other duly authorized officer satisfactory to the Administrative Agent of each Subsidiary and ENP GP (or the managing member thereof) setting forth (i) resolutions of its board of directors or board of managers (or equivalent body) or its managing member authorizing the execution, delivery and performance of the Loan Documents to which each is a party, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (ii) the officers of such Subsidiary or ENP GP (or any managing member thereof) (y) who are authorized to sign the Loan Documents to which such Subsidiary or ENP GP is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the articles or certificate of incorporation and bylaws or certificate of formation and partnership agreement or certificate of formation and limited liability company agreement (as the case may be) of such Subsidiary or ENP GP, certified as being true and complete.  The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Borrower to the contrary.

 

  

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(c) The Administrative Agent shall have received certificates of the appropriate State agencies with respect to the existence, qualification and good standing of the Borrower and its Subsidiaries.

 

(d) The Administrative Agent shall have received duly executed Notes payable to the order of each Lender in a principal amount equal to its Commitment dated as of the Effective Date, and shall have received from Revolver Agent, Borrower and its Subsidiaries duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Intercreditor Agreement.

 

(e) The Administrative Agent shall have received from the Borrower and its Subsidiaries duly executed counterparts (in such number as may be requested by the Administrative Agent) of the ENP Interests Pledge Agreement and the other Security Instruments, which shall be in form and substance satisfactory to the Administrative Agent.

 

(f) Each of the Loan Documents shall be in full force and effect as of the Effective Date.

 

(g) The Administrative Agent shall have received opinions of (i) Vinson & Elkins LLP, counsel to the Borrower and its Subsidiaries, and (ii) Wyatt, Tarrant & Combs, LLP, special Kentucky counsel to the Borrower and its Subsidiaries, acceptable to the Administrative Agent covering such matters with respect to the Loan Documents as the Administrative Agent may reasonably request, including without limitation those matters described in Sections 7.01 and 7.02.

 

(h) The Administrative Agent shall have received satisfactory evidence that no event, development or circumstance has occurred or shall then exist that has resulted in, or could reasonably be expected to have, a Material Adverse Effect.

 

(i) The Administrative Agent shall be satisfied that no material disruption or material adverse change has occurred in conditions in the financial, banking or capital markets which the Administrative Agent, in its sole discretion, deems material in connection with the syndication of the credit facility evidenced by this Agreement.

 

  

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(j) The Lenders shall have received (1) a satisfactory pro forma opening balance sheet of the Borrower as of September 30, 2010, giving pro forma effect to the ENP Acquisition and the Debt to be incurred on the Effective Date, evidencing pro forma compliance with all financial covenants as of the Effective Date, after giving effect to the ENP Acquisition and such Debt, and (2) pro forma financial projections and forecasts for the four fiscal quarters ending December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011.

 

(k) All governmental and third party approvals necessary or, in the discretion of the Administrative Agent, advisable in connection with the Transactions and the continuing operations of the Borrower and its Subsidiaries shall have been obtained and be in full force and effect, including without limitation any required consents with respect to Borrower’s pledge of the ENP Common Units and ENP GP’s pledge of the ENP General Partner Units pursuant to the ENP Interests Pledge Agreement.

 

(l) The Administrative Agent shall be reasonably satisfied with title to, and the environmental condition of, the Borrower’s and its Subsidiaries’ Oil and Gas Properties, and evidence that Borrower has entered into such Swap Agreements as may be required under the Revolver.

 

(m) The Administrative Agent shall be satisfied with title to the ENP Interests being acquired by Borrower and ENP GP pursuant to the ENP Acquisition.

 

(n) The Administrative Agent shall have received Uniform Commercial Code and other lien searches reflecting the absence of other Liens and security interests on the ENP Interests and other Property securing the Debt, other than those being released or which are otherwise permitted.

 

(o) The Administrative Agent shall have received (i) original certificates evidencing all ENP Common Units being acquired by the Borrower pursuant to the ENP Acquisition, together with executed undated transfer powers, and (ii) any certificates evidencing any ENP General Partner Units or ENP GP LLC Member Interests, together with executed undated transfer powers.

 

(p) The Administrative Agent shall have received satisfactory evidence that since the date of the ENP Acquisition Agreement, there has not occurred any change, effect, event or occurrence with respect to the condition (financial or otherwise), assets, properties, business, operations or results of operations of ENP GP or ENP, ENP Operating  or the other “Partnership Entities” (as defined in the ENP Acquisition Agreement), that is, or could reasonably be expected to be, material and adverse to ENP, ENP Operating or the other Partnership Entities, taken as a whole, or material and adverse to ENP GP, or that materially and adversely affects the ability of the “Selling Parties” (as defined in the ENP Acquisition Agreement) to consummate the transactions contemplated by the ENP Acquisition Agreement (an “ENP Material Adverse Effect”); it being understood that none of the following shall be deemed to constitute an ENP Material Adverse Effect: any effect resulting from (i) entering into, or the announcement of the transactions contemplated by, the ENP Acquisition Agreement, (ii) changes in oil and gas prices, including changes in price differentials, (iii) changes in general economic conditions in the industry in which ENP, ENP Operating or any of the other Partnership Entities operates, or (iv) changes in the United States or global economy as a whole, unless in the case of clauses (ii) and (iv) above such change has a disproportionately adverse effect on ENP, ENP Operating or the other Partnership Entities or ENP GP relative to other participants in the industry or industries in which ENP GP and ENP, ENP Operating and the other Partnership Entities operate.

 

  

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(q) The Borrower shall have received proceeds from the issuance of Equity Interests on and after the date hereof and prior to the Effective Date (including proceeds from the sale of Borrower’s common units closed on October 13, 2010) in an amount not less than 55% of the total purchase price of the ENP Acquisition, the proceeds of which shall be used to prepay the Revolver Indebtedness and pursuant thereto, drawings under the Revolver, together with the Loans, shall be used to finance the ENP Acquisition.

 

(r) The Administrative Agent shall receive a copy of a consent from the lenders under the ENP Credit Agreement, or an amendment thereto, in form and substance reasonably satisfactory to the Administrative Agent and in full force and effect as of the Effective Date, consenting to the “Change of Control” (as defined in the ENP Credit Agreement) resulting from the consummation of the ENP Acquisition, or amending such term so as to permit the consummation of the ENP Acquisition.

 

(s) The Administrative Agent shall be reasonably satisfied that the ENP Acquisition is being closed contemporaneously with the funding of the Loan on terms and subject to conditions reasonably satisfactory to the Administrative Agent.  The Administrative Agent shall have received true and complete copies of all ENP Acquisition Documents, and be reasonably satisfied with the substance thereof, and copies of any legal opinions rendered in favor of Borrower with respect to the ENP Acquisition, addressed to the Administrative Agent and Lenders, upon which the Administrative Agent and the Lenders shall be entitled to rely.

 

(t) The Administrative Agent shall be reasonably satisfied that as of the Effective Date, after the making of the Loans, the application of the proceeds thereof and after giving effect to the ENP Acquisition, (1) the Revolver Availability shall be not less than 10% of the Revolver Borrowing Base and (2) the sum of (x) the Revolver Availability plus (y) the ENP Credit Facility Availability shall be not less than $175,000,000.

 

Section 6.03. Additional Funding Conditions.  The obligation of each Lender to make its Term Loan is subject to the satisfaction of the following additional conditions:

 

(a) At the time of and immediately after giving effect to the Borrowing, no Default shall have occurred and be continuing.

 

(b) At the time of and immediately after giving effect to the Borrowing, no event, development or circumstance has occurred or shall then exist that has resulted in, or could reasonably be expected to have, a Material Adverse Effect.

 

(c) The representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects (except that any representation or warranty that is qualified as to “materiality” or “material adverse effect” shall be true and correct in all respects) on and as of the date of such Borrowing, 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, such representations and warranties shall continue to be true and correct as of such specified earlier date.

 

  

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(d) The making of such Loan would not conflict with, or cause any Lender to violate or exceed, any applicable Governmental Requirement, and no Change in Law shall have occurred, and no litigation shall be pending or threatened, which does or, with respect to any threatened litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of any Loan or any participations therein or the consummation of the transactions contemplated by this Agreement or any other Loan Document or the ENP Acquisition Documents.

 

(e) The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03.

 

The request for the Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in Section 6.03(a) through (e).

 

ARTICLE VII

 

Representations and Warranties

 

The Borrower represents and warrants to the Administrative Agent and the Lenders that:

 

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

 

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

 

Section 7.03. Approvals; No Conflicts.  The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including members or any class of managers, 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, (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, and (iii) consents by, required notices to, or other actions by state and federal governmental entities in connection with the assignment of state and federal oil and gas leases or other interests therein that are customarily obtained subsequent to such assignments, (b) will not violate any applicable law or Organizational Documents of the Borrower or any Subsidiary or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any Subsidiary or its Properties, or give rise to a right thereunder to require any payment to be made by the Borrower or such Subsidiary and (d) will not result in the creation or imposition of any Lien on any Property of the Borrower or any Subsidiary (other than the Liens created by the Loan Documents).

 

  

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Section 7.04. Financial Condition; No Material Adverse Change.

 

(a) Financial Statements.

 

(i) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, members’ equity and cash flows (A) as of and for the fiscal year ended December 31, 2009, reported on by BDO Seidman LLP, independent public accountant and (B) as of and for the fiscal quarter and the portion of the fiscal year ended June 30, 2010, certified by its chief financial officer.  Such financial statements present fairly, in all material respects, the financial condition 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.  Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Borrower and its Consolidated Subsidiaries as of the dates thereof.

 

(ii) The Borrower has heretofore furnished to the Lenders the consolidated balance sheet and statements of income, members’ equity and cash flows of ENP (A) as of and for the fiscal year ended December 31, 2009, reported on by Ernst & Young, independent public accountant and (B) as of and for the fiscal quarter and the portion of the fiscal year ended June 30, 2010, certified by its chief financial officer.  Such financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the financial condition of ENP and its consolidated subsidiaries at and as of the respective dates thereof and the consolidated results of operations and changes in cash flows for the periods indicated (subject, in the case of unaudited financial statements, to normal year-end audit adjustments consistent with prior periods).

 

  

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(b) Since June 30, 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 Subsidiaries has been conducted only in the ordinary course consistent with past business practices.

 

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

 

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 Subsidiary  (i) not fully covered by insurance (except for normal deductibles) as to which there is a reasonable possibility of an adverse determination that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, (ii) that involve any Loan Document or the Transactions or (iii) that could impair the consummation of the Acquisition on the time and in the manner contemplated by the Acquisition Documents.

 

(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 as set forth in Schedule 7.06 and as could not be reasonably expected to have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions could not be reasonably expected to have a Material Adverse Effect):

 

(a) neither any Property of the Borrower or any Subsidiary nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws.

 

(b) no Property of the Borrower or any Subsidiary nor the operations currently conducted thereon or, to the knowledge of the Borrower, by any prior owner or operator of such Property or operation, are in violation of or subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to any remedial obligations under Environmental Laws.

 

(c) all notices, permits, licenses, exemptions, approvals or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any and all Property of the Borrower and each Subsidiary, including, without limitation, past or present treatment, storage, disposal or release of a hazardous substance, oil and gas waste or solid waste into the environment, have been duly obtained or filed, and the Borrower and each Subsidiary are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations.

 

  

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(d) all hazardous substances, solid waste and oil and gas waste, if any, generated at any and all Property of the Borrower or any Subsidiary have in the past been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and, to the knowledge of the Borrower, all such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and are not the subject of any existing, pending or threatened action, investigation or inquiry by any Governmental Authority in connection with any Environmental Laws.

 

(e) the Borrower has taken all steps reasonably necessary to determine and has determined that no oil, hazardous substances, solid waste or oil and gas waste, have been disposed of or otherwise released and there has been no threatened release of any oil, hazardous substances, solid waste or oil and gas waste on or to any Property of the Borrower or any Subsidiary except in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment.

 

(f) neither the Borrower nor any Subsidiary has any known contingent liability or Remedial Work in connection with any release or threatened release of any oil, hazardous substance, solid waste or oil and gas waste into the environment.

 

Section 7.07. Compliance with the Laws and Agreements; No Defaults.

 

(a) Each of the Borrower and each 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 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 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 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 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 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 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 Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.  The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of Taxes and other governmental charges are adequate.  No Tax Lien has been filed and, to the knowledge of the Borrower, no claim is being asserted with respect to any such Tax or other such governmental charge.

 

  

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Section 7.10. ERISA.

 

(a) The Borrower, the 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 act, omission or transaction has occurred which could result in imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA.

 

(d) No Plan (other than a defined contribu­tion plan) or any trust created under any such Plan has been terminated since September 2, 1974.  No liability to the PBGC (other than for the payment of current premiums which are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be incurred with respect to any Plan.  No ERISA Event with respect to any Plan has occurred.

 

(e) Full payment when due has been made of all amounts which the Borrower, the Subsidiaries or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contribu­tions to such Plan as of the date hereof, 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.

 

(f) The actuarial present value of the benefit liabili­ties under each Plan which is subject to Title IV of ERISA 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.

 

(g) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material liability.

 

  

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(h) Neither the Borrower, the 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.

 

(i) Neither the Borrower, the 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 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 other reports, financial statements, certificates or other information furnished by or on behalf of the Borrower or any 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 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 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 Oil and Gas Properties and production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and that the Borrower and the Subsidiaries do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

 

Section 7.12. Insurance.  Schedule 7.12 sets forth a true, complete and correct description of all insurance maintained by the Borrower or by the Borrower for its Subsidiaries or by each Subsidiary for itself, as the case may be, as of the date hereof.  The Borrower has, and has caused all of its Subsidiaries to have, (a) all insurance policies sufficient for the compliance by each of them with all material Governmental Requirements and all material agreements and (b) insurance coverage in at least amounts and against such risk (including, without limitation, public liability) that are commercially reasonable and 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 Subsidiaries.  The Administrative Agent has been named as an additional insured in respect of such liability insurance policies, and the Administrative Agent has been named as loss payee with respect to Property loss insurance.

 

  

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Section 7.13. Restriction on Liens.  Neither the Borrower nor any of the Subsidiaries is a party to any material agreement or arrangement (other than Capital Leases creating Liens permitted by Section 9.03(c), but then only on the Property subject of such Capital Lease), 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 Indebtedness and the Loan Documents.

 

Section 7.14. Subsidiaries.  Except as set forth on Schedule 7.14 or as disclosed in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower has no Subsidiaries and the Borrower has no Foreign Subsidiaries.  Each Subsidiary on such schedule is a Wholly-Owned Subsidiary and a disregarded entity for federal income tax purposes.  Schedule 7.14, as supplemented as of the Effective Date, lists the Borrower’s and its Subsidiaries’ percentage ownership of ENP GP and ENP as of the Effective Date.

 

Section 7.15. Location of Business and Offices.  The Borrower’s jurisdiction of organization is Kentucky; the name of the Borrower as listed in the public records of its jurisdiction of organization is Vanguard Natural Gas, LLC; and the organizational identification number of the Borrower in its jurisdiction of organization is 0601349 (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(n) in accordance with Section 12.01).  The Borrower’s principal place of business is located at the address in London, Kentucky specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(n) and Section 12.01(c)), and its chief executive offices is located at the San Felipe street address in Houston, Texas specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(n) and Section 12.01(c)).  Each Subsidiary’s jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to Section 8.01(n)).

 

Section 7.16. Properties; Titles, Etc.

 

(a) Each of the Borrower and the Subsidiaries has good and defensible title to the Oil and Gas Properties evaluated in the most recently delivered Reserve Report and good title to all its personal Properties, in each case, free and clear of all Liens except Liens permitted by Section 9.03.  After giving full effect to the Excepted Liens, the Borrower or the Subsidiary specified as the owner owns the net interests in production attributable to the Hydrocarbon Interests as reflected in the most recently delivered Reserve Report, and the ownership of such Properties shall not in any material respect obligate the Borrower or such Subsidiary to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount in excess of the working interest of each Property set forth in the most recently delivered Reserve Report that is not offset by a corresponding proportionate increase in the Borrower’s or such Subsidiary’s net revenue interest in such Property.  The ownership by the Borrower or any Subsidiary of the Hydrocarbons and the undivided interests therein specified on the exhibits to the Mortgages are the same interests reflected in the most recently delivered Reserve Report.

 

  

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

 

(c) The rights and Properties presently owned, leased or licensed by the Borrower and the Subsidiaries including, without limitation, all easements and rights of way, include all rights and Properties necessary to permit the Borrower and the Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the date hereof.

 

(d) All of the Properties of the Borrower and the 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.

 

(e) The Borrower and each 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 Subsidiary does not infringe upon the rights of any other Person, except for any such infringements that, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.  The Borrower and its Subsidiaries either own or have valid licenses or other rights to use all databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in the business of the exploration and production of Hydrocarbons, with such exceptions as could not reasonably be expected to have a Material Adverse Effect.

 

(f) As of the Effective Date, Borrower owns all of the outstanding ENP GP LLC Member Interests and 20,924,055 ENP Common Units, which represent an approximate 46% percentage interest in ENP, and ENP GP owns all of the outstanding ENP General Partner Units, which represent a 1.10% percentage interest in ENP, all as set forth on Schedule 7.14 as supplemented as of the Effective Date, and Borrower or ENP GP, as applicable, has good and marketable title to such ENP Interests, free and clear of all Liens, other than (i) first priority senior Liens securing the Indebtedness and (ii) Liens securing the Revolver Indebtedness that are subordinated to the Liens thereon securing the Indebtedness pursuant to the terms of the Intercreditor Agreement.  The ENP GP Units have been duly authorized and validly issued in accordance with the ENP Partnership Agreement.  The ENP Common Units have been duly authorized and validly issued in accordance with the ENP Partnership Agreement, are fully paid (to the extent required by the ENP Partnership Agreement) and nonassessable (except as such nonassessability may be affected by  Section 17-607 of the Delaware Revised Uniform Limited Partnership Act).  The ENP GP LLC Member Interests have been duly authorized and validly issued in accordance with the ENP GP LLC Agreement, are fully paid (to the extent required by the ENP GP LLC Agreement) and nonassessable (except as such nonassessability may be affected by Section 18-607 of the Delaware Limited Liability Company Act).

 

  

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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, and subject to the prior rights and limitations of Borrower as an owner of non-operated working interests, the Oil and Gas Properties (and Properties unitized therewith) of the Borrower and its Subsidiaries have been maintained, operated and developed in a good and workmanlike manner and in conformity with all Governmental Requirements and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties of the Borrower and its Subsidiaries.  Specifically in connection with the foregoing, except for those as could not be reasonably expected to have a Material Adverse Effect, (i) no Oil and Gas Property of the Borrower or any Subsidiary is subject to having allowable production reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) and (ii) none of the wells comprising a part of the Oil and Gas Properties (or Properties unitized therewith) of the Borrower or any Subsidiary is deviated from the vertical more than the maximum permitted by Governmental Requirements (except with respect to horizontal wells permitted by Governmental Authority), and such wells are, in fact, bottomed under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or in the case of wells located on Properties unitized therewith, such unitized Properties) of the Borrower or such Subsidiary.  All pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Borrower or any of its Subsidiaries that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing which are operated by the Borrower or any of its Subsidiaries, in a manner consistent with the Borrower’s or its Subsidiaries’ past practices (other than those the failure of which to maintain in accordance with this Section 7.18 could not reasonably be expected to have a Material Adverse Effect).

 

Section 7.18. Gas Imbalances, Prepayments.  Except as set forth on Schedule 7.18 or on the most recent certificate delivered pursuant to Section 8.12(c), on a net basis there are no Material Gas Imbalances, take or pay or other prepayments which would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor.

 

Section 7.19. Marketing of Production.  Except for contracts listed and in effect on the date hereof on Schedule 7.19, and thereafter either disclosed in writing to the Administrative Agent or included in the most recently delivered Reserve Report (with respect to all of which contracts the Borrower represents that it or its Subsidiaries are receiving a price for all production sold thereunder which is computed substantially in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject Property’s delivery capacity), no material agreements exist which are not cancelable on 60 days notice or less without penalty or detriment for the sale of production from the Borrower’s or its Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other rights to purchase, production, whether or not the same are currently being exercised) that (a) pertain to the sale of production at a fixed price and (b) have a maturity or expiry date of longer than six (6) months from the date hereof.

 

  

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Section 7.20. Swap Agreements.  Schedule 7.20, as of the date hereof, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(f), sets forth, a true and complete list of all Swap Agreements of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement.

 

Section 7.21. Use of Loans.  The proceeds of the Loans shall be used to purchase the ENP Interests pursuant to the provisions of the ENP Acquisition Agreement.

 

The Borrower and its 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 will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.

 

Section 7.22. Solvency.  After giving effect to the transactions contemplated hereby, (a) the aggregate assets (after giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a consolidated basis, as the Debt becomes absolute and matures, (b) each of the Borrower and the Guarantors will not have incurred or intended to incur, and will not believe that it will incur, Debt beyond its ability to pay such Debt (after taking into account the timing and amounts of cash to be received by each of the Borrower and the Guarantors and the amounts to be payable on or in respect of its liabilities, and giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute and matures and (c) each of the Borrower and the Guarantors will not have (and will have no reason to believe that it will have thereafter) unreasonably small capital for the conduct of its business.

 

Section 7.23. Sanctioned Persons.  Neither the Borrower or any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee or Affiliate of the Borrower or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Borrower will not directly or indirectly use the proceeds of the Loans or otherwise make available such proceeds to any Person or entity, for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

 

Section 7.24. Security Instruments.  The Mortgages are effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable Lien on all of the Borrower’s and each Guarantor’s right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof.  When the Mortgages are filed in the offices specified on Schedule 7.24, such Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Borrower and each Guarantor in the Mortgaged Property thereunder and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to (i) Liens securing the Revolver Indebtedness as provided in the Intercreditor Agreement and (ii) the rights of persons pursuant to Liens expressly permitted by Section 9.03.  The ENP Interests Pledge Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable Lien on all of Borrower’s and ENP GP’s right, title and interest in and to the ENP Interests.  Upon the taking of possession by the Administrative Agent of all certificates evidencing the ENP Interests and the filing of financing statements with the Delaware Secretary of State, naming the Borrower and ENP GP as debtors and the Administrative Agent as secured party and describing the ENP Interests as collateral, such Lien shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Borrower and ENP GP in the ENP Interests, in each case prior and superior in right to any other Person.

 

  

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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, the Borrower covenants and agrees with the Lenders that:

 

Section 8.01. Financial Statements; 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 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 an independent public accountant 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.

 

(b) Quarterly Financial Statements.  As soon as available, but in any event in accordance with then applicable law and not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year of 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.

 

(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 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 8.13(b) and Section 9.01 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 7.04 (or, if later, the most recently delivered audited financial statements pursuant to Section 8.01(a)) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

 

  

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(d) Certificate of Accounting Firm -- Defaults.  Concurrently with any delivery of financial statements under Section 8.01(a), a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines).

 

(e) Certificate of Financial Officer -- Consolidating Information.  If, at any time, all of the Consolidated Subsidiaries of the Borrower are not Consolidated 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 Subsidiaries and the eliminating entries, in such form as would be presentable to the auditors of the Borrower.

 

(f) Certificate of Financial Officer -- Swap Agreements.  Concurrently with any delivery of financial statements under Section 8.01(a) and Section 8.01(b), a certificate of a Financial Officer, in form and substance satisfactory to the Administrative Agent, setting forth as of the last Business Day of such fiscal quarter or fiscal year, a true and complete list of all Swap Agreements of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark-to-market value therefor, any new credit support agreements relating thereto, any margin required or supplied under any credit support document, and the counterparty to each such agreement.

 

(g) Certificate of Insurer -- Insurance Coverage.  Concurrently with any delivery of financial statements under Section 8.01(a), a certificate of insurance coverage from each insurer with respect to the insurance required by Section 8.07, in form and substance satisfactory to the Administrative Agent, and, if requested by the Administrative Agent or any Lender, all copies of the applicable policies.

 

(h) Other Accounting Reports.  Promptly upon receipt thereof, a copy of each other report or letter submitted to the Borrower or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or any such Subsidiary, and a copy of any response by the Borrower or any such Subsidiary, or the board of managers of the Borrower or any such Subsidiary, to such letter or report.

 

(i) SEC and Other Filings; Reports to Shareholders.  Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Vanguard Resources with the SEC, or with any national securities exchange, or distributed by Vanguard Resources to its shareholders generally, as the case may be.  Documents required to be delivered pursuant to this clause (i) may be delivered electronically and if so delivered shall be deemed to have been delivered on the date (x) on which Vanguard Resources posts such documents, or provides a link thereto on Vanguard Resources’ website on the Internet; or (ii) on which such documents are posted on Vanguard Resources’ behalf on IntraLinks/SyndTrak or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that:  (i) upon written request by the Administrative Agent, the Borrower shall cause Vanguard Resources to deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify, or cause Vanguard Resources to notify, (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.

 

  

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(j) Notices Under Material Instruments.  Promptly after the furnishing thereof, copies of any financial statement, report or notice furnished to or by any Person pursuant to the terms of any preferred stock designation, indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 8.01.

 

(k) Lists of Purchasers.  Concurrently with the delivery of any Reserve Report to the Administrative Agent pursuant to Section 8.12, a list of the names and addresses of all Persons purchasing Hydrocarbons from the Borrower or any Subsidiary.

 

(l) Notice of Sales of Oil and Gas Properties.  In the event the Borrower or any Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil or Gas Properties or any Equity Interests in any Subsidiary in accordance with Section 9.12, prior written notice of such disposition, the price thereof and the anticipated date of closing and any other details thereof requested by the Administrative Agent or any Lender.

 

(m) Notice of Casualty Events.  Prompt written notice, and in any event within three Business Days, of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event.

 

(n) Information Regarding Borrower and Guarantors.  Prompt written notice (and in any event within thirty (30) days prior thereto) of any change (i) in the Borrower or any Guarantor’s corporate name or in any trade name used to identify such Person in the conduct of its business or in the ownership of its Properties, (ii) in the location of the Borrower or any Guarantor’s chief executive office or principal place of business, (iii) in the Borrower or any Guarantor’s identity or corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in the Borrower or any Guarantor’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in the Borrower or any Guarantor’s federal taxpayer identification number, if any.

 

(o) Production Reports and Lease Operating Statements.  Within 45 days after the end of each fiscal quarter, a report setting forth, for each calendar month during the then current fiscal year to date, (i) the volume of production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) for each such calendar month from the Oil and Gas Properties, individually and in the aggregate, and (ii) the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month.

 

  

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(p) Gas Balancing Reports.  Within 45 days after the end of each fiscal quarter, a report setting forth, for the quarter during the then current fiscal year to date, the existence of any Material Gas Imbalances listed on a property-by-property basis.

 

(q) Notices of Certain Changes.  Promptly, but in any event within five (5) Business Days after the execution thereof, copies of any amendment, modification or supplement to the Organizational Documents of the Borrower or any Subsidiary.

 

(r) Ratings Change.  Promptly after Moody’s or S&P shall have announced a change in the rating of the Borrower or one of its Affiliates or Vanguard Resources, written notice of such rating change.

 

(s) PATRIOT Act.  Promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

 

(t) Other Requested Information.  Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary or Affiliates (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 or any Lender may reasonably request.

 

(u) Notification of Hedging Violation.  Promptly notify Administrative Agent if the volumes of Hydrocarbons hedged under Swap Agreements ever exceed the actual daily production of the Hydrocarbons from the Mortgaged Property.

 

Section 8.02. Notices of Material Events.  The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:

 

(a) the occurrence of any Default;

 

(b) the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against or affecting 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 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;

 

  

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(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 Subsidiaries in an aggregate amount exceeding $500,000; 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 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 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, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which its Oil and Gas Properties is located or the ownership of its Properties requires such qualification, except 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 Subsidiary to, pay its obligations, including Tax liabilities of the Borrower and all of its 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 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 Subsidiary.

 

Section 8.05. Performance of Obligations under Loan Documents.  The Borrower will pay the Notes according to the reading, tenor and effect thereof, and the Borrower will, and will cause each 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 Subsidiary to:

 

(a) operate its Oil and Gas Properties and other material Properties or cause such Oil and Gas Properties and other material Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance with all Governmental Requirements, including, without limitation, applicable pro ration requirements and Environmental Laws, and all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Oil and Gas Properties and the production and sale of Hydrocarbons and other minerals therefrom, except, in each case, in those circumstances where a reasonably prudent operator under similar circumstances and in accordance with customary industry practice would be prudent not to do so, and the failure to comply could not reasonably be expected to have a Material Adverse Effect.

 

  

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(b) operate and maintain 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, all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the gathering, transportation or processing of Hydrocarbons and other minerals therefrom, except, in each case, in those circumstances where a reasonably prudent operator under similar circumstances and in accordance with customary industry practice would be prudent not to do so, and the failure to comply could not reasonably be expected to have a Material Adverse Effect, all pipelines, compressor stations, wells, gas or crude oil processing facilities, field gathering systems, tanks, tank batteries, pumps, pumping units, fixtures, valves, fittings, machinery, parts, engines, boilers, meters, apparatus, appliances, tools, implements, casing, tubing, rods, cables, wires, towers, surface and other material improvements, fixtures and equipment owned in whole or in part by the Borrower or any of its Subsidiaries that are useful or necessary to conduct normal operations relating to gathering, transportation, processing or removal of Hydrocarbons and other minerals or CO2 therefrom.

 

(c) keep and maintain all Property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and preserve, maintain and keep in good repair, working order and efficiency (ordinary wear and tear excepted) all of its material Oil and Gas Properties, all gas or crude oil processing facilities and other material Properties, including, without limitation, all equipment, machinery and facilities.

 

(d) promptly pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties or gas or crude oil processing facilities and will do all other things necessary to keep unimpaired their rights with respect thereto and prevent any forfeiture thereof or default thereunder.

 

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

 

(f) operate its Oil and Gas Properties, all gas or crude oil processing facilities and other material Properties or cause or make reasonable and customary efforts to cause such Oil and Gas Properties, gas or crude oil processing facilities and other material Properties to be operated in accordance with the practices of the industry and in material compliance with all applicable contracts and agreements and in compliance in all material respects with all Governmental Requirements.

 

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

 

  

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Section 8.07. Insurance.  The Borrower will, and will cause each Subsidiary to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.  The 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 and the Lenders as “additional insureds” and provide that the insurer will endeavor to give at least 30 days prior notice of any cancellation to the Administrative Agent.

 

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

 

Section 8.09. Compliance with Laws.  The Borrower will, and will cause each 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 Subsidiary and each Subsidiary’s Properties and operations to comply, with all applicable Environmental Laws, the breach of which could be reasonably expected to have a Material Adverse Effect; (ii) not dispose of or otherwise release, and shall cause each Subsidiary not to dispose of or otherwise release, any oil, oil and gas waste, hazardous substance, or solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties or any other Property to the extent caused by the Borrower’s or any of its Subsidiaries’ operations except in compliance with applicable Environmental Laws, the disposal or release of which could reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or file, and shall cause each Subsidiary to timely obtain or file, all notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or its Subsidiaries’ Properties, which failure to obtain or file could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion, and shall cause each Subsidiary to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “Remedial Work”) in the event any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other release of any oil, oil and gas waste, hazardous substance or solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material Adverse Effect; and (v) establish and implement, and shall cause each Subsidiary to establish and implement, such procedures as may be necessary to continuously determine and assure that the Borrower’s and its 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.

 

  

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(b) The Borrower will promptly, but in no event later than five days of the occurrence of a triggering event, notify the Administrative Agent and the Lenders in writing of any threatened action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit by any landowner or other third party against the Borrower or its 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 $500,000, not fully covered by insurance, subject to normal deductibles.

 

(c) The Borrower will, and will cause each 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 in connection with any future acquisitions of Oil and Gas Properties or other Properties.

 

Section 8.11. Further Assurances.

 

(a) The Borrower at its sole expense will, and will cause each 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 Subsidiary, as the case may be, in the Loan Documents, including the Notes, or to further evidence and more fully describe the collateral intended as security for the Indebtedness, or to correct any omissions in this Agreement or the Security Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in 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 Mortgaged Property , the ENP Interests or other Property covered by the Lien of the Security Instruments 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 the Mortgaged Property, the ENP Interests, such other Property 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 March 1, 2011, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report evaluating the Oil and Gas Properties of the Borrower and its 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 operating officer of the Borrower who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding June 30 Reserve Report.

 

  

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(b) Reserved.

 

(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:  (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct in all material respects, (ii) the Borrower or its Subsidiaries own good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no Material Gas Imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.19 with respect to its Oil and Gas Properties evaluated in such Reserve Report which would require the Borrower or any Subsidiary to deliver Hydrocarbons either generally or produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of their Oil and Gas Properties have been sold since the date of the last Reserve Report except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of the names and addresses of the purchasers which accounted for at least 75% of the total natural gas and oil revenues of the Borrower and its Subsidiaries during the twelve month period ended as of the immediately preceding December 31st or June 30th, as applicable and (vi) attached thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of the total value of the Oil and Gas Properties that the value of such Mortgaged Properties represent in compliance with Section 8.14(a).

 

Section 8.13. Title Information.

 

(a) On or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Section 8.12(a), the Borrower will deliver title information in form and substance acceptable to the Administrative Agent covering enough of the Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received together with title information previously delivered to the Administrative Agent, satisfactory title information on at least 80% of the total value of the Oil and Gas Properties evaluated by such Reserve Report.

 

(b) If the Borrower has provided title information for additional Properties under Section 8.13(a), the Borrower shall, within 60 days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Properties, either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions except for Excepted Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such definition) having an equivalent value or (iii) deliver title information in form and substance acceptable to the Administrative Agent so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, satisfactory title information on at least 80% of the value of the Oil and Gas Properties evaluated by such Reserve Report.

 

  

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(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 not comply with the requirements to provide acceptable title information covering 80% of the value of the Oil and Gas Properties evaluated in the most recent Reserve Report, such default shall not be a Default, but instead the Administrative Agent and/or the Majority Lenders shall have the right to exercise the following remedy in their sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent or the Lenders.  To the extent that the Administrative Agent or the Majority Lenders are not satisfied with title to any Mortgaged Property after the 60-day period has elapsed, such unacceptable Mortgaged Property shall not count towards the 80% requirement.

 

Section 8.14. Additional Collateral; Additional Guarantors.

 

(a) In connection with each Reserve Report, the Borrower shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties represent at least 90% of the total value of the Oil and Gas Properties evaluated in the most recently completed Reserve Report after giving effect to exploration and production activities, acquisitions, dispositions and production.  In the event that the Mortgaged Properties do not represent at least 90% of such total value, then the Borrower shall, and shall cause its 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 Indebtedness a first-priority Lien interest (subordinate and subject to any Liens securing the Revolver Indebtedness as provided in the Intercreditor Agreement) (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 Oil and Gas Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 90% of such total value.  All such Liens will be created and perfected by and in accordance with the provisions of Mortgages, 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 Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).

 

(b) The Borrower shall promptly cause each Subsidiary to guarantee the Indebtedness pursuant to a Guaranty Agreement.  In connection with any such guaranty, the Borrower shall, or shall cause such Subsidiary to, (A) pledge all of the Equity Interests of such new Subsidiary pursuant to a Subsidiary Pledge Agreement (including, without limitation, delivery of original stock certificates, if any, evidencing the Equity Interests of such Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof) and (B) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent.

 

  

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(c) If the Borrower elects to provide additional Mortgaged Properties in lieu of making any mandatory prepayment pursuant to Section 3.04(c) of the Revolver, then the Borrower shall, or shall cause its Subsidiaries to, grant to the Administrative Agent as security for the Indebtedness a first-priority Lien interest (subordinate and subject to any Liens securing the Revolver Indebtedness as provided in the Intercreditor Agreement) (subject only to Excepted Liens) on additional Oil and Gas Properties not already subject to a Lien of the Security Instruments.  All such Liens will be created and perfected by and in accordance with the provisions of Mortgages, deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance satisfactory to the Administrative Agent and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes.  In order to comply with the foregoing, if any Subsidiary places such a Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).

 

(d) In the event  that (i) the Majority Lenders waive the provisions of Section 9.15 to permit the Borrower or any Domestic Subsidiary to become the owner of a Foreign Subsidiary (such waiver to be granted in the sole discretion of the Majority Lenders), and (ii) such Foreign Subsidiary has total assets in excess of $1,000,000, then the Borrower shall promptly, or shall cause such Domestic Subsidiary to promptly, guarantee the Indebtedness pursuant to the Guaranty Agreement.  In connection with any such guaranty, the Borrower shall, or shall cause such Domestic Subsidiary to, (i) execute and deliver a supplement to the Guaranty Agreement, (ii) pledge 65% of all the Equity Interests of such Foreign Subsidiary (including, without limitation, 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) and (iii) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent.

 

(e) Upon the acquisition by the Borrower or any Subsidiary of any ENP Interests after the Effective Date, the Borrower shall grant, or shall cause such Subsidiary to grant, within five Business Days after the acquisition thereof, to the Administrative Agent as security for the Indebtedness a first-priority Lien interest in such acquired ENP Interests and shall deliver to the Administrative Agent any and all certificates evidencing such acquired ENP Interests.  All such Liens will be created and perfected by and in accordance with the provisions of the ENP Interests Pledge Agreement and financing statements with respect thereto, all in form and substance reasonably satisfactory to the Administrative Agent.

 

Section 8.15. ERISA Compliance.  The Borrower will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent (i) 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, (ii) 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 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 Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action the Borrower, the 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 (iii) 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 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.

 

  

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Section 8.16. Reserved.

 

Section 8.17. Revolver Agent as Principal Depository.  The Borrower shall maintain Revolver Agent as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts

 

Section 8.18. Chief Financial Officer.  The Borrower shall keep the position of chief financial officer filled through the Maturity Date.

 

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, the Borrower covenants and agrees with the Lenders that:

 

Section 9.01. Financial Covenants.

 

(a) Consolidated Interest Coverage Ratio.  The Borrower will not, as of the last day of any fiscal quarter beginning with the fiscal quarter ending December 31, 2010, permit its Consolidated Interest Coverage Ratio be less than 2.5 to 1.0.

 

(b) Consolidated Leverage Ratio.  The Borrower will not, as of the last day of any fiscal quarter beginning with the fiscal quarter ending December 31, 2010, permit its Consolidated Leverage Ratio to be greater than 4.00 to 1.0.

 

(c) Consolidated Current Ratio.  The Borrower will not permit, at any time, the ratio of (i) consolidated current assets (including the unused amount of the total Commitments, but excluding non-cash assets under FAS 133) to (ii) consolidated current liabilities (excluding non-cash obligations under FAS 133 and current maturities under this Agreement and under the Revolver) to be less than 1.0 to 1.0.  This ratio shall be computed for the Borrower, the Consolidated Subsidiaries and Vanguard Resources on a consolidated basis.

 

  

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(d) Minimum Liquidity.  The Borrower shall maintain at all times unencumbered liquid assets having an aggregate value of at least $2,000,000.  The phrase ‘unencumbered liquid assets’ means the sum of (a) the Revolver Availability, plus (b) cash which is not subject to any Lien or right of set-off.

 

(e) Minimum Equity Financing of Acquisitions.  The Borrower will not permit the aggregate received proceeds from Equity Offerings after the Effective Date to be less than the difference of (i) the aggregate purchase price of all Property acquired by the Borrower, ENP and their respective Consolidated Subsidiaries after the Effective Date minus (ii) the aggregate increased Revolver Availability and ENP Credit Facility Availability, if any, resulting from such acquisitions, determined with respect to each such acquisition as of the date of such acquisition.

 

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

 

(a) the Notes or other Indebtedness arising under the Loan Documents or any guaranty of or suretyship arrangement for the Notes or other Indebtedness arising under the Loan Documents.

 

(b) 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 sixty (60) 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.

 

(c) Debt under Capital Leases not to exceed $1,000,000.

 

(d) Debt associated with bonds or surety obligations required by Governmental Requirements in connection with the operation of the Oil and Gas Properties.

 

(e) intercompany Debt between the Borrower and any Subsidiary or between Subsidiaries to the extent permitted by Section 9.05(g); provided that such Debt is not held, assigned, transferred, negotiated or pledged to any Person other than the Borrower or one of its Wholly-Owned Subsidiaries, and, provided further, that any such Debt owed by either the Borrower or a Guarantor shall be subordinated to the Indebtedness on terms satisfactory to the Administrative Agent.

 

(f) endorsements of negotiable instruments for collection in the ordinary course of business.

 

(g) Revolver Indebtedness

 

  

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(h) other Debt, including purchase-money obligations, not to exceed $1,000,000 in the aggregate at any one time outstanding.

 

(i) Debt arising under Swap Agreements permitted under Section 9.18 hereof.

 

Section 9.03. Liens.  The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except:

 

(a) Liens securing the payment of any Indebtedness.

 

(b) Excepted Liens.

 

(c) Liens securing Capital Leases permitted by Section 9.02(c) but only on the Property under lease.

 

(d) Liens on any Property of the Borrower and its Subsidiaries existing on the date hereof and set forth on Schedule 9.03; provided that such Liens shall secure only those obligations which they secure on the date hereof.

 

(e) Liens on Property not constituting collateral for the Indebtedness and not otherwise permitted by the foregoing clauses of this Section 9.03; provided that the aggregate principal or face amount of all Debt secured under this Section 9.03(e) shall not exceed $2,000,000 at any time.

 

(f) Subject to the terms of the Intercreditor Agreement, Liens securing the Revolver Indebtedness; provided, any and all such Liens on any ENP Interests shall be subordinate and subject to any and all Liens thereon securing the Indebtedness as provided in the Intercreditor Agreement.

 

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

 

(a) the Borrower may declare and pay cash distributions to its Equity Interest holders to permit such holders to pay federal and state taxes due with respect to the income of the Borrower;

 

(b) 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);

 

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

 

  

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

 

(e) the Borrower may make Restricted Payments to its Equity Interest holders provided that (i) no Default has occurred and is continuing or would result from the making of such Restricted Payment, and (ii) after giving effect to such Restricted Payment, the Revolver Revolving Credit Exposure is less than 90% of the Revolver Borrowing Base as of such date, and (iii) in the case of a Restricted Payment which will be used by Vanguard Resources, to purchase treasury stock, the sum of the amounts of all such payments to date, plus the amount of such proposed Restricted Payment, does not exceed $5,000,000.

 

Section 9.05. Investments, Loans and Advances.  The Borrower will not, and will not permit any 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 reflected in the Financial Statements or which are disclosed to the Lenders in Schedule 9.05.

 

(b) accounts receivable arising in the ordinary course of business.

 

(c) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case maturing within one year from the date of creation thereof.

 

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

 

(e) deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the date of such bank or trust company’s most 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 Subsidiary in or to the Borrower or any Guarantor and (iii) made by the Borrower or any Subsidiary in or to all other Domestic Subsidiaries which are not Guarantors in an aggregate amount at any one time outstanding not to exceed $1,000,000.

 

(h) Investments (including, without limitation, capital contributions) in general or limited partnerships or other types of entities (each a “venture”) entered into by the Borrower or a Subsidiary with others in the ordinary course of business; provided that (i) any such venture is engaged exclusively in oil and gas exploration, development, production, processing and related activities, including transportation, (ii) the interest in such venture is acquired in the ordinary course of business and on fair and reasonable terms and (iii) such venture interests acquired and capital contributions made (valued as of the date such interest was acquired or the contribution made) do not exceed, in the aggregate at any time outstanding an amount equal to $1,000,000.

 

  

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(i) Investments made by the Borrower or a Guarantor in direct ownership interests in additional Oil and Gas Properties and gas gathering systems related thereto or related to farm-out, farm-in, joint operating, joint venture or area of mutual interest agreements, gathering systems, pipelines or other similar arrangements which are usual and customary in the oil and gas exploration and production business located within the geographic boundaries of the United States of America, provided that (A) the Borrower shall be in compliance, on a pro forma basis after giving effect to any such Investment, with the financial covenants set forth in Section 9.01 recomputed as at the last day of the most recently ended fiscal quarter of the Borrower for which financial statements are available, and (B) no Default shall have occurred and be continuing or would result therefrom.

 

(j) 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 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 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(k) exceeds $1,000,000.

 

(k) Investments in ENP Interests.

 

(l) other Investments not to exceed $1,000,000 in the aggregate at any time.

 

Section 9.06. Nature of Business; International Operations.  The Borrower will not, and will not permit any Subsidiary to, allow any material change to be made in the character of its business as currently conducted by it and business activities reasonably incidental thereto as an independent oil and gas exploration and production company with operations in the continental United States.  From and after the date hereof, the Borrower and its Subsidiaries will not acquire or make any other expenditure (whether such expenditure is capital, operating or otherwise) in or related to, any Oil and Gas Properties not located within the geographical boundaries of the United States.

 

Section 9.07. Limitation on Leases.  The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal but excluding Capital Leases and leases of Hydrocarbon Interests), under leases or lease agreements which would cause the aggregate amount of all payments made by the Borrower and the Subsidiaries pursuant to all such leases or lease agreements, including, without limitation, any residual payments at the end of any lease, to exceed $5,000,000 in any period of twelve consecutive calendar months during the life of such leases.

 

  

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Section 9.08. Proceeds of Notes.  The Borrower will not permit the proceeds of the Notes to be used for any purpose other than those permitted by Section 7.21.  Neither the 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 Subsidiary to, at any time:

 

(a) engage in, or permit any ERISA Affiliate to engage in, any transaction in connection with which the Borrower, a Subsidiary or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code.

 

(b) 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 Subsidiary or any ERISA Affiliate to the PBGC.

 

(c) 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 Subsidiary or any ERISA Affiliate is required to pay as contributions thereto.

 

(d) 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.

 

(e) permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by the Borrower, a Subsidiary or any ERISA Affiliate which is regulated under Title IV of ERISA 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.

 

(f) 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.

 

(g) 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 Subsidiary or with respect to any ERISA Affiliate of the Borrower or a Subsidiary if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds 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.

 

  

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(h) 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.

 

(i) 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 employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any material liability.

 

(j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Borrower, a 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 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 Subsidiary to, discount or sell (with or without recourse) any of its notes receivable or accounts receivable.

 

Section 9.11. Mergers, Etc.  Neither the Borrower nor any of its Subsidiaries will merge into or with or consolidate with any other Person, or sell, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property to any other Person, except that (i) any Wholly-Owned Subsidiary may merge with any other Wholly-Owned Subsidiary, (ii) the Borrower may merge with any Wholly-Owned Subsidiary so long as the Borrower is the survivor and (iii) a Wholly-Owned Subsidiary with no assets may merge with and into ENP so long as ENP is the survivor.

 

Section 9.12. Sale of Properties.  The Borrower will not, and will not permit any Subsidiary to sell any ENP Interests. The Borrower will not, and will not permit any Subsidiary to,  sell, assign, farm-out, convey or otherwise transfer any other Property except for (a) the sale of Hydrocarbons in the ordinary course of business; (b) farmouts of undeveloped acreage and assignments in connection with such farmouts; (c) the sale or transfer of equipment that is no longer necessary for the business of the Borrower or such Subsidiary or is replaced by equipment of at least comparable value and use; and (d) sales and other dispositions of Property not regulated by Sections 9.01(a) through 9.01(d) having a fair market value not in excess of 5% of the Revolver Borrowing Base (as determined by the Revolver Agent), individually or in the aggregate during any 12-month period.

 

  

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Section 9.13. Environmental Matters.  The Borrower will not, and will not permit any Subsidiary to, cause or permit any of its Property which it or a Subsidiary operates 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.  The Borrower will use its reasonable efforts to cause the operator of Properties which the Borrower or any Subsidiary does not operate to comply with the terms and provisions of this Section 9.13.

 

Section 9.14. Transactions with Affiliates.  The Borrower will not, and will not permit any 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 the Guarantors and Wholly-Owned Subsidiaries of the Borrower) 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.

 

Section 9.15. Subsidiaries.  The Borrower will not, and will not permit any Subsidiary to, create or acquire any additional Subsidiary unless the Borrower gives written notice to the Administrative Agent of such creation or acquisition and complies with Section 8.14(b) and Section 8.14(c); provided however, that the Borrower and any Wholly-Owned Subsidiary may create a Subsidiary to be used in connection with the merger by the Borrower or any Subsidiary with ENP, ENP Operating or any of their respective Subsidiaries.  The Borrower shall not, and shall not permit any Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any Subsidiary except in compliance with Section 9.12(d).  Neither the Borrower nor any Subsidiary shall have any Foreign Subsidiaries.

 

Section 9.16. Negative Pledge Agreements; Dividend Restrictions.  The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any contract, agreement or understanding (other than this Agreement, the Security Instruments or Capital Leases creating Liens permitted by Section 9.03(c)) 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 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, or which restricts (other than the ENP Partnership Agreement, the ENP GP LLC Agreement and the ENP Credit Agreement) ENP, ENP GP or any ENP Restricted Subsidiary from paying dividends or making distributions.

 

Section 9.17. Gas Imbalances, Take-or-Pay or Other Prepayments.  The Borrower will not, and will not permit any Subsidiary to, (a) incur, become or remain liable for, any Material Gas Imbalance, or (b) allow take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower or any Subsidiary that would require the Borrower or such Subsidiary to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefor.

 

  

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Section 9.18. Swap Agreements.  The Borrower will not, and will not permit any Subsidiary to, enter into any Swap Agreements with any Person other than (a) Swap Agreements in respect of commodities (i) with an Approved Counterparty and (ii) the notional volumes for which (when aggregated with other commodity Swap Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements):

 

(1) do not exceed the current actual daily production of Hydrocarbons from the Mortgaged Property at the time any proposed Swap Agreement is entered into (and in connection with any acquisition of interests in Oil and Gas Properties for which a binding purchase and sale agreement has been entered into and/or consummated subsequent to the date of the most recent Reserve Report delivered to the Lenders hereunder, after giving effect to such acquisition on a pro forma basis), and

 

(2) do not exceed 85% of the projected production of Hydrocarbons from Proved Reserves of the Oil and Gas Properties (as reflected on the most recently delivered Reserve Reports acceptable to the Administrative Agent) during the period (and in connection with any acquisition of interests in Oil and Gas Properties for which a binding purchase and sale agreement has been entered into and/or consummated subsequent to the date of the most recent Reserve Report delivered to the Lenders hereunder, after giving effect to such future acquisition on a pro forma basis) during which such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately (gas and NGL may be reported on a combined basis), and

 

(3) do not include more than 25% of the projected production of Hydrocarbons from Proved Reserves constituting PDNP or PUD, and

 

(b) Swap Agreements in respect of interest rates with an Approved Counterparty with the purpose and effect of fixing interest rates on a principal amount of indebtedness of the Borrower that is accruing interest at a variable rate, provided that (i) the aggregate notional amount of such contracts never exceeds 85% of the anticipated outstanding principal balance of the indebtedness to be hedged by such contracts or an average of such principal balances calculated by using a generally accepted method of matching interest rate swap contracts to declining principal balances, and (ii) the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding indebtedness to be hedged by such contract.  In no event shall any Swap Agreement contain any requirement, agreement or covenant for the Borrower or any Subsidiary to post collateral or margin to secure their obligations under such Swap Agreement or to cover market exposures.  Should there be a breach of this Section 9.18, the Borrower or any Subsidiary, as applicable, shall promptly unwind, modify, assign or terminate any Swap Agreement as is necessary to cure such breach; provided that nothing contained herein shall be construed to modify or limit the terms of Section 10.01(d).

 

Section 9.19. Marketing Activities.  The Borrower will not, and will not permit any of its Subsidiaries to, engage in marketing activities for any Hydrocarbons or enter into any contracts related thereto other than (i) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from their proved Oil and Gas Properties during the period of such contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from proved Oil and Gas Properties of third parties during the period of such contract associated with the Oil and Gas Properties of the Borrower and its Subsidiaries that the Borrower or one of its Subsidiaries has the right to market pursuant to joint operating agreements, unitization agreements or other similar contracts that are usual and customary in the oil and gas business and (iii) other contracts for the purchase and/or sale of Hydrocarbons of third parties (A) which have generally offsetting provisions (i.e. corresponding pricing mechanics, delivery dates and points and volumes) such that no “position” is taken and (B) for which appropriate credit support has been taken to alleviate the material credit risks of the counterparty thereto.

 

  

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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 when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof, by acceleration or otherwise.

 

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 10.01(a)) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) Business Days.

 

(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any 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 when made or deemed made.

 

(d) the Borrower or any Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in Section 8.01(j), Section 8.01(n), Section 8.01(q), Section 8.02, Section 8.03, Section 8.14, Section 8.15 or in ARTICLE IX; provided, that an Event of Default under clause (a) of Section 9.18 shall not be deemed to have occurred unless the breach of such provision has continued unremedied for a period of 10 days after its occurrence.

 

(e) the Borrower or any Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or any other Loan Document, and such failure shall continue unremedied for a period of 30 days after the earlier to occur of (A) notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender) or (B) a Responsible Officer of the Borrower or such Subsidiary otherwise becoming aware of such default.

 

(f) 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, or ENP, ENP GP or any ENP Restricted Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of ENP Material Indebtedness, in each case when and as the same shall become due and payable (after giving effect to any applicable notice and cure period).

 

  

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(g) any event or condition occurs that results in any Material Indebtedness or ENP Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the Redemption thereof or any offer to Redeem to be made in respect thereof prior to its scheduled maturity, or require the Borrower or any Subsidiary to make an offer in respect thereof.

 

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

 

(i) the Borrower or any Subsidiary, or ENP, ENP GP or any ENP Restricted Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 10.01(h), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary, or ENP, ENP GP or any ENP Restricted Subsidiary, or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing.

 

(j) the Borrower or any Subsidiary, or ENP, ENP GP or any ENP Restricted Subsidiary, shall become unable, admit in writing its inability or fail generally to pay its debts as they become due.

 

(k) (i) one or more final judgments for the payment of money in an aggregate amount in excess of (x) with respect to the Borrower or any Subsidiary, 2% of the existing Revolver Borrowing Base, and (y) with respect to ENP, ENP GP or any ENP Restricted Subsidiary, $15,000,000, (in each case 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 (x) against the Borrower, any Subsidiary or any combination thereof, or (y) against ENP, ENP GP, any ENP Restricted Subsidiary or any combination thereof, and in each such case the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary, or upon any assets of ENP, ENP GP or any ENP Restricted Subsidiary, to enforce any such judgment.

 

  

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(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 Subsidiary or any of their Affiliates shall so state in writing.

 

(m) an ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $1,000,000 in any year.

 

(n) There occurs under any Swap Agreement an early Termination Date (as defined in such Swap Agreement) resulting from (i) any event of default under such Swap Agreement to which the Borrower or any Subsidiary, or ENP, ENP GP or any ENP Restricted Subsidiary, is the Defaulting Party (as defined in such Swap Agreement), or (ii) any Termination Event (as so defined) under such Swap Agreement as to which the Borrower or any Subsidiary, or ENP, ENP GP or any ENP Restricted Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value (x) owed by the Borrower or such Subsidiary as a result thereof exceeds $2,000,000 or (y) owed by ENP, ENP GP or such ENP Restricted Subsidiary as a result thereof exceeds $15,000,000, and such amount owed by ENP, ENP GP or such ENP Restricted Subsidiary is not paid when due.

 

(o) a Change in Control shall occur.

 

(p) any of Scott Smith, Richard Robert or Britt Pence shall cease for any reason to be actively involved in the full time executive management of the Borrower, and a successor to such person acceptable to the Administrative Agent has not been appointed within 90 days.

 

Section 10.02. Remedies.

 

(a) In the case of an Event of Default other than one described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter during the continuance of such Event of Default, the Administrative Agent may, and at the request of the Majority Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Notes and the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents, shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the Commitments shall automatically terminate and the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents, 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.

 

  

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(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 Notes, whether by acceleration or otherwise, shall be applied:

 

first, to payment or reimbursement of that portion of the Indebtedness constituting fees, expenses and indemnities payable to the Administrative Agent in its capacity as such;

 

second, pro rata to payment or reimbursement of that portion of the Indebtedness constituting fees, expenses and indemnities payable to the Lenders;

 

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

 

fourth, pro rata to payment of principal outstanding on the Loans;

 

fifth, pro rata to any other Indebtedness; and

 

sixth, any excess, after all of the Indebtedness shall have been indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental Requirement.

 

ARTICLE XI                                

 

The Agents

 

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

 

Section 11.02. Duties and Obligations of Administrative Agent.  The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents.  Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing (the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties), (b) the Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to 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 not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.02 and 12.02) or (ii) in the absence of its own gross negligence or willful misconduct.  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.

 

  

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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 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.  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 to the extent such liability is determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted primarily from its own gross negligence or willful misconduct.

 

  

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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 (including electronic message, Internet or intranet web posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon and each of the Borrower and the Lenders 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.  In determining compliance with any condition hereunder to the making of a Loan, that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan.  The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.  The Administrative Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the Administrative Agent.

 

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

 

  

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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 and the Borrower.  Upon any such resignation or removal, the Majority Lenders shall have the right, in consultation with the Borrower, to appoint a successor; provided that, no consultation with the Borrower shall be required if an Event of Default has occurred and is continuing.  If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation or removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the retiring Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as the Majority Lenders appoint a successor Administrative Agent as provided for above in this paragraph.  Upon the acceptance of its appointment as 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 (if not already discharged as provided for above in this paragraph).  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.  The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

 

  

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Section 11.08. No Reliance.

 

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

 

(b) The Lenders acknowledge that the Administrative Agent and the Arranger are acting solely in administrative capacities with respect to the structuring and syndication of this facility and have no duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than their administrative duties, responsibilities and liabilities specifically as set forth in the Loan Documents and in their capacity as Lenders hereunder.  In structuring, arranging or syndicating this facility, each Lender acknowledges that the Administrative Agent and/or Arranger may be an agent or lender under these Notes, other loans or other securities and waives any existing or future conflicts of interest associated with the their role in such other debt instruments.  If in its administration of this facility or any other debt instrument, the Administrative Agent determines (or is given written notice by any Lender) that a conflict exists, then it shall eliminate such conflict within 90 days or resign pursuant to Section 11.06 and shall have no liability for action taken or not taken while such conflict existed.

 

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:

 

  

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(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Indebtedness that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 12.03) allowed in such judicial proceeding; and

 

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

 

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

 

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

 

Section 11.10. Authority of Administrative Agent to Release Collateral and Liens.  Each Lender 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 hereby authorizes the Administrative Agent to execute and deliver to the Borrower, at the Borrower’s sole cost and expense, any and all releases of Liens, termination statements, assignments or other documents reasonably requested by the Borrower in connection with any sale or other disposition of Property to the extent such sale or other disposition is permitted by the terms of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.

 

Section 11.11. The Arranger, Bookrunner, Etc.  Anything herein to the contrary notwithstanding, none of the Arrangers, shall have any powers, duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than its powers, duties, responsibilities and liabilities in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.

 

ARTICLE XII

 

Miscellaneous

 

Section 12.01. Notices.

 

(a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to Section 12.01(b)), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

 

  

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(i) if to the Borrower, to it at

 

5847 San Felipe, Suite 3000

 

Houston, Texas  77057-3399

 

Attn:  Mr. Richard Robert

 

Telecopy:  832-327-2260

 

Telephone:  832-327-2258

 

(ii) if to the Administrative Agent, to it at

 

525 Washington Blvd., 8th floor

Jersey City, New Jersey 07310

Attention: Dina Wilson, Loan Assistant

Telecopy:  201-850-4020

Telephone: 201-850-6807

 

with a copy to the Administrative Agent at:

 

1200 Smith Street, Suite 3100

Houston, Texas  77002

Attention:  Brian Malone/Betsy Jocher

Telecopy: 713-659-6915

Telephone: 713-982-1153; -1155

 

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

 

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

 

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  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.

 

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

 

  

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(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.  All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

 

Section 12.02. Waivers; Amendments.

 

(a) No failure on the part of the Administrative Agent, any other Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege, or any abandonment or discontinuance of steps to enforce such right, power or privilege, under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies of the Administrative Agent, any other Agent 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 shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any other Agent or any Lender may have had notice or knowledge of such Default at the time.

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 10.02 for the benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as the Administrative Agent) hereunder and under the other Loan Documents, (b) reserved, (c) any Lender from exercising setoff rights in accordance with Section 12.08 (subject to the terms of Section 4.01, or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any debtor relief law; and provided, further, that if at any time there is no Person acting as the Administrative Agent hereunder and under the other Loan Documents, then (i) the Majority Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 10.02 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 4.01, any Lender may, with the consent of the Majority Lenders, enforce any rights and remedies available to it and as authorized by the Majority Lenders.

 

  

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(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) reserved, (iii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or under any other Loan Document, without the written consent of each Lender affected thereby, (iv) postpone the scheduled date of payment or prepayment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or any other Indebtedness hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Maturity Date without the written consent of each Lender affected thereby, (v) change Section 2.02(a), Section 2.04(a), Section 2.06(b)(ii), Section 3.04(b), Section 4.01(b), Section 4.01(c) or Section 10.02(c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (vi) waive or amend Section 8.14, without the written consent of each Lender, (vii) reserved, (viii) release any Guarantor (except as set forth herein or in the Guaranty Agreement), release all or substantially all of the collateral (other than as provided in Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less than 90%, without the written consent of each Lender, or (ix) change any of the provisions of this Section 12.02(b) or the definition of “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 (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or any other Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or such other Agent, as the case may be, and (B) nothing in this Section 12.02 shall cause any waiver, amendment, modification or consent to any fee letter between the Borrower and any Lender, Agent or the Administrative Agent to require the consent of the Majority Lenders.

 

(c) Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove of any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

 

Section 12.03. Expenses, Indemnity; Damage Waiver.

 

(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including, without limitation, the reasonable fees, charges and disbursements of counsel and other outside consultants for the Administrative Agent, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental 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 any Agent or any Lender in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein, (iii) reserved, (iv) all out-of-pocket expenses incurred by any Agent or any Lender, including the fees, charges and disbursements of any counsel for any Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 12.03, or in connection with the Loans made hereunder, including, without limitation, all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

 

  

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(b) THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT (AND ANY SUB-AGENT THEREOF), 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, PENALTIES AND RELATED EXPENSES (INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE), AND SHALL INDEMNIFY AND HOLD HARMLESS EACH INDEMNITEE FROM ALL FEES AND TIME CHARGES AND DISBURSEMENTS FOR ATTORNEYS WHO MAY BE EMPLOYEES OF ANY INDEMNITEE, INCURRED BY ANY INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY THE BORROWER OR ANY SUBSIDIARY ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (II) ANY LOAN OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM, (III) 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, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY SUBSIDIARY, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES, PENALTIES OR RELATED EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR (Y) RESULT FROM A CLAIM BROUGHT BY THE BORROWER OR ANY OTHER LOAN PARTY AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IF THE BORROWER OR SUCH LOAN PARTY HAS OBTAINED A FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.

 

  

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(c) To the extent that the Borrower fails to indefeasibly pay any amount required to be paid by it to any Agent or the Arranger under Section 12.03(a) or (b), each Lender severally agrees to pay to such Agent (or any sub-agent), or such Related Party 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, penalty or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity.  The obligations of the Lenders under this paragraph (c) are several and not joint.

 

(d) To the fullest 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 the use of the proceeds thereof.  No Indemnitee referred to in paragraph (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

 

(e) All amounts due under this Section 12.03 shall be payable not later than three Business Days after written demand therefor.

 

(f) The provisions of this Section 12.03 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent or any Lender.

 

Section 12.04. Successors and Assigns.

 

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, 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 (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in Section 12.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

  

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(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

 

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

 

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

 

(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 (which fee may be waived or reduced in the sole discretion of the Administrative Agent and which fee shall not apply where the assignee is another Lender); 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 by the Administrative Agent, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c).

 

  

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(iv) The Administrative Agent, acting solely 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 principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent 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 and any Lender, at any reasonable time and from time to time upon reasonable prior notice.  In connection with any changes to the Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and forward a copy of such revised Annex I to the Borrower and each Lender.

 

(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in Section 12.04(b) and any written consent to such assignment required by Section 12.04(b), the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register.  No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 12.04(b).

 

(c) (i)           Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities other than the Borrower, any Guarantor and their Affiliates (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 and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the proviso to Section 12.02 that affects such Participant.  In addition such agreement must provide that the Participant be bound by the provisions of Section 12.03.  Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.04(b).  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as though it were a Lender.

 

  

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(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.

 

(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, 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.

 

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, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any other Agent 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 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, and the Commitments or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.

 

  

88

  

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

 

Section 12.06. Counterparts; Integration; Effectiveness.

 

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

 

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

 

(c) Except as provided in Section 6.02, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

 

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

 

  

89

  

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 their respective Affiliates are 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, in whatever currency) at any time held and other obligations (of whatsoever kind, including, without limitation, obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any Subsidiary against any of and all the obligations of the Borrower or any 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.  Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

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

 

(a) Governing Law.  This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

 

(b) Submission to Jurisdiction.  The Borrower irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such Federal court.  Each of the parties hereto agrees that a final, non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any Subsidiary or its Properties in the courts of any jurisdiction.

 

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

 

  

90

  

(d) Service of Process.  Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 12.01.  Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable law.

 

(e) WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT.  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

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 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’ respective partners, directors, managers, officers, advisors, 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 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, (ii) any actual or prospective counterparty (or its advisors) to any Swap Agreement relating to the Borrower and its obligations, (g) with the consent of the Borrower, (h) to any credit insurance provider relating to the Borrower and its obligations or (i) to the extent such Information (1) becomes publicly available other than as a result of a breach of this Section 12.11 or (2) becomes available to the Administrative Agent 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 Subsidiary relating to the Borrower or any Subsidiary and their businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower or a Subsidiary; provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section 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.

 

  

91

  

Section 12.12. Interest Rate Limitation.  It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it.  Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America and the State of New York or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows:  (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law.  If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.12.

 

 

92

 

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. Reserved. 

 

Section 12.15. No Third Party Beneficiaries.  This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans hereunder are solely for the benefit of the Borrower, and no other Person (including, without limitation, any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or materialman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent 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 “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

 

Section 12.17. Concerning the Intercreditor Agreement.  Each Lender (a) consents to the subordination of Liens provided for in the Intercreditor Agreement, (b) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement, and (c) authorizes and instructs the Administrative Agent to enter into the Intercreditor Agreement as Term Loan Collateral Agent on behalf of such Lender.  The foregoing provisions are intended as an inducement to the Lenders to extend credit and such Lenders are intended third party beneficiaries of such provisions and the provisions of the Intercreditor Agreement.

 

 

93

 

 

[This space is left intentionally blank.  Signature Pages follow.]

 

  

  

94

  

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

 

BORROWER:                                                                VANGUARD NATURAL GAS, LLC

By:           /s/ Richard Robert                                                                

Richard Robert

Executive Vice President

and Chief Financial Officer

 

  

1

  

ADMINISTRATIVE AGENT:                                                                BNP PARIBAS

as Administrative Agent

By:           /s/ Betsy Jocher                                                                

Name:      Betsy Jocher 

Title:        Director                                                                

By:           /s/ Richard Hawthorne                                                                

Name:      Richard Hawthorne 

Title:        Director                                                                

LENDERS:                                                                BNP PARIBAS

By:           /s/ Betsy Jocher                                                                

Name:     Betsy Jocher 

Title:       Director                                                                

By:           /s/ Richard Hawthorne                                                                

Name:      Richard Hawthorne 

Title:        Director                                                                

 

 

  

2

  

LENDERS:                                                                CITIBANK, N.A.

By:       /s/ John F. Miller                                                                

Name:  John F. Miller 

Title:    Attorney-in-Fact                                                                

 

  

3

  

 LENDERS:                                                                CREDIT AGRICOLE CORPORATE AND

                                                                INVESTMENT BANK

By:       /s/ Page Dillehunt                                                                

Name:  Page Dillehunt                                                                           

Title:    Managing Director                                                                

By:       /s/ Sharada Manne                                                                 

Name:  Sharada Manne                                                                           

Title:    Director                                                                

 

 

4

 

LENDERS:                                                                ROYAL BANK OF CANADA

By:           /s/ Don J. McKinnerney                                                                

Name:     Don J. McKinnerney 

Title:       Authorized Signatory 

 

  

5

  

LENDERS:                                                                WELLS FARGO BANK, N.A.

By:           /s/ Ryan Sauer 

Name:      Ryan Sauer                                                                           

Title:       Assistant Vice President                                                                

 

  

6

  

LENDERS:                                                                THE BANK OF NOVA SCOTIA

By:           /s/ John Frazell                                                                

Name:      John Frazell                                                                           

Title:        Director                                                                

 

  

7

  

ANNEX I

 

LIST OF MAXIMUM CREDIT AMOUNTS

 

Commitments

 

	
Name of Lender

	
Applicable Percentage

	
Commitment

	
BNP Paribas

	
19.4285714%

	
$ 34,000,000.00

	
Citibank, N.A.

	
19.4285714%

	
$ 34,000,000.00

	
Credit Agricole Corporate and Investment Bank

	
19.4285714%

	
$ 34,000,000.00

	
Royal Bank of Canada

	
19.4285714%

	
$ 34,000,000.00

	
Wells Fargo Bank, N.A.

	
14.2857143%

	
$ 25,000,000.00

	
The Bank of Nova Scotia

	
8.0000000%

	
$ 14,000,000.00

	  	  	  
	
TOTAL

	
100.0000000%

	
$175,000,000.00

 

 

  

  

  

EXHIBIT A

 

FORM OF NOTE

 

$[_____________] _____________, 20__

FOR VALUE RECEIVED, VANGUARD NATURAL GAS, LLC, a Kentucky limited liability company (the “Borrower”) hereby promises to pay to the order of _____________________ (the “Lender”), at the principal office of BNP PARIBAS (the “Administrative Agent”), the principal sum of _________________ Dollars ($_________) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the Lender to the Borrower under the Credit Agreement, as hereinafter defined), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement.

 

The date, amount, interest rate, Interest Period and maturity of each Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, may be endorsed by the Lender on the schedules attached hereto or any continuation thereof or on any separate record maintained by the Lender.  Failure to make any such notation or to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of this Note.

 

This Note is one of the Notes referred to in the Term Loan Agreement dated as of November 16, 2010 among the Borrower, the Administrative Agent, and the other agents and lenders signatory thereto (including the Lender), and evidences Loans made by the Lender thereunder (such Credit Agreement as the same may be amended, supplemented or restated from time to time, the “Credit Agreement”).  Capitalized terms used in this Note have the respective meanings assigned to them in the Credit Agreement.

 

This Note is issued pursuant to, and is subject to the terms and conditions set forth in, the Credit Agreement and is entitled to the benefits provided for in the Credit Agreement and the other Loan Documents.  The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events, for prepayments of Loans upon the terms and conditions specified therein and other provisions relevant to this Note.

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

VANGUARD NATURAL GAS, LLC

By:                                                                           

Name:______________________________

Title:_______________________________

 

  

  

  

EXHIBIT B

 

FORM OF BORROWING REQUEST

 

______________, 20__

 

VANGUARD NATURAL GAS, LLC, a Kentucky limited liability company (the “Borrower”), pursuant to Section 2.03 of the Term Loan Agreement dated as of November 16, 2010 (together with all amendments, restatements, supplements or other modifications thereto, the “Credit Agreement”) among the Borrower, BNP PARIBAS, as Administrative Agent and the other agents and lenders (the “Lenders”) which are or become parties thereto (unless otherwise defined herein, each capitalized term used herein is defined in the Credit Agreement), hereby requests a Borrowing as follows:

 

(i) Aggregate amount of the requested Borrowing is $__________;

 

(ii) Date of such Borrowing is ______________, 20__;

 

(iii) Requested Borrowing is to be an Eurodollar Borrowing;

 

(iv) The initial Interest Period applicable thereto is _____________;

 

(v) Amount of Commitments in effect on the date hereof is $______________; and

 

(vi) Location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05 of the Credit Agreement, is as follows:

 

 

 

 

 

 

  

  

  

The undersigned certifies that he/she is the _____________ of the Borrower, and that as such he/she is authorized to execute this certificate on behalf of the Borrower.  The undersigned further certifies, represents and warrants on behalf of the Borrower that the Borrower is entitled to receive the requested Borrowing under the terms and conditions of the Credit Agreement.

 

VANGUARD NATURAL GAS, LLC

By:                                                                           

Name:                                                                           

Title:                                                                           

 

  

  

  

EXHIBIT C

 

FORM OF INTEREST ELECTION REQUEST

 

_______________, 20__

 

VANGUARD NATURAL GAS, LLC, a Kentucky limited liability company (the “Borrower”), pursuant to Section 2.04 of the Term Loan Agreement dated as of November 16, 2010 (together with all amendments, restatements, supplements or other modifications thereto, the “Credit Agreement”) among the Borrower, BNP PARIBAS, as Administrative Agent and the other agents and lenders which are or become parties thereto (unless otherwise defined herein, each capitalized term used herein is defined in the Credit Agreement), hereby makes an Interest Election Request as follows:

 

(i)           The Borrowing to which this Interest Election Request applies, and if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information specified pursuant to (iii) and (iv) below shall be specified for each resulting Borrowing) is [                ];

 

(ii)           The effective date of the election made pursuant to this Interest Election Request is _____________, 20__;[and]

 

(iii)           The resulting Borrowing is to be an Eurodollar Borrowing][; and]

 

[(iv)           The Interest Period applicable to the resulting Borrowing after giving effect to such election is [                ]].

 

The undersigned certifies that he/she is the [                ] of the Borrower, and that as such he/she is authorized to execute this certificate on behalf of the Borrower.  The undersigned further certifies, represents and warrants on behalf of the Borrower that the Borrower is entitled to receive the requested continuation or conversion under the terms and conditions of the Credit Agreement.

 

VANGUARD NATURAL GAS, LLC

By:                                                                           

Name:                                                                           

Title:                                                                           

 

  

  

  

EXHIBIT D

 

FORM OF COMPLIANCE CERTIFICATE

 

The undersigned hereby certifies that he/she is the _______________ of VANGUARD NATURAL GAS, LLC, a Kentucky limited liability company (the “Borrower”), and that as such he/she is authorized to execute this certificate on behalf of the Borrower.  With reference to the Term Loan Agreement dated as of November 16, 2010 (together with all amendments, restatements, supplements or other modifications thereto being the “Agreement”) among the Borrower, BNP PARIBAS, as Administrative Agent, and the other agents and lenders (the “Lenders”) which are or become a party thereto, and such Lenders, the undersigned represents and warrants as follows (each capitalized term used herein having the same meaning given to it in the Agreement unless otherwise specified):

 

(a)           The representations and warranties of the Borrower contained in Article VII of the Agreement and in the Loan Documents and otherwise made in writing by or on behalf of the Borrower pursuant to the Agreement and the Loan Documents were true and correct in all material respects when made, and are repeated at and as of the time of delivery hereof and are true and correct in all material respects at and as of the time of delivery hereof, except to the extent such representations and warranties are expressly limited to an earlier date or the Majority Lenders have expressly consented in writing to the contrary.

 

(b)           The Borrower has performed and complied with all agreements and conditions contained in the Agreement and in the Loan Documents required to be performed or complied with by it prior to or at the time of delivery hereof [or specify default and describe].

 

(c)           Since _________________, 20__, no change has occurred, either in any case or in the aggregate, in the condition, financial or otherwise, of the Borrower or any Subsidiary which could reasonably be expected to have a Material Adverse Effect [or specify event].

 

(d)           There exists no Default or Event of Default [or specify Default and describe].

 

(e)           The aggregate amount of cash used to date by Vanguard Resources, LLC to repurchase treasury stock is $_________________.

 

(f)           Attached hereto are the detailed computations necessary to determine whether the Borrower is in compliance with Section 9.01 and Section 8.14 as of the end of the [fiscal quarter][fiscal year] ending [                              ].

 

EXECUTED AND DELIVERED this _________ day of __________, 20__.

 

VANGUARD NATURAL GAS, LLC

By:                                                                           

Name:

Title:                                                                           

 

  

  

  

For the Quarter/Year ended ___________________(“Statement Date”)

 

SCHEDULE 2

 

to the Compliance Certificate

 

($ in 000’s)

 

	
I.Section 9.01(a) – Interest Coverage Ratio.

	  
	
A.EBITDA

	  
	
1.consolidated net income, less

	
$______________

	
2.non-cash revenue or expense associated with Swap Agreements resulting from FAS 133, less

	
($______________)

 

	
3.income or plus loss from discontinued operations and extraordinary items, plus

	
($______________)

 

	
4.income taxes, plus

	
$______________

	
5.interest expense, plus

	
$______________

	
6.depreciation, plus

	
$______________

	
7.depletion, plus

	
$______________

	
8.amortization, plus

	
$______________

	
9.non-cash and extraordinary items, plus

	
$______________

	
10.Proforma cash distributions by ENP and ENP GP with respect to ENP Interests (annualized)

	
$______________

	
11.Total EBITDA

	
$______________

	
12.        less  the aggregate amount of cash used to purchase Equity Interests of Vanguard Resources, LLC during the twelve month period ending on the Statement Date

	
 

$______________

	
B.Interest Expense

	
$______________

	
C.Ratio (Line I.A.12 ÷ Line I.B)

	
_________ to 1.0

	
Minimum Required:  2.5 to 1.0

	  

Exhibit D - 

  

  

  

	
II.           Section 9.01(b) – Consolidated Leverage Ratio.

	  
	
A.Total Debt

	
 

	
1.Debt, less

	
$_______________

	
2.Non-cash obligations under FAS 133, less

	
($______________)

	
3.Accounts payable and other accrued liabilities not greater than 60 days past due or which are being contested in good faith

 

	
($______________)

	
4.Total Debt

	
$_______________

	
B.EBITDA (amount on Line I.A.11)

	
$_______________

	
C.Ratio (Line II.A.4 ÷ Line II.B)

	
__________ to 1.0

	
Maximum Permitted:  4.00 to 1.0

	  
	
III.Section 9.01(c) – Current Ratio.

	  
	
A.Current Assets  (including Aggregate Maximum Credit Amounts availability under Revolver)

	
$______________

	
B.Current Liabilities (excluding current maturities of Indebtedness owed to Lenders and current maturities of indebtedness owed to Lenders under the Revolver)

	
$______________

	
C.Ratio (Line III.A ÷ Line III.B):

	
_________ to 1.0

	
Minimum Required:  1.0 to 1.0

	  

 

 

  

  

  

EXHIBIT E

 

SECURITY INSTRUMENTS

 

	
1.  

	
The ENP Interests Pledge Agreement.

 

	
2.  

	
Financing Statements for ENP Interests Pledge Agreement.

 

a.           Borrower - Kentucky Secretary of State

 

b.           Encore Energy Partners GP LLC - Delaware Secretary of State

 

	
3.  

	
Guaranty Agreement to be dated as of the Effective Date by Encore Energy Partners GP LLC in favor of the Administrative Agent and the Lenders.

 

	
4.  

	
The Intercreditor Agreement.

 

	
5.  

	
Guaranty Agreement to be dated as of the Effective Date by Ariana Energy, LLC in favor of the Administrative Agent and the Lenders.

 

	
6.  

	
Guaranty Agreement to be dated as of the Effective Date by Trust Energy Company, LLC in favor of the Administrative Agent and the Lenders.

 

	
7.  

	
Limited Liability Company Interests Security Agreement to be dated as of the Effective Date, by Borrower in favor of the Administrative Agent and the Lenders, as amended.

 

	
8.  

	
Financing Statements in respect of item 9, by the Borrower - Kentucky Secretary of State.

 

	
9.  

	
Mortgage to be dated as of the Effective Date – Trust Energy Company, LLC – Kentucky – in favor of the Administrative Agent for the benefit of the Lenders, as amended.

 

	
10.  

	
Mortgage to be dated as of the Effective Date – Trust Energy Company, LLC – Campbell County, Tennessee – in favor of Richard C. Raines, as Trustee for the benefit of the Administrative Agent and the Lenders.

 

	
11.  

	
Mortgages to be dated as of the Effective Date – Nami Resources Company L.L.C. – in favor of the Administrative Agent for the benefit of the Lenders.

 

	
12.  

	
Mortgages to be dated as of the Effective Date – Nami Resources Company L.L.C. (Pipeline Mortgage) – in favor of the Administrative Agent for the benefit of the Lenders.

 

	
13.  

	
Mortgages to be dated as of the Effective Date – Ariana Energy, LLC – in favor of Richard C. Raines, as Trustee for the benefit of the Administrative Agent and the Lenders.

 

	
14.  

	
Security Agreement to be dated as of the Effective Date by Trust Energy Company, LLC in favor of the Administrative Agent for the benefit of the Lenders.

 

	
15.  

	
Guaranty Agreement to be dated as of the Effective Date by Vanguard Permian, LLC in favor of the Administrative Agent and the Lenders.

 

	
16.  

	
Mortgage to be dated as of the Effective Date – Vanguard Permian, LLC – Lea County, New Mexico – in favor of the Administrative Agent for the benefit of the Lenders.

 

	
17.  

	
Mortgage to be dated as of the Effective Date – Vanguard Permian, LLC – Crockett, Gaines, Irion, Reagan, Schleicher, Tom Green, Upton, Ward and Yoakum Counties, Texas – in favor of the Administrative Agent for the benefit of the Lenders.

 

	
18.  

	
Mortgage to be dated as of the Effective Date – Vanguard Permian, LLC – Mississippi – in favor of the Administrative Agent for the benefit of the Lenders.

 

	
19.  

	
Financing Statements for Mortgages.

 

a.           Borrower - Kentucky Secretary of State

 

b.           Ariana Energy, LLC - Tennessee Secretary of State

 

c.           Trust Energy Company, LLC - Kentucky Secretary of State

 

d.           Nami Resources Company L.L.C. – Kentucky Secretary of State

 

e           Vanguard Permian, LLC – Delaware Secretary of State

 

	
20.  

	
Guaranty Agreement to be dated as of the Effective Date by VNR Holdings, LLC in favor of the Administrative Agent and the Lenders.

 

 

 

  

  

  

EXHIBIT F

 

FORM OF ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Term Loan Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including guarantees included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”).  Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

 

	
  

	
1.Assignor:______________________________

 

	
2.

	
Assignee:

	
______________________________

 

	
  

	
[and is an Affiliate/Approved Fund of [identify Lender]1]

 

	
3.

	
Borrower:

	
__________________________

 

	
  

	
4.

	
Administrative Agent:

	
BNP Paribas, as the administrative agent under the Credit Agreement

 

	
  

	
5.

	
Credit Agreement:

	
The Term Loan Agreement dated as of November 16, 2010 among Vanguard Natural Gas, LLC, the Lenders parties thereto, BNP Paribas, as Administrative Agent, and the other agents parties thereto

 

	
6.

	
Assigned Interest:

 

	
Commitment Assigned

	
Aggregate Amount of Commitment/Loans for all Lenders

	
Amount of Commitment/Loans Assigned

	
Percentage Assigned of Commitment/Loans2

	  	
$

	
$

	
%

	  	
$

	
$

	
%

	  	
$

	
$

	
%

 

Effective Date:  _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

 

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:                                                                

Name:                                                                

Title:                                                                

ASSIGNEE

[NAME OF ASSIGNEE]

By:                                                                

Name:                                                                

Title:                                                                

  

1 Select as applicable.

  

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

 

  

  

  

[Consented to and]3 Accepted:

 

BNP PARIBAS,

as Administrative Agent

By:                                                                

Name:                                                                

Title:                                                                

[Consented to:]4

[NAME OF RELEVANT PARTY]

By:                                                                

Name:                                                                

Title:                                                                

  

3 To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

  

4 To be added only if the consent of the Borrower and/or other parties is required by the terms of the Credit Agreement.

 

  

  

  

 ANNEX 1

 

STANDARD TERMS AND CONDITIONS FOR

 

ASSIGNMENT AND ASSUMPTION

 

1.  Representations and Warranties.

 

1.1   Assignor.  The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

 

1.2.  Assignee.  The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.01 thereof, as applicable, and such other documents and information as it has deemed appropriate D to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (vi) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

 

2.   Payments.    From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

 

3.  General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption.  This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

 

 

 

 

  

  

  

EXHIBIT G

 

FORM OF LIEN SUBORDINATION AND INTERCREDITOR AGREEMENT

 

 

  

  

  

SCHEDULE 7.05

 

LITIGATION

 

The Borrower and Subsidiaries do not anticipate that any of the following litigation or claims can reasonably be expected in the event of an adverse determination, individually or in the aggregate, to result in a Material Adverse Effect.  Nonetheless the Borrower makes the following disclosure concerning litigation and claims to the Lenders:

 

	
1.

	
Leonard K. Nave and Kentucky Natural Gas Service v. Nami Resources, LLC, et al. Laurel Circuit Court, Division I, Civil Action No. 06-CI-1088.  The Plaintiffs in this action (the “New Action”) assert that the Company failed to perform a settlement agreement pursuant to which the parties settled all of the claims asserted in the litigation styled Leonard K. Nave, et al v. Majeed Saiedynami, et al., Laurel Circuit, Civil Action No. 02-CI-817 (the “Original Action”).  On June 13, 2007 the Laurel Circuit Court dismissed Plaintiff’s fraud claims, dismissed Mike Nami from the case, individually and ordered Plaintiffs to amend their complaint limiting the nature and scope of the claims.  As currently positioned, Plaintiff’s claim is for $270,000 plus interest.

 

	
  

	
On November 2, 2007, Mr. Nave entered a Plea Agreement in U.S.D.C. in Lexington in connection with his criminal prosecution wherein he admitted “knowingly making false, material declarations and statements.”  As part of the Plea Agreement, Mr. Nave agreed to pay “restitution totaling $100,000 to a number of victims to the fraud scheme.”  Mr. Nave was sentenced to a ten month term of imprisonment.  NRC intends to vigorously defend the New Action as it believes it has fully performed the settlement agreement.

 

	
2.

	
The Company has been involved in an ongoing dispute with a significant lessor, Asher and Land and Mineral Company, Ltd. (“Asher”).  That dispute includes claims by Asher that the Company did not correctly calculate the royalties paid to it and that the Company has otherwise failed to abide by certain terms of the leases relating to the coordination of oil and gas development with coal development.

 

	
  

	
On September 8, 2006, Asher filed a complaint to initiate an action styled Asher Land and Mineral, Ltd. v. Nami Resources Company, LLC, Bell Circuit Court, Civil Action No. 06-CI-00417.  In that action, Asher sought damages and rescission of its leases with the Company.  Before the Company filed a responsive pleading, Asher voluntarily withdrew its complaint and dismissed that action.

 

	
  

	
On December 15, 2006, Asher filed a new action styled Asher Land and Mineral, Ltd. v. Nami Resources Company, LLC, Bell Circuit Court, Civil Action No. 06-CI-00566.  In that action, Asher made the same allegations as in the prior suit and added a claim for an undetermined amount of punitive damages.  On August 13, 2007, the Court granted Plaintiff’s Motion to join additional Defendants and file a First Amended Complaint.  Since that time, the Plaintiff has since filed three subsequent amended complaints. The Fourth Amended Complaint asserts claims of fraudulent conveyance against the Company, Vanguard Resources, LLC, Vinland Energy Eastern, LLC, Vanguard Natural Gas, LLC, Trust Energy Company, LLC, Vinland Energy Operations, LLC, Vinland Gathering, LLC and Majeed S. Nami, individually.  Discovery has only recently been commenced with regards to these claims.  The newly added Defendants have entered appearances and denied all claims.  The Company will vigorously defend the litigation on the grounds that it has substantially complied with its obligations under the leases and Asher has suffered no damage, even if its assertions were true.

 

 

  

  

  

SCHEDULE 7.06

 

ENVIRONMENTAL

 

 

NONE

 

 

  

  

  

SCHEDULE 7.12

 

INSURANCE

 

(The insurance certificate follows this page)

 

 

  

  

  

SCHEDULE 7.14

 

SUBSIDIARIES AND PARTNERSHIPS

 

 

	
Subsidiaries

 

	
Jurisdiction of Organization

	
Organizational Identification Number

	
Principal Place of Business

and Chief Executive Office

	
Ariana Energy, LLC

	
Tennessee

	
0425970

	
Same as Borrower

	
Trust Energy Company, LLC

	
Kentucky

	
0601354

	
Same as Borrower

	
Vanguard Permian, LLC

	
Delaware

	
4476999

	
Same as Borrower

	
VNR Holdings, LLC

	
Delaware

	
4328433

	
Same as Borrower

 

  

  

  

SCHEDULE 7.18

 

GAS IMBALANCES

 

 

NONE

 

 

  

  

  

SCHEDULE 7.19

 

MARKETING CONTRACTS

 

	
1.

	
Transportation Agreement dated April 30, 1986, between Southern Gas Company, Inc. and Delta Natural Gas Company, Inc., as amended by Amendment to Transportation Agreement dated April 11, 1996, between Delta Natural Gas Company, Inc. and Southern Gas Company of Delaware, Inc. re:  transportation of natural gas from Whitley County, Kentucky to Clay County, Kentucky

 

	
2.

	
Letter dated August 19, 1999, from Southern Gas Co. of Delaware, Inc. to Nami Resources Company L.L.C. re:  conveyance of leases and wells by Southern Gas Co. of Delaware, Inc. to Nami Resources Company L.L.C.

 

	
3.

	
Agreement dated February 1, 2001, between Delta Natural Gas Company, Inc. and Nami Resources Company L.L.C. re:  transportation of natural gas from southeast Kentucky to Whitley County, Kentucky

 

	
4.

	
Agreement dated August 24, 2004 between Delta Natural Gas Company, Inc. and Nami Resources Company L.L.C. re:  transportation of natural gas in Knox County, Kentucky

 

	
5.

	
Agreement dated March 10, 2005, between Delta Natural Gas Company, Inc. and Nami Resources Company L.L.C. re:  transportation of natural gas from Bell, Knox and Harlan Counties, Kentucky

 

	
6.

	
Agreement dated January 5, 2007 between Vinland Energy Gathering, LLC and Vanguard Natural Gas, LLC re:  gathering and compression of natural gas in Kentucky

 

	
7.

	
Agreement dated January 5, 2007 between Vinland Energy Gathering, LLC and Ariana Energy, LLC re:  gathering and compression of natural gas in Tennessee

 

	
8.

	
Gas Purchase Contract dated October 1, 1999 between DCP Midstream, LP and Vanguard Permian, LLC relating to the Hobbs and Lovington Fields

 

	
9.

	
Gas Purchase Contract dated August 1, 1989 between DCP Midstream, LP and Vanguard Permian, LLC relating to the Lovington Field

 

	
10.

	
Gas Purchase Contract Amendment dated December 1, 2000 between DCP Midstream, LP and Vanguard Permian, LLC relating to the Robertson Field

 

	
11.

	
Gas Purchase Contract dated July 1, 2003 between Targa Texas Field Services and Vanguard Permian, LLC relating to the Hondo Field

 

	
12.

	
Gas Purchase Contract dated August 20, 1996 between Markwest Pinnacle L.P. and Vanguard Permian, LLC relating to the West Field

 

	
13.

	
Gas Purchase Contract dated September 8, 2003 between DCP Midstream, LP and Vanguard Permian, LLC relating to the Lovington Field

 

	
14.

	
Gas Purchase Contract dated February 12, 2004 between Belvan Corporation and Vanguard Permian, LLC relating to the Wyatt Field

 

	
15.

	
Gas Purchase Contract dated June 1, 2005 between Davis Gas Processing, Inc. and Vanguard Permian, LLC relating to the H J Strawn Field

 

	
16.

	
Gas Gathering Agreement dated July 1, 2006 between Enterprise Hydrocarbons, L.P. and Lewis Petro Properties, Inc.

 

	
17.

	
Gas Purchase Agreement dated August 1, 2005, between Houston Pipe Line Company, L.P. and Lewis Petro Properties, Inc., as amended by that certain First Amendment to Gas Purchase Agreement effective August 1, 2005, and as amended by that certain Second Amendment to Gas Purchase Agreement effective August 1, 2005.

 

	
18.

	
Crude Oil Purchase Contract dated March 6, 2008 between Plains Marketing L.P. and Vanguard Permian, LLC.

 

	
19.

	
Crude Oil Purchase Agreement dated February 22, 2008 between Sunoco Partners Marketing & Terminals, LP and Vanguard Permian, LLC relating to the Hoblit-Jacobs Field.

 

	
20.

	
Crude Oil Purchase Contract dated March 1, 2008 between Shell Trading U.S. Company and Vanguard Permian, LLC relating to the Wyatt Field, as amended by that certain First Amendment to Purchase Contract effective September 1, 2008.

 

	
21.

	
Crude Oil Contract dated February 27, 2008 between Occidental Energy Marketing Inc. and Vanguard Permian, LLC as amended by that certain First Amendment to Crude Oil Contract effective March 1, 2008 and as amended by that certain Second Amendment to Crude Oil Contract effective March 1, 2008 and as amended by that certain Third Amendment effective July 1, 2009.

 

	
22.

	
Crude Oil Purchase Agreement dated March 1, 2008 between Navajo Refining Company, LP and Vanguard Permian, LLC.

 

	
23.

	
Crude Oil Purchase Agreement dated March 14, 2008 between ConocoPhillips and Vanguard Permian, LLC relating to the Garrett Field.

 

 

  

  

  

SCHEDULE 7.20

 

CURRENT SWAP AGREEMENTS

 

See attached

 

  

  

  

SCHEDULE 7.24

 

MORTGAGE FILING OFFICES

 

I.           KENTUCKY

 

Attn: UCC Branch

 

Kentucky Secretary of State

 

700 Capital Avenue, Suite 153

 

Frankfurt, Kentucky 40601

 

Bell County Court Clerk

 

Bell County Courthouse

 

101 Courthouse Square

 

Pineville, Kentucky 40977

 

Clay County Court Clerk

 

Clay County Courthouse

 

102 Richmond Rd., Suite 101

 

Manchester, Kentucky 40962

 

Harlan County Court Clerk

 

Harlan County Courthouse

 

129 South 1st Street

 

Harlan, Kentucky 40831

 

Knox County Court Clerk

 

Knox County Courthouse

 

401 Court Square

 

Barbourville, Kentucky 40906

 

Leslie County Court Clerk

 

Leslie County Courthouse

 

22010 Main Street

 

Hyden, Kentucky 41749

 

McCreary County Court Clerk

 

McCreary County Courthouse

 

One North Main Street

 

Whitley City, Kentucky 42653

 

Whitley County Court Clerk

 

Whitley County Courthouse

 

200 Main Street

 

Williamsburg, Kentucky 40769

 

II.           TENNESSEE

 

Attn: Business Services

 

Tennessee Secretary of State

 

312 8th Avenue, North

 

6th Floor, Snodgrass Tower

 

Nashville, Tennessee 37243

 

Anderson County Register of Deeds

 

Anderson County Courthouse

 

100 N. Main Street

 

Clinton, Tennessee 37716-3608

 

Campbell County Register of Deeds

 

Campbell County Courthouse

 

195 Ky. Street

 

Jacksboro, Tennessee 37757

 

Morgan County Register of Deeds

 

Morgan County Courthouse

 

415 S. Kingston St.

 

Wartburg, Tennessee 37887

 

Scott County Register of Deeds

 

Scott County Courthouse

 

283 Court Street

 

Huntsville, Tennessee 37756

 

	
III.

	
NEW MEXICO

 

Lea County Clerk

Lea County Courthouse

100 N. Main

Lovington, New Mexico  88260

IV.  TEXAS

Crockett County Clerk

909 Avenue D

Ozona, TX  76943

Gaines County Clerk

101 S. Main, Room 107

Seminole, TX  79360

Irion County Clerk

209 N. Parkview

Mertzon, TX  76941

LaSalle County Clerk

101 Courthouse Square, Suite 107

Cotulla, TX  78014

Reagan County Clerk

Third at Plaza

Big Lake, TX  76932

Schleicher County Clerk

Hwy 277

Eldorado, TX  76936

Tom Green County Clerk

124 W. Beauregard

San Angelo, TX  76903

Upton County Clerk

205 East 10th Street

Rankin, TX  79778

Ward County Clerks Office

400 South Allen Avenue, Suite 101

Monahans, TX 79756

Webb County Clerk

1110 Victoria Street, Suite 201

Laredo, TX  78040

Yoakum County Clerk

Cowboy Way & Avenue G

Plains, TX  79355

V.  MISSISSIPPI

Covington County Chancery Clerk

101 South Elm Avenue

Collins, MS  39428

Jasper County Chancery Clerk (1st District)

1782 Highway 503

Paulding, MS  39348

Jefferson Davis County Chancery Clerk

1025 3rd Street

Prentiss, MS  39474

Jones County Clerk(1st District)

101 N. Court Street, Suite D

Post Office Box 248

Ellisville, MS  39437

Jones County Clerk (2nd District)

415 N. 5th Avenue

Post Office Box 1468

Laurel, MS  39441

VI.  DELAWARE

Delaware Secretary of State

401 Federal Street, Suite 3

Dover, DE  19901

 

  

  

  

SCHEDULE 9.03

EXISTING LIENS

Liens Granted by Vanguard Natural Gas, LLC

 

None

 

 

Liens Granted by Trust Energy Company, LLC

 

None

 

 

Liens Granted by Ariana Energy, LLC

 

None

 

 

Liens Granted by VNR Holdings, LLC

 

None

 

 

Schedule 9.03 - 

  

  

  

SCHEDULE 9.05

 

INVESTMENTS

 

NONE, except for the ownership by the Borrower of 100% of the Equity Interests of each of Ariana Energy, LLC, TEC, Vanguard Permian and VNR Holdings, LLC, and 7,435 units of Vanguard Resources, LLC stock for purposes of new director and employee compensation, and any described in the Financial Statements.

 

Schedule 9.05 -

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