Document:

Exhibit 10.1

 

Execution Version

 

FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY AND COLLATERAL AGREEMENT

 

THIS FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of October 10, 2014 (the “Amendment Effective Date”), is by and among Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Borrower”), the Guarantors party thereto, the Lenders party hereto, and Wells Fargo Bank, National Association, as administrative agent for the Lenders (together with its successors in such capacity, the “Administrative Agent”).

 

RECITALS

 

WHEREAS, the Borrower, the Lenders and the Administrative Agent are party to that certain Amended and Restated Credit Agreement, dated as of June 22, 2011 (as amended, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”).  Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement;

 

WHEREAS, the Borrower, each of the Grantors (as defined therein) and Guarantors (as defined therein) from time to time party thereto, and the Administrative Agent, for and on behalf of the Secured Parties, are party to that certain Amended and Restated Guaranty and Collateral Agreement, dated as of June 22, 2011 (as amended, supplemented or otherwise modified prior to the date hereof, the “Guaranty Agreement”);

 

WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders amend (i) the Credit Agreement to, among other things, extend the Maturity Date thereof, and (ii) the Guaranty Agreement, in each case upon the satisfaction of the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

Amendments to Credit Agreement

 

Section 1.01                             In reliance on the representations, warranties, covenants and agreements contained in this Amendment, and subject to the satisfaction of the conditions precedent set forth in ARTICLE IV hereof, the Credit Agreement (including, for the avoidance of doubt, the annexes, schedules and exhibits attached thereto) shall be amended, effective as of the Amendment Effective Date, in its entirety in the form set forth as Exhibit A hereto.

 

ARTICLE II

 

Amendment to Guaranty Agreement

 

Section 2.01                             In reliance on the representations, warranties, covenants and agreements contained in this Amendment, and subject to the satisfaction of the conditions precedent set forth

 

 

in ARTICLE IV hereof, Section 3.01 of the Guaranty Agreement is hereby amended by adding the following paragraph as a new paragraph at the end thereof:

 

Notwithstanding anything to the contrary set forth herein, “Collateral”, “Investment Property” and “Proceeds” shall not include the Regency Units and any proceeds thereof.

 

ARTICLE III

 

Reallocation of Commitments and Lender Joinder

 

Section 3.01                             Reallocation of Commitments.

 

(a)                                 The Lenders have agreed to reallocate the Credit Exposure, Commitments and Maximum Credit Amounts among themselves in connection with the restatement of Annex I to the Credit Agreement pursuant to this Amendment, and each of the parties hereto consents to such reallocation of the Credit Exposure, Commitments and Maximum Credit Amounts.  The assignments by certain Lenders necessary to effect such reallocation of the Credit Exposure, Commitments and Maximum Credit Amounts and the assumptions by the other Lenders party to such assignments necessary for such Lenders to acquire such interests are hereby consummated pursuant to the terms and provisions of this Section 3.01(a) and of Section 12.04(b) of the Credit Agreement, and each Lender hereby consummates such assignments and assumptions pursuant to the terms, provisions and representations of the Assignment and Assumption attached as Exhibit F to the Credit Agreement as if each Lender party such assignment and assumption had executed and delivered an Assignment and Assumption (with the Effective Date, as defined therein, being the Amendment Effective Date); provided that the Administrative Agent hereby waives the $3,500 processing and recordation fee set forth in Section 12.04(b)(ii)(C) of the Credit Agreement with respect to the assignments and assumptions contemplated by this Section 3.01(a).

 

(b)                                 The Borrower shall be required to make any break funding payments required by Section 5.02 of the Credit Agreement resulting from the assignments and assumptions contemplated by Section 3.01(a).

 

(c)                                  Notwithstanding any provision in Section 12.04(b) of the Credit Agreement to the contrary, all parties hereto agree that the assignments and assumptions provided for in Section 3.01(a) have been approved and consented to by all such parties and are effective as provided herein and in the event of any conflict between this ARTICLE III and Section 12.04(b) of the Credit Agreement, the terms and provisions of this ARTICLE III shall control.

 

Section 3.02                             New Lender.  BMO Harris Bank, N.A. (“BMO”) hereby joins in, becomes a party to, and agrees to comply with and be bound by the terms and conditions of the Credit Agreement as a Lender thereunder and under each and every other Loan Document to which any Lender is required to be bound by the Credit Agreement, to the same extent as if BMO were an original signatory thereto.  BMO hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the 

 

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Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto.  BMO represents and warrants that (a) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment, to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (b) it has received a copy of the Credit Agreement and copies of the most recent financial statements delivered pursuant to Section 8.01 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment and to become a Lender 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 (c) from and after the Amendment Effective Date, it shall be a party to and be bound by the provisions of the Credit Agreement and the other Loan Documents and have the rights and obligations of a Lender thereunder.

 

ARTICLE IV

 

Conditions Precedent

 

Section 4.01                             This Amendment shall not become effective until the date on which each of the following conditions is satisfied:

 

(a)                                 the Administrative Agent shall have received duly executed counterparts of this Amendment from the Borrower and each Lender, in such numbers as the Administrative Agent or its counsel may reasonably request;

 

(b)                                 the Administrative Agent shall have received a duly executed Note, dated as of the date hereof, payable to each Lender that has requested a Note, in a principal amount equal to its Maximum Credit Amount (as amended hereby);

 

(c)                                  the Administrative Agent shall have received duly executed counterparts of amendments to the Mortgages (which shall be in proper form for filing, registration or recordation in the applicable jurisdiction), in each case in form and substance reasonably satisfactory to the Administrative Agent;

 

(d)                                 the Administrative Agent shall have received (i) Thompson & Knight LLP, special counsel to the Borrower and the other Loan Parties, and (ii) to the extent reasonably requested by the Administrative Agent, opinions of local counsel in any jurisdictions in which any amendments to Mortgages are to be recorded, in form and substance satisfactory to the Administrative Agent;

 

(e)                                  the Administrative Agent shall have received (i) for the account of each Lender, upfront fees in an aggregate amount for each Lender equal to twenty basis points (0.20%) of the amount of such Lender’s Commitment (after giving effect to this Amendment), (ii) for its own account, such other fees as have been separately agreed between the Borrower and the Administrative Agent and (iii) to the extent invoiced in reasonable detail, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower under the Credit Agreement (including, without limitation, (A) the reasonable fees and expenses of counsel to the Administrative Agent 

 

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and (B) any recording, registration or filing fees or mortgage taxes payable in connection with the recording of amendments to the Mortgages);

 

(f)                                   the Administrative Agent shall have received a certificate of the Secretary or an Assistant Secretary of each Loan Party (or supplements to those certificates delivered on the Effective Date of the Credit Agreement) setting forth (i) resolutions of its board of directors (or its equivalent) with respect to the authorization of such Loan Party to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of such Loan Party (A) who are authorized to sign the Loan Documents to which such Loan Party is a party and (B) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the Transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the Organization Documents of such Loan Party, certified as being true and complete;

 

(g)                                  the Administrative Agent shall have received certificates of the appropriate state agencies with respect to the existence, qualification and good standing of each Loan Party in its state of formation;

 

(h)                                 the Administrative Agent shall have received a certificate of a Responsible Officer certifying, as of the Amendment Effective Date that, before and after giving effect to this Amendment, (i) no Default or Event of Default has occurred and is continuing, or will occur and be continuing as of the Amendment Effective Date and (ii) the representations and warranties of the Loan Parties set forth in the Credit Agreement and in the other Loan Documents (in each case as amended hereby or as contemplated herein) are true and correct in all material respects on and as of the Amendment Effective Date, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, on and as of the Amendment Effective Date, such representations and warranties shall continue to be true and correct in all material respects as of such specified earlier date.

 

The Administrative Agent is authorized to declare this Amendment effective upon the satisfaction of the foregoing conditions and shall notify the Borrower and the Lenders thereof, and such notice shall be conclusive and binding.

 

ARTICLE V
 Miscellaneous

 

Section 5.01                             Credit Agreement in Full Force and Effect as Amended.  Except as specifically amended hereby, the Credit Agreement and other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed as so amended.  Each Loan Party hereby (a) acknowledges the terms of this Amendment and (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, and any security interested granted by, each Loan Document to which it is a party and agrees that each Loan 

 

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Document to which it is a party remains in full force and effect.  Except as expressly set forth herein, this Amendment shall not be deemed to be a waiver, amendment or modification of any provisions of the Credit Agreement or any other Loan Document or any right, power or remedy of the Administrative Agent or the Lenders, or constitute a waiver of any provision of the Credit Agreement or any other Loan Document, or any other document, instrument and/or agreement executed or delivered in connection therewith or of any Default or Event of Default under any of the foregoing, in each case whether arising before or after the date hereof or as a result of performance hereunder or thereunder.  This Amendment also shall not preclude the future exercise of any right, remedy, power, or privilege available to the Administrative Agent and/or the Lenders whether under the Credit Agreement, the other Loan Documents, at law or otherwise.  All references to the Credit Agreement shall be deemed to mean the Credit Agreement as modified hereby.  The parties hereto agree to be bound by the terms and conditions of the Credit Agreement and Loan Documents as amended by this Amendment, as though such terms and conditions were set forth herein.  Each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of similar import shall mean and be a reference to the Credit Agreement as amended by this Amendment, and each reference herein or in any other Loan Documents to the “Credit Agreement” shall mean and be a reference to the Credit Agreement as amended and modified by this Amendment.

 

Section 5.02                             GOVERNING LAW.  THIS AMENDMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

Section 5.03                             Descriptive Headings, Etc.  The descriptive headings of the sections of this Amendment are inserted for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.  The statements made and the terms defined in the recitals to this Amendment are hereby incorporated into this Amendment in their entirety.

 

Section 5.04                             Entire Agreement.  This Amendment and the documents referred to herein represent the entire understanding of the parties hereto regarding the subject matter hereof and supersede all prior and contemporaneous oral and written agreements of the parties hereto with respect to the subject matter hereof.

 

Section 5.05                             Loan Document.  This Amendment is a Loan Document executed under the Credit Agreement, and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto.

 

Section 5.06                             Counterparts.  This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one agreement.  Delivery of an executed counterpart of the signature page of this Amendment by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart thereof.

 

Section 5.07                             Successors.  The execution and delivery of this Amendment by any Lender shall be binding upon each of its successors and assigns.

 

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[SIGNATURE PAGES FOLLOW]

 

6

 

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

 

 

	
BORROWER:
    	
EAGLE ROCK ENERGY   PARTNERS, L.P.
    
	
 
    	
By:
    	
Eagle Rock Energy GP, L.P.
    
	
 
    	
By:
    	
Eagle Rock Energy G&P, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Joseph A. Mills
    
	
 
    	
Name: 
    	
Joseph A. Mills
    
	
 
    	
Title:
    	
Chief Executive Officer
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
GUARANTORS:
    	
EAGLE ROCK UPSTREAM   DEVELOPMENT II, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Eagle Rock   Upstream Development Company, Inc., its general partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Joseph A. Mills
    
	
 
    	
 
    	
Name: 
    	
Joseph A. Mills
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
EAGLE ROCK ACQUISITION   PARTNERSHIP L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Eagle Rock   Upstream Development Company II, Inc., its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Joseph A. Mills
    
	
 
    	
 
    	
Name: 
    	
Joseph A. Mills
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
EAGLE ROCK ACQUISITION   PARTNERSHIP II, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Eagle Rock   Upstream Development Company II, Inc., its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Joseph A. Mills
    
	
 
    	
 
    	
Name: 
    	
Joseph A. Mills
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
EAGLE ROCK ENERGY GP,   L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Eagle Rock Energy   G&P, LLC, its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Joseph A. Mills
    
	
 
    	
 
    	
Name: 
    	
Joseph A. Mills
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
EAGLE ROCK ENERGY   G&P, LLC
    
	
 
    	
EROC PRODUCTION, LLC
    
	
 
    	
EAGLE ROCK ENERGY   ACQUISITION CO., INC.
    
	
 
    	
EAGLE ROCK UPSTREAM DEVELOPMENT   COMPANY, INC.
    
	
 
    	
ESCAMBIA ASSET CO. LLC
    
	
 
    	
ESCAMBIA OPERATING CO.   LLC
    
	
 
    	
EAGLE ROCK ENERGY   ACQUISITION CO. II, INC.
    
	
 
    	
EAGLE ROCK UPSTREAM DEVELOPMENT COMPANY   II, INC.
    
	
 
    	
EAGLE ROCK ENERGY FINANCE   CORP.
    
	
 
    	
EAGLE ROCK ENERGY G&P   HOLDING, INC.
    
	
 
    	
EAGLE ROCK MID-CONTINENT   HOLDING, LLC
    
	
 
    	
EAGLE ROCK MID-CONTINENT   ASSET, LLC
    
	
 
    	
EAGLE ROCK MID-CONTINENT OPERATING, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Joseph A. Mills
    
	
 
    	
 
    	
Name: 
    	
Joseph A. Mills
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
WELLS FARGO BANK, NATIONAL ASSOCIATION,
    
	
 
    	
as Administrative Agent and Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Real
    
	
 
    	
Name:
    	
Michael Real
    
	
 
    	
Title:
    	
Director
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
BANK OF AMERICA, N.A.,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Alia Qaddumi
    
	
 
    	
Name:
    	
Alia Qaddumi
    
	
 
    	
Title:
    	
Vice President
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
THE ROYAL BANK OF SCOTLAND PLC, 
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
James L. Moyes 
    
	
 
    	
Name:
    	
James L. Moyes 
    
	
 
    	
Title:
    	
Managing Director
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
ING CAPITAL, LLC,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/Michael Price
    
	
 
    	
Name:
    	
Michael Price
    
	
 
    	
Title:
    	
Managing Director
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Juli Bieser
    
	
 
    	
Name:
    	
Juli Bieser
    
	
 
    	
Title:
    	
Director
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
COMERICA BANK,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ William Robinson
    
	
 
    	
Name:
    	
William Robinson
    
	
 
    	
Title:
    	
Vice President
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
ROYAL BANK OF CANADA,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Mark Lumpkin, Jr.
    
	
 
    	
Name:
    	
Mark Lumpkin, Jr.
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
COMPASS BANK,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Ian Payne
    
	
 
    	
Name:
    	
Ian Payne
    
	
 
    	
Title:
    	
Vice President
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
CAPITAL ONE, NATIONAL ASSOCIATION
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Higgins
    
	
 
    	
Name:
    	
Michael Higgins
    
	
 
    	
Title:
    	
Director
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
REGIONS BANK,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Daniel G. Steele
    
	
 
    	
Name:
    	
Daniel G. Steele
    
	
 
    	
Title:
    	
Senior Vice President
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
CITIBANK, N.A.,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Peter Kardos
    
	
 
    	
Name:
    	
Peter Kardos
    
	
 
    	
Title:
    	
Vice-President
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
BMO HARRIS BANK, N.A.,
    
	
 
    	
as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ James V. Ducote
    
	
 
    	
Name:
    	
James V. Ducote
    
	
 
    	
Title:
    	
Managing Director
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
WHITNEY BANK,
    
	
 
    	
as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Parker U. Mears
    
	
 
    	
Name:
    	
Parker U. Mears
    
	
 
    	
Title:
    	
Vice President
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

	
 
    	
GOLDMAN SACHS LENDING PARTNERS LLC,
    
	
 
    	
as Lender
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Nicole Ferry-Lacchia
    
	
 
    	
Name:
    	
Nicole Ferry-Lacchia
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

SIGNATURE PAGE
 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

 

EXHIBIT A TO FIFTH AMENDMENT

 

FORM OF AMENDED CREDIT AGREEMENT

 

 

AMENDED & RESTATED CREDIT AGREEMENT

 

DATED AS OF
 June 22, 2011

 

AMONG

 

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

 

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

 

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

 

AND

 

THE LENDERS PARTY HERETO

 

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

 

AS JOINT LEAD ARRANGERS AND BOOKRUNNERS

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE I
    
	
DEFINITIONS   AND ACCOUNTING MATTERS
    
	
 
    	
 
    	
 
    	
 
    
	
Section 1.01
    	
Defined Terms
    	
 
    	
1
    
	
Section 1.02
    	
Types of Loans and Borrowings
    	
 
    	
29
    
	
Section 1.03
    	
Terms Generally; Rules of Construction
    	
 
    	
29
    
	
Section 1.04
    	
Accounting Terms and Determinations; GAAP
    	
 
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II
    
	
THE   CREDITS
    
	
 
    	
 
    	
 
    	
 
    
	
Section 2.01
    	
Commitments
    	
 
    	
30
    
	
Section 2.02
    	
Loans and Borrowings
    	
 
    	
30
    
	
Section 2.03
    	
Requests for Borrowings
    	
 
    	
31
    
	
Section 2.04
    	
Swingline Loans
    	
 
    	
32
    
	
Section 2.05
    	
Interest Elections
    	
 
    	
33
    
	
Section 2.06
    	
Funding of Borrowings
    	
 
    	
35
    
	
Section 2.07
    	
Termination and Reduction of Aggregate Maximum Credit   Amount; Increase and Reduction of Aggregate Elected Commitment Amount
    	
 
    	
35
    
	
Section 2.08
    	
Borrowing Base
    	
 
    	
40
    
	
Section 2.09
    	
Letters of Credit
    	
 
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III
    
	
PAYMENTS   OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
    
	
 
    	
 
    	
 
    	
 
    
	
Section 3.01
    	
Repayment of Loans
    	
 
    	
48
    
	
Section 3.02
    	
Interest
    	
 
    	
48
    
	
Section 3.03
    	
Alternate Rate of Interest
    	
 
    	
49
    
	
Section 3.04
    	
Prepayments
    	
 
    	
49
    
	
Section 3.05
    	
Fees
    	
 
    	
51
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV
    
	
PAYMENTS;   PRO RATA TREATMENT; SHARING OF SET-OFFS
    
	
 
    	
 
    	
 
    	
 
    
	
Section 4.01
    	
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
    	
 
    	
52
    
	
Section 4.02
    	
Presumption of Payment by the Borrower
    	
 
    	
53
    
	
Section 4.03
    	
Certain Deductions by the Administrative Agent
    	
 
    	
53
    
	
Section 4.04
    	
Disposition of Proceeds
    	
 
    	
54
    
	
Section 4.05
    	
Defaulting Lenders
    	
 
    	
54
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V
    
	
INCREASED   COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
    
	
 
    	
 
    	
 
    	
 
    
	
Section 5.01
    	
Increased Costs
    	
 
    	
57
    
	
Section 5.02
    	
Break Funding Payments
    	
 
    	
58
    
	
Section 5.03
    	
Taxes
    	
 
    	
58
    
	
Section 5.04
    	
Mitigation Obligations; Replacement of Lenders
    	
 
    	
61
    
	
Section 5.05
    	
Illegality
    	
 
    	
62
    

 

1

 

	
ARTICLE VI
    
	
CONDITIONS   PRECEDENT
    
	
 
    	
 
    	
 
    	
 
    
	
Section 6.01
    	
Effective Date
    	
 
    	
62
    
	
Section 6.02
    	
Each Credit Event
    	
 
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII
    
	
REPRESENTATIONS   AND WARRANTIES
    
	
 
    	
 
    	
 
    	
 
    
	
Section 7.01
    	
Organization; Powers
    	
 
    	
66
    
	
Section 7.02
    	
Authority; Enforceability
    	
 
    	
66
    
	
Section 7.03
    	
Approvals; No Conflicts
    	
 
    	
66
    
	
Section 7.04
    	
Financial Condition; No Material Adverse Change
    	
 
    	
67
    
	
Section 7.05
    	
Litigation
    	
 
    	
67
    
	
Section 7.06
    	
Environmental Matters
    	
 
    	
68
    
	
Section 7.07
    	
Compliance with the Laws and Agreements; No Defaults
    	
 
    	
69
    
	
Section 7.08
    	
Investment Company Act
    	
 
    	
69
    
	
Section 7.09
    	
Taxes
    	
 
    	
69
    
	
Section 7.10
    	
ERISA
    	
 
    	
70
    
	
Section 7.11
    	
Disclosure; No Material Misstatements
    	
 
    	
70
    
	
Section 7.12
    	
Insurance
    	
 
    	
71
    
	
Section 7.13
    	
Restriction on Liens
    	
 
    	
71
    
	
Section 7.14
    	
Subsidiaries
    	
 
    	
71
    
	
Section 7.15
    	
Location of Business and Offices
    	
 
    	
72
    
	
Section 7.16
    	
Properties; Titles, Etc.
    	
 
    	
72
    
	
Section 7.17
    	
Maintenance of Properties
    	
 
    	
73
    
	
Section 7.18
    	
Gas Imbalances, Prepayments
    	
 
    	
73
    
	
Section 7.19
    	
Marketing of Production
    	
 
    	
73
    
	
Section 7.20
    	
Security Instruments
    	
 
    	
73
    
	
Section 7.21
    	
Hedging Agreements
    	
 
    	
74
    
	
Section 7.22
    	
Use of Loans and Letters of Credit
    	
 
    	
74
    
	
Section 7.23
    	
Solvency
    	
 
    	
75
    
	
Section 7.24
    	
Anti-Terrorism Laws
    	
 
    	
75
    
	
Section 7.25
    	
Anti-Corruption Laws and Sanctions
    	
 
    	
76
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII
    
	
AFFIRMATIVE   COVENANTS
    
	
 
    	
 
    	
 
    	
 
    
	
Section 8.01
    	
Financial Statements; Ratings Change; Other Information
    	
 
    	
76
    
	
Section 8.02
    	
Notices of Material Events
    	
 
    	
79
    
	
Section 8.03
    	
Existence; Conduct of Business
    	
 
    	
79
    
	
Section 8.04
    	
Payment of Obligations
    	
 
    	
79
    
	
Section 8.05
    	
Performance of Obligations under Loan Documents
    	
 
    	
79
    
	
Section 8.06
    	
Operation and Maintenance of Properties
    	
 
    	
80
    
	
Section 8.07
    	
Insurance
    	
 
    	
80
    
	
Section 8.08
    	
Books and Records; Inspection Rights
    	
 
    	
80
    
	
Section 8.09
    	
Compliance with Laws
    	
 
    	
80
    
	
Section 8.10
    	
Environmental Matters
    	
 
    	
81
    
	
Section 8.11
    	
Further Assurances
    	
 
    	
82
    

 

2

 

	
Section 8.12
    	
Reserve Reports
    	
 
    	
82
    
	
Section 8.13
    	
Title Information
    	
 
    	
83
    
	
Section 8.14
    	
Additional Collateral; Additional Guarantors
    	
 
    	
84
    
	
Section 8.15
    	
ERISA Compliance
    	
 
    	
86
    
	
Section 8.16
    	
Unrestricted Subsidiaries
    	
 
    	
86
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX
    
	
NEGATIVE   COVENANTS
    
	
 
    	
 
    	
 
    	
 
    
	
Section 9.01
    	
Financial Covenants
    	
 
    	
87
    
	
Section 9.02
    	
Indebtedness
    	
 
    	
87
    
	
Section 9.03
    	
Liens
    	
 
    	
89
    
	
Section 9.04
    	
Restricted Payments
    	
 
    	
89
    
	
Section 9.05
    	
Investments, Loans and Advances
    	
 
    	
90
    
	
Section 9.06
    	
Designation and Conversion of Restricted and Unrestricted   Subsidiaries; Indebtedness of Unrestricted Subsidiaries
    	
 
    	
92
    
	
Section 9.07
    	
Nature of Business
    	
 
    	
92
    
	
Section 9.08
    	
Proceeds of Loans
    	
 
    	
92
    
	
Section 9.09
    	
ERISA Compliance
    	
 
    	
93
    
	
Section 9.10
    	
Sale or Discount of Receivables
    	
 
    	
94
    
	
Section 9.11
    	
Mergers, Etc.
    	
 
    	
94
    
	
Section 9.12
    	
Sale of Properties
    	
 
    	
94
    
	
Section 9.13
    	
Environmental Matters
    	
 
    	
95
    
	
Section 9.14
    	
Transactions with Shareholders and Affiliates
    	
 
    	
95
    
	
Section 9.15
    	
Subsidiaries
    	
 
    	
95
    
	
Section 9.16
    	
Negative Pledge Agreements; Dividend Restrictions
    	
 
    	
95
    
	
Section 9.17
    	
Limitation on Issuance of Equity Interests
    	
 
    	
96
    
	
Section 9.18
    	
Gas Imbalances, Take-or-Pay or Other Prepayments
    	
 
    	
96
    
	
Section 9.19
    	
Hedging Agreements
    	
 
    	
96
    
	
Section 9.20
    	
Amendments to Fiscal Year End; Prepayments of Other   Indebtedness
    	
 
    	
97
    
	
Section 9.21
    	
Marketing Activities
    	
 
    	
97
    
	
Section 9.22
    	
Anti-Terrorism Laws
    	
 
    	
98
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE X
    
	
EVENTS OF   DEFAULT; REMEDIES
    
	
 
    	
 
    	
 
    	
 
    
	
Section 10.01
    	
Events of Default
    	
 
    	
98
    
	
Section 10.02
    	
Remedies
    	
 
    	
100
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE XI
    
	
THE   AGENTS
    
	
 
    	
 
    	
 
    	
 
    
	
Section 11.01
    	
Appointment; Powers
    	
 
    	
101
    
	
Section 11.02
    	
Duties and Obligations of Administrative Agent
    	
 
    	
101
    
	
Section 11.03
    	
Action by Administrative Agent
    	
 
    	
102
    
	
Section 11.04
    	
Reliance by Administrative Agent
    	
 
    	
103
    
	
Section 11.05
    	
Sub-agents
    	
 
    	
103
    
	
Section 11.06
    	
Resignation or Removal of Administrative Agent
    	
 
    	
103
    
	
Section 11.07
    	
Agents as Lenders
    	
 
    	
104
    
	
Section 11.08
    	
No Reliance
    	
 
    	
104
    

 

3

 

	
Section 11.09
    	
Administrative Agent May File Proofs of Claim
    	
 
    	
105
    
	
Section 11.10
    	
Authority of Administrative Agent to Release Collateral and   Liens
    	
 
    	
105
    
	
Section 11.11
    	
The Arranger and the Co-Syndication Agents
    	
 
    	
105
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE XII
    
	
MISCELLANEOUS
    
	
 
    	
 
    	
 
    	
 
    
	
Section 12.01
    	
Notices
    	
 
    	
106
    
	
Section 12.02
    	
Waivers; Amendments
    	
 
    	
107
    
	
Section 12.03
    	
Expenses, Indemnity; Damage Waiver
    	
 
    	
108
    
	
Section 12.04
    	
Assignments and Participations
    	
 
    	
111
    
	
Section 12.05
    	
Survival; Revival; Reinstatement
    	
 
    	
114
    
	
Section 12.06
    	
Counterparts; Integration; Effectiveness
    	
 
    	
115
    
	
Section 12.07
    	
Severability
    	
 
    	
116
    
	
Section 12.08
    	
Right of Setoff
    	
 
    	
116
    
	
Section 12.09
    	
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
    	
 
    	
116
    
	
Section 12.10
    	
Headings
    	
 
    	
117
    
	
Section 12.11
    	
Confidentiality
    	
 
    	
117
    
	
Section 12.12
    	
Interest Rate Limitation
    	
 
    	
118
    
	
Section 12.13
    	
EXCULPATION PROVISIONS
    	
 
    	
119
    
	
Section 12.14
    	
Collateral Matters; Hedging Agreements; Treasury Management   Agreements
    	
 
    	
119
    
	
Section 12.15
    	
No Third Party Beneficiaries
    	
 
    	
119
    
	
Section 12.16
    	
USA Patriot Act Notice
    	
 
    	
120
    
	
Section 12.17
    	
Existing Credit Agreement
    	
 
    	
120
    
	
Section 12.18
    	
No Fiduciary Duty
    	
 
    	
120
    
	
Section 12.19
    	
Keepwell
    	
 
    	
121
    

 

EXHIBITS AND SCHEDULES

 

	
Exhibit   A
    	
Form   of Note
    
	
Exhibit   B
    	
Form   of Borrowing Request
    
	
Exhibit   C
    	
Form   of Interest Election Request
    
	
Exhibit   D-1
    	
Form   of Compliance Certificate (Effective Date)
    
	
Exhibit   D-2
    	
Form   of Compliance Certificate (Ongoing)
    
	
Exhibit   E
    	
Form   of Guaranty and Collateral Agreement
    
	
Exhibit   F
    	
Form   of Assignment and Assumption
    
	
Exhibit   G
    	
Form   of Elected Commitment Increase Certificate
    
	
Exhibit   H
    	
Form   of Additional Lender Certificate
    
	
 
    	
 
    
	
Schedule   1.01(a)
    	
Existing   Letters of Credit
    
	
Schedule   7.05
    	
Litigation
    
	
Schedule   7.06
    	
Environmental   Matters
    
	
Schedule   7.14
    	
Subsidiaries
    
	
Schedule   7.18
    	
Gas   Imbalances
    

 

4

 

	
Schedule   7.19
    	
Marketing   Contracts
    
	
Schedule   7.21
    	
Hedging   Agreements
    
	
Schedule   9.02
    	
Existing   Indebtedness
    
	
Schedule   9.03
    	
Existing   Liens
    
	
Schedule   9.05
    	
Existing   Investments
    
	
Schedule   9.14
    	
Certain   Shareholder and Affiliate Transactions
    
	
 
    	
 
    
	
Annex   I
    	
Commitments
    

 

5

 

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

 

R E C I T A L S

 

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

 

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

 

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

 

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

 

ARTICLE I
 DEFINITIONS AND ACCOUNTING MATTERS

 

Section 1.01         Defined Terms.  As used in this Agreement, the following terms have the meanings specified below:

 

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

 

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

 

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

 

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

 

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

 

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

 

1

 

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

 

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

 

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

 

“Aggregate Elected Commitment Amount” at any time shall equal the sum of the Elected Commitments, as the same may be increased, reduced or terminated pursuant to Section 2.07.  As of the Fifth Amendment Effective Date, the Aggregate Elected Commitment Amount is $320,000,000.

 

“Aggregate Maximum Credit Amount” at any time shall equal the sum of the Maximum Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.07.  As of the Fifth Amendment Effective Date, the Aggregate Maximum Credit Amount is $1,200,000,000.00.

 

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

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.0%; provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be 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, on such day as the rate for dollar deposits with a one month maturity.  Any change in the Alternate Base Rate due to a change in the Prime Rate, 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, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

 

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.

 

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

 

“Applicable Margin” means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the Commitment Fee Rate, as the case may be, the rate per annum set forth below based upon the Borrowing Base Utilization Percentage then in effect:

 

2

 

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

 

Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change.  If at any time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), then the “Applicable Margin” shall mean the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level until such time as the Reserve Report is delivered, whereupon the Applicable Margin shall be determined as if the Reserve Report had been timely delivered, and is to be effective as of the first Business Day immediately following the date such Reserve Report was delivered.

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the Aggregate Maximum Credit Amount represented by such Lender’s Maximum Credit Amount as such percentage is set forth on Annex I; provided that in the case of Section 4.05 when a Defaulting Lender shall exist, “Applicable Percentage” as used in such Section 4.05 shall mean the percentage of the Aggregate Maximum Credit Amount (disregarding any Defaulting Lender’s Maximum Credit Amount) represented by such Lender’s Maximum Credit Amount.

 

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

 

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc., (b) Ryder Scott Company Petroleum Consultants, L.P., (c) Cawley, Gillespie & Associates and (d) any other independent petroleum engineers reasonably acceptable to the Administrative Agent.

 

3

 

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

 

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

 

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

 

“Availability Period” means the period from and including the Effective Date to but excluding the Termination Date.

 

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

 

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

 

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

 

“Borrowing Base” means at any time an amount equal to the amount determined in accordance with Section 2.08, as the same may be adjusted from time to time pursuant to Section 8.13(c).

 

“Borrowing Base Deficiency” occurs if at any time the total Credit Exposures exceed the Borrowing Base then in effect.

 

“Borrowing Base Properties” means the proved Oil and Gas Properties of the Loan Parties included in the most recently delivered Reserve Report and evaluated for purposes of determining the Borrowing Base then in effect.

 

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

 

 “Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to remain closed; and if such day relates to a Borrowing or continuation of, a payment or prepayment of principal of or interest on, or a conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect to any such Borrowing or continuation, payment, prepayment, conversion or Interest Period, any day which is also a day on which dealings in dollar deposits are carried out in the London interbank market.

 

4

 

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

 

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

 

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

 

“Change in Control” means:

 

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

 

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

 

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

 

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

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all requests, rules, guidelines or directives thereunder or

 

5

 

issued in connection therewith and all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall, in each case, be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

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

 

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

 

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

 

“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.07 and (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b).  The amount representing each Lender’s Commitment shall at any time be the least of such Lender’s (i) Maximum Credit Amount, (ii) Applicable Percentage of the then effective Borrowing Base and (iii) Elected Commitment.

 

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

 

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

 

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

 

“Consolidated EBITDAX” means, for any period, (a) the sum of (i) Consolidated Net Income for such period (excluding, to the extent included in the calculation of Consolidated Net Income in such period, gains or losses attributable to asset Dispositions not in the ordinary course of business) plus (ii) the following expenses or charges to the extent deducted from Consolidated Net Income in such period (including, in respect of assets classified as discontinued operations but still owned by the Borrower or a Consolidated Restricted Subsidiary as of the end of such period): Consolidated Interest Expense, income taxes (including any franchise taxes to the extent based upon net income), depreciation, depletion, accretion of asset retirement obligations, amortization, exploration expenses and other similar non-cash charges (excluding any such non-cash charge to the extent that it represents an accrual or reserve for potential cash charges in any future period or amortization of a prepaid cash charge that was paid in a prior period), non-cash compensation expense related to the Borrower’s equity-based compensation program, and reasonable and customary cash transaction expenses incurred in connection with permitted acquisitions and Dispositions in an aggregate amount not to exceed 15% of Consolidated EBITDAX for such period (before adding back any such transaction expenses in

 

6

 

the calculation of Consolidated EBITDAX) minus (b) all non-cash income added to Consolidated Net Income (excluding any such non-cash income to the extent it represents the reversal of an accrual or reserve for potential cash charge in any prior period).

 

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

 

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

 

“Consolidated Net Income” means with respect to the Borrower and the Consolidated Restricted Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries after allowances for taxes for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or any Consolidated Restricted Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and the Consolidated Restricted Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to a Consolidated Restricted Subsidiary, as the case may be; (b) the net income (but not loss) during such period of any Consolidated Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Restricted Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or

 

7

 

Governmental Requirement applicable to such Consolidated Restricted Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) any extraordinary non-cash gains or losses during such period and (d) any gains or losses attributable to writeups or writedowns of assets, including ceiling test write downs.

 

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

 

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

 

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

 

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

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

 

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

 

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

 

“Defaulting Lender” means any Lender that has (a) failed to fund any portion of its Loans or participations in Letters of Credit within two Business Days of the date required to be funded by it hereunder unless such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) notified the Borrower, the Administrative Agent, the Issuing Bank or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a specifically identified condition precedent to funding a Loan under this Agreement cannot be satisfied), (c) failed, within two Business Days after request by

 

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the Administrative Agent or the Borrower, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans and participations in then outstanding Letters of Credit, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith dispute, or (e)(i) been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or has a parent company that has been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding other than an Undisclosed Administration, or, other than via an Undisclosed Administration, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided, that a Lender shall not become a Defaulting Lender solely as the result of the acquisition or maintenance of an ownership interest in such Lender or a parent company thereof or the exercise of control over a Lender or a parent company thereof by a Governmental Authority or an instrumentality thereof.

 

“Deficiency Amount” means, at the time of determination, the amount by which the total Credit Exposures exceed the Borrowing Base then in effect.

 

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

 

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

 

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

 

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

 

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

 

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“Elected Commitment” means, as to each Lender, the amount set forth opposite such Lender’s name on Annex I under the caption “Elected Commitment”, as the same may be increased, reduced or terminated from time to time in connection with an increase, reduction or termination of the Aggregate Elected Commitment Amount pursuant to Section 2.07.

 

“Elected Commitment Increase Certificate” has the meaning assigned to such term in Section 2.07(e).

 

“Engineering Reports” has the meaning assigned to such term in Section 2.08(c)(i).

 

“Environmental Laws” means any and all Governmental Requirements pertaining in any way to the environment or the preservation or reclamation of natural resources, in effect in any and all jurisdictions in which the Borrower or any Restricted Subsidiary is conducting or at any time has conducted business, or where any Property of the Borrower or any Restricted Subsidiary is located, including without limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection Governmental Requirements.  The term “oil” shall have the meaning specified in OPA, the terms “hazardous substance” and “release” (or “threatened release”) have the meanings specified in CERCLA, the terms “solid waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and the term “oil and gas waste” shall have the meaning specified in Section 91.1011 of the Texas Natural Resources Code (“Section 91.1011”); provided, however, that (a) in the event either OPA, CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (b) to the extent the laws of the state or other jurisdiction in which any Property of the Borrower or any Restricted Subsidiary is located establish a meaning for “oil,” “hazardous substance,” “release,” “solid waste,” “disposal,” or “oil and gas waste” which is broader than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.

 

“Environmental Permit” means any permit, registration, license, approval, consent, exemption, variance, or other authorization required under or issued pursuant to applicable Environmental Laws.

 

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

 

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

 

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“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 to such term in Section 10.01.

 

“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Restricted Subsidiary or materially impair the value of such Property subject thereto; (e) Liens arising solely by virtue of

 

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customary deposit account agreements with the depositary institution or any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by Borrower or any of its Restricted Subsidiaries to provide collateral to the depository institution; (f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property of the Borrower or any Restricted Subsidiary for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure any monetary obligations and which in the aggregate do not materially impair the use of such Property for the purposes of which such Property is held by the Borrower or any Restricted Subsidiary or materially impair the value of such Property subject thereto; (g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, plugging and abandonment bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business not to exceed $10,000,000 in the aggregate at any time; (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (i) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; and (j) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced; provided, further, that Liens described in clauses (a) through (e) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced and no intention to subordinate the first priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted Liens.

 

“Excluded Hedging Obligation” means, with respect to any Loan Party individually determined on a Loan Party by Loan Party basis, any Secured Obligation in respect of any Hedging Agreement if, and solely to the extent that, all or a portion of the guarantee by such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Secured Obligation in respect of any Hedging Agreement (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time such guarantee or grant of a security interest becomes effective with respect to such related Secured Obligation in respect of any Hedging Agreement.  If any Secured Obligation in respect of any Hedging Agreement arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Secured Obligation in respect of any Hedging Agreement that is attributable to swaps for which such guarantee or security interest is or becomes illegal.

 

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“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower or any Guarantor hereunder or under any other Loan Document, (a) income or franchise taxes (including the Texas Margin Tax) imposed on (or measured by) its net income in each case (i) by the United States of America or such other jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, or (ii) as the result of any other present or former connection between such recipient and the jurisdiction imposing such Tax (other than any connection arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in (a) above, (c) any backup withholding tax that is required by the Code to be withheld from amounts payable to a Lender that has failed to comply with Section 5.03(e)(ii), (d) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 5.04(b)), any withholding tax that (i) is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender pursuant to any law in effect becomes a party to this Agreement (or designates a new lending office) except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c) or (ii) is attributable to such Foreign Lender’s failure to comply with Section 5.03(e), and (e) any taxes imposed pursuant to FATCA.

 

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

 

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

 

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

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any regulations or official interpretations thereof.

 

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

 

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

 

“Fifth Amendment Effective Date” means October 10, 2014.

 

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

 

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

 

“Flood Insurance Regulations” means (a) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (b) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statute thereto, (c) the National Flood Insurance Reform Act of 1994 (amending 42 USC § 4001, et seq.), as the same may be amended or recodified from time to time, and (d) the Flood Insurance Reform Act of 2004 and any regulations promulgated thereunder.

 

 “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located.  For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

“Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic Subsidiary.

 

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

 

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time subject to the terms and conditions set forth in Section 1.04.

 

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

 

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

 

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

 

“Guarantors” means:

 

(a)                               each Person listed on Schedule 7.14,

 

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

 

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

 

“Guaranty and Collateral Agreement” means an agreement executed by the Loan Parties (including the Borrower) in substantially the form of Exhibit E granting security interests in certain Collateral and unconditionally guarantying on a joint and several basis, payment of the Secured Obligations, as the same may be amended, modified or supplemented from time to time.

 

“Hazardous Material” means any substance regulated or as to which liability might arise under any applicable Environmental Law and including, without limitation:  (a) any chemical, compound, material, product, byproduct, substance or waste defined as or included in the definition or meaning of “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar meaning or import found in any applicable Environmental Law; (b) petroleum hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and gas waste, crude oil, and any components, fractions, or derivatives thereof; and (c) radioactive materials, asbestos containing materials, polychlorinated biphenyls, or radon.

 

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

 

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

 

“Hedging Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions (including any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act); provided, that no phantom stock or similar plan providing for payments only on account of

 

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services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Hedging Agreement.

 

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

 

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

 

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

 

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

 

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above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

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

 

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

 

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

 

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

 

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

 

“Interim Redetermination” has the meaning assigned to such term in Section 2.08(b).

 

“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit with, or advance, loan or capital contribution to, assumption of Indebtedness of, purchase or other acquisition of any other Indebtedness or equity participation or interest in, or other extension of credit to, any other Person (including the

 

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purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person that constitutes a business unit or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.  For the avoidance of doubt, “Investment” does not include the acquisition of any Oil and Gas Properties and any gas gathering systems related thereto.

 

“Issuing Bank” means (a) Wells Fargo Bank, National Association, and (b) any other Lender agreed to by the Borrower, the Administrative Agent and such Lender, as applicable, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.09(i).  Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“LC Commitment” means, at any time, an amount not in excess of the lesser of (a) $50,000,000 and (b) the Aggregate Elected Commitment Amount at such time.

 

“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter of Credit.

 

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time.  The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.

 

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

 

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

 

“Letter of Credit Agreements” means all letter of credit applications and other agreements (including any amendments, modifications or supplements thereto) submitted by the Borrower, or entered into by the Borrower, with any Issuing Bank relating to any Letter of Credit.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate 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.,

 

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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 (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of an amount comparable to such Eurodollar Borrowing 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.  Notwithstanding the foregoing, if the LIBO Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.

 

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

 

“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of 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 Restricted Subsidiaries shall be deemed to be the owner of any Property which they have acquired or hold subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.

 

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

 

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

 

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

 

“Majority Lenders” means, at any time while no Loans or LC Exposure is outstanding, Lenders having greater than fifty percent (50%) of the total Commitments, and at any time while any Loans or LC Exposure is outstanding, Lenders having greater than fifty (50%) of the outstanding aggregate principal amount of the Loans and participation interests in Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided, that if any Lender is a Defaulting Lender at the time of determination, the total Credit Exposures and Commitments of such Lender shall be excluded from the determination of Majority Lenders.

 

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

 

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

 

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

 

“Maturity Date” means October 10, 2019.

 

“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such Lender’s name on Annex I under the caption “Maximum Credit Amount”, as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amount pursuant to Section 2.07 or (b) modified from time to time pursuant to any assignment permitted by Section 12.04(b).

 

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

 

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

 

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

 

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

 

“New Borrowing Base Notice” has the meaning assigned to such term in Section 2.08(d).

 

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

 

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

 

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

 

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

 

“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 expressly provided herein, all references in this Agreement to “Oil and Gas Properties” refer to Oil and Gas Properties owned by the Borrower and its Restricted Subsidiaries, as the context requires.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non US jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint

 

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venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or Property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement and any other Loan Document.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Prime Rate” means the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.  Such rate is set by the Administrative Agent as a general reference rate of interest, taking into account such factors as the Administrative Agent may deem appropriate; it

 

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being understood that many of the Administrative Agent’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Administrative Agent may make various commercial or other loans at rates of interest having no relationship to such rate.

 

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

 

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible (including, without limitation, cash, securities, accounts, contract rights and Equity Interests or other ownership interests of any Person), whether now in existence or owned or hereafter acquired.

 

“Proposed Borrowing Base” has the meaning assigned to such term in Section 2.08(c)(i).

 

“Proposed Borrowing Base Notice” has the meaning assigned to such term in Section 2.08(c)(ii).

 

“Purchase Money Indebtedness” means Indebtedness, the proceeds of which are used to finance the acquisition, construction or improvement of inventory, equipment or other property in the ordinary course of business.

 

“Qualified Acquisition” means an acquisition of Oil and Gas Properties or Equity Interests of a Person, the aggregate purchase price for which, when combined with the aggregate purchase price for all other such acquisitions consummated during the same fiscal quarter, is greater than or equal to $50,000,000.

 

“Qualified Acquisition Period” means any period commencing on the date that a Qualified Acquisition is consummated through and including the last day of the first full fiscal quarter following the date on which such acquisition is consummated; provided that there shall be at least one full fiscal quarter between any two Acquisition Periods.

 

“Qualified ECP Guarantor” means, in respect of any Hedging Agreement, at any time, each Loan Party that (a) has total assets exceeding $10,000,000 at the time any guaranty of obligations under such Hedging Agreement or grant of the relevant security interest becomes effective or (b) otherwise constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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

 

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

 

“Redetermination Date” means, with respect to any Scheduled Redetermination or any Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes effective pursuant to Section 2.08(d).

 

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

 

“Regency Units” means the Equity Interests in Regency Energy Partners, L.P. owned by the Loan Parties.

 

“Regency Unit Proceeds” means any and all proceeds from any Disposition, in whole or in part, of any Regency Units; provided, any such cash proceeds are segregated from other funds of the Borrower and its Subsidiaries and held in a separate account of the Borrower or a Subsidiary maintained with the Administrative Agent that is designated in writing by the Borrower as being maintained solely for such purposes (such account, the “Regency Units Proceeds Account”).

 

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

 

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

 

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

 

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

 

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

 

“Required Lenders” means, at any time while no Loans or LC Exposure is outstanding, Lenders having at least sixty-six and two-thirds percent (662/3%) of the total Commitments; and at any time while any Loans or LC Exposure is outstanding, Lenders holding at least sixty-six and two-thirds percent (662/3%) of the outstanding aggregate principal amount of the Loans or participation interests in Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided, that if any Lender is a Defaulting Lender at the time of determination, the total Credit Exposures and Commitments of such Lender shall be excluded from the determination of Required Lenders.

 

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“Reserve Report” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of each December 31st or June 30th (or such other date in the event of an Interim Redetermination), the oil and gas reserves attributable to the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date.

 

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the President, any Financial Officer or any Senior Vice President of such Person (or such Person’s general partner or manager).  Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Ultimate General Partner.

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other Property) with respect to any Equity Interests in the Borrower or any of its Subsidiaries, or any payment (whether in cash, securities or other Property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Borrower or any of its Subsidiaries or any option, warrant or other right to acquire any such Equity Interests in the Borrower or any of its Subsidiaries.

 

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

 

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

 

“Sanctioned Country” means, at any time, a country or territory which is itself the subject or target of any Sanctions (as of the Fifth Amendment Effective Date, Cuba, Iran, North Korea, Sudan, Syria and Ukraine-related).

 

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the European Union or any European Union member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).

 

“Sanctions” economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state or Her Majesty’s Treasury of the United Kingdom.

 

“Scheduled Redetermination” has the meaning assigned to such term in Section 2.08(b).

 

“Scheduled Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to a Scheduled Redetermination becomes effective as provided in Section 2.08(d).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Subsidiary” means:  (a) any Person of which at least a majority of the outstanding Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board of directors, manager or other governing body of such Person (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by (i) another Person, (ii) one or more of such other Person’s Subsidiaries or (iii) collectively, such other Person and one or more of such other Person’s Subsidiaries, and (b) any partnership of which such other Person or any of such other Person’s Subsidiaries is a general partner.  Unless otherwise indicated herein, each reference to the term “Subsidiary” means a Subsidiary of the Borrower.

 

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

 

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

 

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

 

“Synthetic Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of

 

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U.S. federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, 80% of the residual value of the Property subject to such operating lease upon expiration or early termination of such lease.

 

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

 

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

 

“Total Commitments Utilization Percentage” means, as of any day, the fraction expressed as a percentage, the numerator of which is the total Credit Exposures on such day, and the denominator of which is the total Commitments in effect on such day.

 

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

 

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

 

“Transactions” means, with respect to (a) the Borrower, the execution, delivery and performance by the Borrower of this Agreement and each other Loan Document to which it is a party, the Refinancing, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, the guaranteeing of the Secured Obligations and the other obligations of its Restricted Subsidiaries under the Guaranty and Collateral Agreement, and the grant of Liens by the Borrower on Collateral pursuant to the Security Instruments, and (b) each Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the Secured Obligations and the other obligations under the Guaranty and Collateral Agreement by such Guarantor and such Guarantor’s grant of the security interests and provision of Collateral under the Security Instruments, and the grant of Liens by such Guarantor on Collateral pursuant to the Security Instruments.

 

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

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 1.02         Types of Loans and Borrowings.  For purposes of this Agreement, Loans and Borrowings, respectively, may be classified and referred to by Type (e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).

 

Section 1.03         Terms Generally; Rules of Construction.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be

 

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construed to include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections, Exhibits, Annexes and Schedules shall be construed to refer to Articles and Sections of, and Exhibits, Annexes and Schedules to, this Agreement.  No provision of this Agreement or any other Loan Document shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

 

Section 1.04         Accounting Terms and Determinations; GAAP.  Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the Financial Statements except for changes in which Borrower’s independent certified public accountants concur and which are disclosed to Administrative Agent on the next date on which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the Borrower and the Majority Lenders shall otherwise agree in writing, no such change shall modify or affect the manner in which compliance with the covenants contained herein is computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods.

 

ARTICLE II
 THE CREDITS

 

Section 2.01         Commitments.  Subject to the terms and conditions set forth herein, each Lender agrees to make revolving loans to the Borrower during the Availability Period in an aggregate principal amount that will not result in (a) such Lender’s Credit Exposure exceeding such Lender’s Commitment or (b) the total Credit Exposures exceeding the total Commitments.  Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow the Loans.

 

Section 2.02         Loans and Borrowings.

 

(a)           Borrowings; Several Obligations.  Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments.  The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

 

(b)           Types of Loans.  Subject to Section 3.03, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith.  Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

 

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(c)           Minimum Amounts; Limitation on Number of Borrowings.  At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000.  At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.09(e).  Borrowings of more than one Type may be outstanding at the same time, provided that there shall not at any time be more than a total of ten (10) Eurodollar Borrowings outstanding.  Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

 

(d)           Notes.  The Loans made by each Lender, if requested by such Lender, shall be evidenced by a single promissory note of the Borrower in substantially the form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the date of this Agreement, (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption or (iii) any Lender that becomes a party hereto in connection with an increase in the Aggregate Elected Commitment Amount pursuant to Section 2.07(e) as of the effective date of such increase, in each case, payable to such Lender in a principal amount equal to its Maximum Credit Amount as in effect on such date, and otherwise duly completed.  In the event that any Lender’s Maximum Credit Amount increases or decreases for any reason (whether pursuant to Section 2.07, Section 12.04(b) or otherwise), if requested by such Lender, the Borrower shall deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to such Lender in a principal amount equal to its Maximum Credit Amount 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         Requests for Borrowings.  To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, Eastern time, three (3) Business Days before the date of the proposed Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Eastern time, on the date of the proposed Borrowing; provided that no such notice shall be required for any deemed request of an ABR Borrowing to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e).  Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, facsimile or other electronic transmission to the Administrative Agent of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower.  Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

 

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(i)            the aggregate amount of the requested Borrowing;

 

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

 

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

 

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

 

(v)           the amount of the then effective Borrowing Base, the Aggregate Elected Commitment Amount, the current total Credit Exposures (without regard to the requested Borrowing) and the pro forma total Credit Exposures (giving effect to the requested Borrowing).

 

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one (1) month’s duration.  Each Borrowing Request shall constitute a representation that the amount of the requested Borrowing shall not cause the total Credit Exposures to exceed the total Commitments.

 

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

 

Section 2.04         Swingline Loans.

 

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

 

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

 

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Section 2.09(e), by remittance to the applicable Issuing Bank) by 4:00 p.m., Eastern time, on the requested date of such Swingline Loan.

 

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

 

Section 2.05         Interest Elections.

 

(a)           Conversion and Continuance.  Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.05.  The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

 

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(b)           Interest Election Requests.  To make an election pursuant to this Section 2.05, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election.  Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile or other electronic transmission to the Administrative Agent of a written Interest Election Request in substantially the form of Exhibit C and signed by the Borrower.

 

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

 

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

 

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

 

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

 

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

 

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

 

(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.

 

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Section 2.06                            Funding of Borrowings.

 

(a)                                 Funding by Lenders.  Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m., Eastern time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04.  The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to the account of the Borrower designated in the Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.09(e) shall be remitted by the Administrative Agent to the relevant Issuing Bank.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

 

(b)                                 Presumption of Funding by the Lenders.  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing (or prior to the proposed time of any same day ABR Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.06(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender agrees to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.  If such Lender does not pay such corresponding amount to the Administrative Agent within three (3) Business Days after demand, the Borrower agrees to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent at the interest rate applicable to ABR Loans.  If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

Section 2.07                            Termination and Reduction of Aggregate Maximum Credit Amount; Increase and Reduction of Aggregate Elected Commitment Amount.

 

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

 

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(b)                                 Optional Termination and Reduction of Aggregate Maximum Credit Amount.

 

(i)                                     The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum Credit Amount; provided that (A) each reduction of the total Aggregate Maximum Credit Amount shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000, (B) the Borrower shall not terminate or reduce the Aggregate Maximum Credit Amount if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Credit Exposures would exceed the total Commitments and (C) upon any reduction of the Aggregate Maximum Credit Amount that would otherwise result in the Aggregate Maximum Credit Amount being less than the Aggregate Elected Commitment Amount, the Aggregate Elected Commitment Amount shall be automatically reduced (ratably among the Lenders) so that it equals the Aggregate Maximum Credit Amount as so reduced.

 

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

 

(c)                                  Any termination or reduction of the Aggregate Maximum Credit Amount shall be permanent and may not be reinstated.  Each reduction of the Aggregate Maximum Credit Amount shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.

 

(d)                                 If any Lender shall be a Defaulting Lender, the Borrower, at the Borrower’s election may elect to terminate such Defaulting Lender’s Maximum Credit Amount and Elected Commitment hereunder; provided that (i) such termination must be of the Defaulting Lender’s entire Maximum Credit Amount and Elected Commitment, (ii) the Borrower shall pay all amounts owed by the Borrower to such Defaulting Lender under this Agreement and under the other Loan Documents (including principal of and interest on the Loans owed to such Defaulting Lender, commitment fees accrued prior to the time such Defaulting Lender became a Defaulting Lender, and letter of credit fees accrued prior to the time such Defaulting Lender became a Defaulting Lender but specifically excluding any amounts owing under Section 5.02 as result of such payment of Loans) and shall deposit with the Administrative Agent cash collateral in the amount equal to such Defaulting Lender’s ratable share of the LC Exposure, including any such LC Exposure that has been reallocated pursuant to Section 4.05(a)(iv); and (iii) a Defaulting Lender’s Maximum Credit Amount and Elected Commitment may be terminated by the

 

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

 

(e)                                  Increase and Reduction of Aggregate Elected Commitment Amount.

 

(i)                                     Subject to the conditions set forth in Section 2.07(e)(ii), the Borrower may, at its election, increase the Aggregate Elected Commitment Amount then in effect by increasing the Elected Commitment of one or more existing Lenders and/or by causing one or more Persons that are acceptable to the Administrative Agent and that at such time are not Lenders to become a Lender (each an “Additional Lender”).  Notwithstanding anything to the contrary contained in this Agreement, in no case shall an Additional Lender be the Borrower, an Affiliate of the Borrower or a natural person.

 

(ii)                                  Any increase in the Aggregate Elected Commitment Amount shall be subject to the following additional conditions:

 

(A)                               such increase shall not be less than $10,000,000 unless (1) the Administrative Agent otherwise consents or (2) prior to giving effect to such increase, the Borrowing Base exceeds the Aggregate Elected Commitment Amount by less than $10,000,000 and after giving effect to such increase, the Aggregate Elected Commitment Amount will equal the Borrowing Base, and no such increase shall be permitted if after giving effect thereto the Aggregate Elected Commitment Amount exceeds the Borrowing Base then in effect;

 

(B)                               following any Scheduled Redetermination Date, the Borrower may not increase the Aggregate Elected Commitment Amount more than once before the next Scheduled Redetermination Date unless the Administrative Agent otherwise consents (it being understood that the Aggregate Elected Commitment Amount may also be increased on any Scheduled Redetermination Date);

 

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

 

(D)                               on the effective date of such increase, no Eurodollar Borrowings shall be outstanding or if any Eurodollar Borrowings are outstanding,

 

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then the effective date of such increase shall be the last day of the Interest Period in respect of such Eurodollar Borrowings unless the Borrower pays compensation, if any, required by Section 5.02;

 

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

 

(F)                                 subject to Section 2.07(e)(ix) below, if the Borrower elects to increase the Aggregate Elected Commitment Amount by increasing the Elected Commitment of one or more Lenders, the Borrower and each such Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit G (an “Elected Commitment Increase Certificate”) and the Borrower shall pay any applicable fees as may have been agreed to between the Borrower, such Lender and/or the Administrative Agent; and

 

(G)                               if the Borrower elects to increase the Aggregate Elected Commitment Amount by causing one or more Additional Lenders to become a party to this Agreement, then the Borrower and each such Additional Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit H (an “Additional Lender Certificate”), together with an Administrative Questionnaire and a processing and recordation fee of $3,500 for each Additional Lender which shall be payable by the Borrower to the Administrative Agent unless waived by the Administrative Agent, and the Borrower shall (1) if requested by any Additional Lender, deliver a Note payable to such Additional Lender in a principal amount equal to its Maximum Credit Amount, and otherwise duly completed and (2) pay any applicable fees as may have been agreed to between the Borrower, any Additional Lender and/or the Administrative Agent.

 

(iii)                               Subject to acceptance and recording thereof pursuant to Section 2.07(e)(iv), from and after the effective date specified in the Elected Commitment Increase Certificate or the Additional Lender Certificate (or if any Eurodollar Borrowings are outstanding, then the last day of the Interest Period in respect of such Eurodollar Borrowings, unless the Borrower has paid compensation, if any, required by Section 5.02):  (A) the amount of the Aggregate Elected Commitment Amount shall be increased as set forth therein, and (B) in the case of an Additional Lender Certificate, any Additional Lender party thereto shall be a party to this Agreement and have the rights and obligations of a Lender under this Agreement and the other Loan Documents.  In addition, the Lender or the Additional Lender, as applicable, shall be deemed to have purchased a pro rata portion of the outstanding Loans (and participation interests in Letters of Credit) of each of the other Lenders (and such Lenders hereby agree to sell and to take all such further action to effectuate such sale) such that each Lender (including any Additional Lender, if applicable) shall hold its Applicable Percentage of the outstanding Loans (and participation interests in Letters of Credit) after giving effect to the increase in the Aggregate Elected Commitment Amount and the resulting modification of each Lender’s Maximum Credit Amount pursuant to Section 2.07(e)(v).

 

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(iv)                              Upon its receipt of a duly completed Elected Commitment Increase Certificate or an Additional Lender Certificate, executed by the Borrower and the Lender or by the Borrower and the Additional Lender party thereto, as applicable, the processing and recording fee referred to in Section 2.07(e)(ii) and the Administrative Questionnaire referred to in Section 2.07(e)(ii), if applicable, the Administrative Agent shall accept such Elected Commitment Increase Certificate or Additional Lender Certificate and record the information contained therein in the Register required to be maintained by the Administrative Agent pursuant to Section 12.04(b)(iv).  No increase in the Aggregate Elected Commitment Amount shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 2.07(e)(iv).

 

(v)                                 Upon any increase in the Aggregate Elected Commitment Amount pursuant to this Section 2.07(e), (A) each Lender’s Maximum Credit Amount shall be automatically deemed amended to the extent necessary so that each such Lender’s Applicable Percentage equals the percentage of the Aggregate Elected Commitment Amount represented by such Lender’s Elected Commitment, in each case after giving effect to such increase, (B) Annex I to this Agreement shall be deemed amended to reflect the Elected Commitment of each Lender (including any Additional Lender) as thereby increased, any changes in the Lenders’ Maximum Credit Amounts pursuant to the foregoing clause (A), and any resulting changes in the Lenders’ Applicable Percentages, and (C) the Borrower shall execute and deliver new Notes to the extent required under Section 2.02(d).

 

(vi)                              The Borrower may from time to time reduce the Aggregate Elected Commitment Amount; provided that (A) each reduction of the Aggregate Elected Commitment Amount shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 unless the Administrative Agent otherwise consents and (B) the Borrower shall not reduce the Aggregate Elected Commitment Amount if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04, the total Credit Exposures would exceed the Aggregate Elected Commitment Amount.

 

(vii)                           The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Elected Commitment Amount under Section 2.07(e)(vi) 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 2.07(e)(vii) shall be irrevocable.  Any termination or reduction of the Aggregate Elected Commitment Amount shall be permanent and may not be reinstated, except pursuant to Section 2.07(e)(i).  Each reduction of the Aggregate Elected Commitment Amount shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.

 

(viii)                        Upon any redetermination or other adjustment in the Borrowing Base pursuant to this Agreement that would otherwise result in the Borrowing Base becoming less than the Aggregate Elected Commitment Amount, the Aggregate Elected Commitment Amount shall be automatically reduced (ratably among the Lenders in

 

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accordance with each Lender’s Applicable Percentage) so that it equals such redetermined Borrowing Base (and Annex I shall be deemed amended to reflect such amendments to each Lender’s Elected Commitment and the Aggregate Elected Commitment Amount).

 

(ix)                              Contemporaneously with any increase in the Borrowing Base pursuant to this Agreement, if (A) the Borrower elects to increase the Aggregate Elected Commitment Amount ratably among the Lenders and (B) each Lender has consented to such increase in its Elected Commitment, then the Aggregate Elected Commitment Amount shall be increased (ratably among the Lenders in accordance with each Lender’s Applicable Percentage) by the amount requested by the Borrower (subject to the limitations set forth in Section 2.07(e)(ii)(A)) without the requirement that any Lender deliver an Elected Commitment Increase Certificate, and Annex I shall be deemed amended to reflect such amendments to each Lender’s Elected Commitment and the Aggregate Elected Commitment Amount.  The Administrative Agent shall record the information regarding such increases in the Register required to be maintained by the Administrative Agent pursuant to Section 12.04(b)(iv).

 

Section 2.08                            Borrowing Base.

 

(a)                                 Initial Borrowing Base.  For the period from and including the Fifth Amendment Effective Date to but excluding the next Redetermination Date to occur after the Fifth Amendment Effective Date, the amount of the Borrowing Base shall be $320,000,000.  Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from time to time before the next Redetermination Date to occur after the Fifth Amendment Effective Date pursuant to Section 2.08(e), Section 2.08(f), or Section 2.08(g).

 

(b)                                 Borrowing Base Redeterminations.  The Borrowing Base shall be redetermined semi-annually in accordance with this Section 2.08(b) (a “Scheduled Redetermination”), and subject to Section 2.08(d), such redetermined Borrowing Base shall become effective and applicable to the Borrower, the Agents, any Issuing Bank and the Lenders on April 1st and October 1st of each year, with the first Scheduled Redetermination following the Fifth Amendment Effective Date occurring on April 1, 2015.  In addition, the Borrower may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at the direction of the Majority Lenders, by notifying the Borrower thereof, elect to cause the Borrowing Base to be redetermined one time each between Scheduled Redeterminations in accordance with this Section 2.08(b) (each such redetermination, an “Interim Redetermination”).

 

(c)                                  Borrowing Base Redetermination Procedure.

 

(i)                                     Each Scheduled Redetermination and each Interim Redetermination shall be effectuated as follows:  Upon receipt by the Administrative Agent of (A) the Reserve Report and the certificate required to be delivered by the Borrower to the Administrative Agent, in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an Interim Redetermination, pursuant to Section 8.12(b) and (c), and (B) such other reports, data and supplemental information, including, without limitation, the information provided pursuant to

 

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Section 8.12(c), as may, from time to time, be reasonably requested by the Majority Lenders (the Reserve Report, such certificate and such other reports, data and supplemental information being the “Engineering Reports”), the Administrative Agent shall evaluate the information contained in the Engineering Reports and shall, in good faith, propose a new Borrowing Base (the “Proposed Borrowing Base”) based upon such Engineering Report and such other information (consistent with the Administrative Agent’s normal oil and gas lending criteria and the price assumptions used by the Administrative Agent in evaluating oil and gas loans generally, in each case as they exist at the particular time).  In no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amount.

 

(ii)                                  The Administrative Agent shall notify the Borrower and the Lenders of the Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):

 

(A)                               in the case of a Scheduled Redetermination (1) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on or before the March 15th and September 15th of such year following the date of delivery, or (2) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner, then promptly after the Administrative Agent has received complete Engineering Reports from the Borrower and has had a reasonable opportunity to determine the Proposed Borrowing Base in accordance with Section 2.08(c)(i); and

 

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

 

(iii)                               Any Proposed Borrowing Base that would increase the Borrowing Base then in effect must be approved or deemed to have been approved by all of the Lenders (except for any Defaulting Lender) as provided in this Section 2.08(c)(iii); and any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect must be approved or be deemed to have been approved by the Required Lenders as provided in this Section 2.08(c)(iii).  Upon receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days to, in its sole discretion and consistent with such Lender’s normal and customary oil and gas lending criteria, agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by proposing an alternate Borrowing Base.  If at the end of such fifteen (15) days, any Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be an approval of the Proposed Borrowing Base.  If, at the end of such 15-day period, all of the Lenders, in the case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, or the Required Lenders, in the case of a Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, have approved or deemed to have approved, as aforesaid, then the Proposed Borrowing Base shall become the new Borrowing Base, effective on the date specified in Section 2.08(d).  If, however, at the end of such 15-day period, all of the Lenders or the

 

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Required Lenders, as applicable, have not approved or deemed to have approved, as aforesaid, then (A) the Administrative Agent shall poll the Lenders to ascertain the highest Borrowing Base then acceptable to all Lenders or the number of Lenders sufficient to constitute the Required Lenders, as applicable, and such amount shall become the new Borrowing Base, effective on the date specified in Section 2.08(d) and (B) the Borrower may replace any Non-Consenting Lender with respect to such Proposed Borrowing Base as provided in Section 5.04(b).

 

(d)                                 Effectiveness of a Redetermined Borrowing Base.  After a Proposed Borrowing Base is approved or is deemed to have been approved by all of the Lenders or the Required Lenders, as applicable, pursuant to Section 2.08(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing Base Notice”), and such amount shall become the Borrowing Base, effective and applicable to the Borrower, the Agents, any Issuing Bank and the Lenders:

 

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

 

(ii)                                  in the case of an Interim Redetermination or an adjustment to the Borrowing Base under Section 2.08(e), Section 2.08(f) or Section 2.08(g), on the Business Day next succeeding delivery of such notice.

 

Such amount shall then become the Borrowing Base until the next Redetermination Date or the next adjustment to the Borrowing Base under Section 2.08(e), Section 2.08(f), or Section 2.08(g), whichever occurs first.  Notwithstanding the foregoing, no Scheduled Redetermination or Interim Redetermination shall become effective until the New Borrowing Base Notice related thereto is received by the Borrower.

 

(e)                                  Reduction of Borrowing Base Upon Asset Dispositions and Hedge Unwinds.  If the Borrower or a Restricted Subsidiary shall (i) Dispose of any Borrowing Base Properties or (ii) terminate prior to the contracted term therefore or create any off-setting positions in respect of any commodity Hedging Agreements entered into by the Borrower and its Restricted Subsidiaries related to Borrowing Base Properties (whether evidenced by a floor, put or Hedging Agreement) (a “Hedge Unwind”), if the aggregate attributed Borrowing Base value of all Borrowing Base Properties Disposed of and Hedging Agreements subject to Hedge Unwinds since the last redetermination of the Borrowing Base exceeds ten percent (10%) of the Borrowing Base then in effect, the Administrative Agent shall adjust the Borrowing Base in an amount equal to the Borrowing Base value attributable to the Borrowing Base Properties being Disposed of and/or Hedging Agreements subject to such Hedge Unwinds, as applicable.  The Administrative Agent shall promptly notify the Borrower and the Lenders in writing of the Borrowing Base value attributable to the Borrowing Base Properties being Disposed of and/or the Hedging Agreements subject to such Hedge Unwinds, as applicable, in the calculation of the

 

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then-effective Borrowing Base and upon receipt of such notice, the Borrowing Base shall be reduced by such amount.

 

(f)                                   Reduction of Borrowing Base Upon Issuance of Unsecured Indebtedness.  Upon the issuance or incurrence of any unsecured Indebtedness after the Fifth Amendment Effective Date pursuant to Section 9.02(h) (other than any unsecured Indebtedness issued or incurred to refinance previously issued or incurred unsecured Indebtedness, up to the principal amount of such Indebtedness being refinanced), the Borrowing Base then in effect shall be reduced by an amount equal to the product of 0.25 multiplied by the principal amount of such newly issued Indebtedness (without regard to any original issue discount).  The Administrative Agent shall promptly notify the Borrower and the Lenders of the new Borrowing Base.

 

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

 

Section 2.09                            Letters of Credit.

 

(a)                                 General.  The Borrower, the Administrative Agent, the Issuing Bank, and Lenders hereby agree that all Existing Letters of Credit shall be deemed to be issued under this Agreement as of the Effective Date and shall constitute Letters of Credit hereunder for all purposes (except that no Issuing Bank’s standard issuance fee shall be payable on such deemed issuance).  Subject to the terms and conditions set forth herein, the Borrower may request the issuance of dollar denominated Letters of Credit for its own account or for the account of any of its Restricted Subsidiaries, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time to time during the Availability Period.  In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement, the terms and conditions of this Agreement shall control.

 

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

 

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

 

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

 

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

 

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

 

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(v)                                 specifying the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit; and

 

(vi)                              specifying the amount of the then effective Borrowing Base and the Aggregate Elected Commitment Amount, the current total Credit Exposures (without regard to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma total Credit Exposures (giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit).

 

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

 

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

 

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

 

(d)                                 Participations.  By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of any Issuing Bank or the Lenders, the applicable Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit.  In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.09(e), or of any reimbursement payment required to be refunded to the Borrower for

 

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

 

(e)                                  Reimbursement.  If any Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, Eastern time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., Eastern time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, Eastern time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., Eastern time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Borrowing (or, if such LC Disbursement is less than $1,000,000, a Swingline Loan) in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing (or Swingline Loan).  If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof.  Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.05(a) with respect to Loans made by such Lender (and Section 2.05(a) shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to such Issuing Bank the amounts so received by it from the Lenders.  Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.09(e), the Administrative Agent shall distribute such payment to such Issuing Bank or, to the extent that Lenders have made payments pursuant to this Section 2.09(e) to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear.  Any payment made by a Lender pursuant to this Section 2.09(e) to reimburse such Issuing Bank for any LC Disbursement (other than the funding of ABR Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

 

(f)                                   Obligations Absolute.  The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.09(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by any Issuing Bank under a Letter of Credit against presentation of a draft

 

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or other document that does not substantially comply with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.09(f), constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder, absent such Issuing Bank’s gross negligence or willful misconduct.  Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of any Issuing Bank; provided that the foregoing shall not be construed to excuse such Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of any Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised all requisite care in each such determination.  In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, such Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

 

(g)                                  Disbursement Procedures.  The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit.  Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by facsimile) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.

 

(h)                                 Interim Interest.  If any Issuing Bank shall make any LC Disbursement, then, until the Borrower shall have reimbursed such Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing under Section 2.09(e)), the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans.  Interest accrued pursuant to this Section 2.09(h) shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to Section 2.09(e) to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment.

 

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(i)                                     Replacement of an Issuing Bank.  Any Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank.  The Administrative Agent shall notify the Lenders of any such replacement of the replaced Issuing Bank.  At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 3.05(b).  From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor and any other existing Issuing Banks or to any previous Issuing Bank, or to such successor and all other existing Issuing Banks and previous Issuing Banks, as the context shall require.  After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

 

(j)                                    Cash Collateralization.  If (i) any Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Majority Lenders demanding the deposit of cash collateral pursuant to this Section 2.09(j), or (ii) the Borrower is required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to, in the case of an Event of Default, the LC Exposure, and in the case of a payment required by Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower or any Restricted Subsidiary described in Section 10.01(i) or Section 10.01(j).  The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Banks and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor.  The Borrower’s obligation to deposit amounts pursuant to this Section 2.09(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower or any of its Subsidiaries may now or hereafter have against any such beneficiary, any Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever.  Such deposit shall be held as collateral securing the payment and performance of the Borrower’s and the Guarantor’s obligations under this Agreement and the other Loan Documents.  The Administrative Agent shall have exclusive dominion and control, including the 

 

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exclusive right of withdrawal, over such account.  Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest.  Interest or profits, if any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Banks for LC Disbursements for which they have not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time, and if such moneys shall exceed the LC Exposure at any time, such excess shall be reimbursed to the Borrower.  If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, and the Borrower is not otherwise required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all Events of Default have been cured or waived.

 

ARTICLE III
 PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

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

 

Section 3.02                            Interest.

 

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

 

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

 

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

 

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

 

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

 

(f)                                   Interest Rate Computations.  All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error, and be binding upon the parties hereto.

 

Section 3.03                            Alternate Rate of Interest.  If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

 

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

 

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

 

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or facsimile as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

Section 3.04                            Prepayments.

 

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

 

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

 

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

 

(c)                                  Mandatory Prepayments.

 

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

 

(ii)                                  If a Borrowing Base Deficiency results from or exists immediately after any adjustment of the Borrowing Base due to a Scheduled Redetermination or Interim Redetermination, then within thirty (30) days of the effective date of such new Borrowing Base, the Borrower shall elect to (A) prepay the Loans in an aggregate principal amount equal to such Deficiency Amount, (B) pay such Deficiency Amount in six (6) equal installments, the first such installment being due and payable by the first Business Day after such election has been made and the remaining installments due monthly thereafter until such Deficiency Amount is paid in full, (C) provide and pledge as Mortgaged Properties additional Oil and Gas Properties acceptable to the Administrative Agent and the Lenders in their sole discretion (together with title information with respect thereto as may be required to maintain compliance with Section 8.13(a)) to increase the Borrowing Base by an amount at least equal to such Borrowing Base Deficiency or (D) effect any combination of the foregoing clauses (A), (B) and (C) in amounts necessary to eliminate such Borrowing Base Deficiency; provided, that all payments under this Section 3.04(c)(ii) must be made prior to the Maturity Date.

 

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

 

(iv)                              Each payment made pursuant to this Section 3.04(c) shall be used to prepay the Borrowings, and if any Borrowing Base Deficiency remains after prepaying all of the Borrowings as a result of an LC Exposure, such excess shall be paid to the Administrative Agent on behalf of the Lenders to be held as cash collateral as provided in 

 

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Section 2.09(j).  Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first, to any Swingline Loans then outstanding, second, ratably to any ABR Borrowings then outstanding, and, third, to any Eurodollar Borrowings then outstanding, and if more than one Eurodollar Borrowing is then outstanding, to each such Eurodollar Borrowing in order of priority beginning with the Eurodollar Borrowing with the least number of days remaining in the Interest Period applicable thereto and ending with the Eurodollar Borrowing with the most number of days remaining in the Interest Period applicable thereto.

 

(v)                                 Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied ratably to the Loans included in the prepaid Borrowings.  Prepayments pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the extent required by Section 3.02.

 

(d)                                 No Premium or Penalty.  Prepayments permitted or required under this Section 3.04 shall be without premium or penalty, except as required under Section 5.02.

 

Section 3.05                            Fees.

 

(a)                                 Commitment Fees.  The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Defaulting Lender) a commitment fee, which shall accrue at the applicable Commitment Fee Rate on the average daily amount of the unused amount of the Commitment of such Lender (notwithstanding such Lender’s Applicable Percentage of the Borrowing Base) during the period from and including the date of this Agreement to but excluding the Termination Date; provided that for purposes of calculating commitment fees pursuant to this Section 3.05(a), Swingline Loans shall not be deemed to be a utilization of Commitments.  Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the Termination Date, commencing on the first such date to occur after the date hereof.  All commitment fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

(b)                                 Letter of Credit Fees.  The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender (other than a Defaulting Lender except as provided in Section 4.05(a)(iii)(B)) a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to the applicable Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, and (iii) to the applicable Issuing 

 

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Bank, for its own account, its standard fees with respect to the amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder.  Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third (3rd) Business Day following such last day, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be payable on demand.  Any other fees payable to any Issuing Bank pursuant to this Section 3.05(b) shall be payable within ten (10) days after demand.  All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

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

 

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

 

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

 

(a)                                 Payments by the Borrower.  The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon, Eastern time, on the date when due, in immediately available funds, without defense, deduction, recoupment, set-off or counterclaim.  Fees, once paid, shall be fully earned and shall not be refundable under any circumstances.  Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the Administrative Agent at its offices specified in Section 12.01, except payments to be made directly to any Issuing Bank as expressly provided herein and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled thereto.  The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  All payments hereunder shall be made in dollars.

 

(b)                                 Application of Insufficient Payments.  If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then 

 

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due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements 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 or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements or Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 4.01(c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements and Swingline Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this Section 4.01(c) shall apply).  The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

 

Section 4.02                            Presumption of Payment by the Borrower.  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or any Issuing Bank that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as the case may be, the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

Section 4.03                            Certain Deductions by the Administrative Agent.  If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.06(b), Section 2.09(d), Section 2.09(e) or Section 4.02 then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

 

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

 

Section 4.05                            Defaulting Lenders.

 

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

 

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

 

(ii)                                  Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article X or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 12.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any Issuing Bank or Swingline Lender hereunder; third, to cash collateralize the Fronting Exposure of any Issuing Bank and Swingline Lender with respect to such Defaulting Lender; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) cash collateralize the Issuing Banks’ future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued and Swingline Loans made under this Agreement; sixth, to the payment of any amounts owing to the Lenders, the Issuing Banks or Swingline Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Issuing Banks or Swingline Lenders against such 

 

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Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or LC Disbursements in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 6.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and LC Disbursements owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or LC Disbursements owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letters of Credit and Swingline Loans are held by the Lenders pro rata in accordance with the Commitments without giving effect to Section 4.05(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 4.05(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)                               Certain Fees.

 

(A)                               No Defaulting Lender shall be entitled to receive any Commitment Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender)

 

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

 

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

 

(iv)                              Reallocation of Participations to Reduce Fronting Exposure.  All or any part of such Defaulting Lender’s participation in any outstanding Letters of Credit 

 

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and Swingline Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 6.02 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Commitment.  No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

(v)                                 Cash Collateral, Repayment of Swingline Loans.  If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, (x) first, prepay Swingline Loans in an amount equal to the Swingline Lenders’ Fronting Exposure and (y) second, cash collateralize the Issuing Banks’ Fronting Exposure in accordance with the procedures set forth in Section 2.09(j).

 

(b)                                 Defaulting Lender Cure.  If the Borrower, the Administrative Agent and each Swingline Lender and Issuing Bank agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held pro rata by the Lenders in accordance with the Commitments (without giving effect to Section 4.05(a)(iv), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

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

 

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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);

 

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

 

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

 

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

 

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

 

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(c)                                  Certificates.  A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in Section 5.01(a) or (b) shall be delivered to the Borrower and shall be conclusive absent manifest error.  The Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

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

 

Section 5.02                            Break Funding Payments.  In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 5.04(b), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event.  In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.

 

A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.02 shall be delivered to the Borrower and shall be conclusive absent manifest error.  The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

Section 5.03                            Taxes.

 

(a)                                 Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower or any Guarantor under any Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the Borrower or any Guarantor shall be required by applicable law to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Guarantor shall make such 

 

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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, each Lender and each Issuing Bank, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 5.03) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate of the Administrative Agent, a Lender or an Issuing Bank as to the amount of such payment or liability under this Section 5.03 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall also indemnify the Administrative Agent, within ten (10) days after demand therefor, for any amount which a Lender or the Issuing Bank for any reason fails to pay indefeasibly to the Administrative Agent as required by paragraph (g) below; provided that (i) the Borrower shall not be required to indemnify the Administrative Agent pursuant to this sentence to the extent that any such amount paid or payable as required by such paragraph (g) is a direct result of the Administrative Agent’s gross negligence or willful misconduct, and (ii) such Lender or Issuing Bank, as the case may be, shall indemnify the Borrower to the extent of any such payment the Borrower makes to the Administrative Agent pursuant to this sentence.

 

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

 

(e)                                  Status of Lenders; Tax Documentation.  (i)  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, in the event that the Borrower is a 

 

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resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)                                   Tax Refunds.  If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been 

 

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indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 5.03, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 5.03 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this paragraph (f), in no event will the Administrative Agent or any Lender be required to pay any amount to an indemnifying party pursuant to this paragraph (f) the payment of which would place the Administrative Agent or Lender in a less favorable net after-Tax position than the Administrative Agent or Lender would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This Section 5.03 shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person.

 

(g)                                  Indemnification of the Administrative Agent.  Each Lender shall indemnify the Administrative Agent within ten (10) days after demand therefor, for the full amount of any Excluded Taxes attributable to such Lender that are payable or paid by the Administrative Agent, and reasonable expenses arising therefrom or with respect thereto, whether or not such Excluded Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.  Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender, as the case may be, under any Loan Document against any amount due to the Administrative Agent under this paragraph (g). The agreements of this paragraph (g) shall survive the resignation and/or replacement of the Administrative Agent.

 

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

 

(i)                                     FATCA.  For purposes of determining withholding Taxes imposed under FATCA, from and after the Fifth Amendment Effective Date, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Secured Obligations under this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

 

Section 5.04                            Mitigation Obligations; Replacement of Lenders.

 

(a)                                 Designation of Different Lending Office.  If any Lender requests compensation under Section 5.01, or if the Borrower is required to pay any additional amount to 

 

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any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b)                                 Replacement of Lenders.  If (i) any Lender requests compensation under Section 5.01, (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, (iii) any Lender becomes a Defaulting Lender, (iv) any Lender declines to make a Eurodollar Loan under Section 5.05, or (v) any Lender becomes a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.04(b)), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, and (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts).

 

Section 5.05                            Illegality.  Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its applicable lending office to honor its obligation to make or maintain Eurodollar Loans either generally or having a particular Interest Period hereunder, then (a) such Lender shall promptly notify the Borrower and the Administrative Agent thereof and such Lender’s obligation to make such Eurodollar Loans shall be suspended (the “Affected Loans”) until such time as such Lender may again make and maintain such Eurodollar Loans and (b) all Affected Loans which would otherwise be made by such Lender shall be made instead as ABR Loans (and, if such Lender so requests by notice to the Borrower and the Administrative Agent, all Affected Loans of such Lender then outstanding shall be automatically converted into ABR Loans on the date specified by such Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into) ABR Loans, all payments of principal which would otherwise be applied to such Lender’s Affected Loans shall be applied instead to its ABR Loans.

 

ARTICLE VI
 CONDITIONS PRECEDENT

 

Section 6.01                            Effective Date.  The obligations of the Lenders to make Loans and of any Issuing Bank to issue Letters of Credit hereunder shall not become effective until the Business 

 

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Day on which each of the following conditions is satisfied (or waived in accordance with Section 12.02):

 

(a)                                 The Administrative Agent, the Arranger and the Lenders shall have received all commitment, facility and agency fees and all other fees and amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder (including, without limitation, the costs and expenses for recordation of certain Security Instruments and the fees and expenses of legal counsel pursuant to Section 12.03(a)).

 

(b)                                 The Administrative Agent shall have received a certificate of the Secretary or an Assistant Secretary of each Loan Party setting forth (i) resolutions of its board of directors (or its equivalent) with respect to the authorization of such Loan Party to execute and deliver the Loan Documents to which it is a party and to enter into the Transactions contemplated in those documents, (ii) the officers of such Loan Party (A) who are authorized to sign the Loan Documents to which such Loan Party is a party and (B) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the Transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the Organization Documents of such Loan Party, certified as being true and complete.  The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from such Loan Party to the contrary.

 

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

 

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

 

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

 

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

 

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

 

(i)                                     be reasonably satisfied that the Security Instruments including amendments to the Security Instruments securing the Existing Credit Agreement create first priority, perfected Liens (subject only to Excepted Liens identified in clauses (a) to 

 

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(d) and (f) of the definition thereof, but subject to the provisos at the end of such definition) on (A) at least 80% of the total value of the Oil and Gas Properties as reflected in the Initial Reserve Report, and (B) all of the other material tangible and intangible Property of the Loan Parties (other than any Property for which the Administrative Agent determines, in its sole discretion, that the cost of obtaining a Lien on such Property is excessive in relation to the value afforded thereby); and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

 

Section 6.02                            Each Credit Event.  The obligation of each Lender to make a Loan on the occasion of any Borrowing (including the initial funding), and of any Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

 

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

 

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

 

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

 

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

 

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ARTICLE VII
 REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

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

 

Section 7.03                            Approvals; No Conflicts.  The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including shareholders or any class of directors, whether interested or disinterested, of the Borrower or any other Person), nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, except such as have been obtained or made and are in full force and effect other than (i) the recording and filing of the Security Instruments as required by this Agreement and (ii) those third party approvals or consents which, if not made or obtained, would not cause a Default hereunder, could not reasonably be expected to have a Material Adverse Effect or do not have an adverse effect on the enforceability of the Loan Documents, (b) will not violate any applicable law or regulation or any Organization Document of the Borrower or any Restricted Subsidiary or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any Restricted Subsidiary or its Properties, or give rise to a right thereunder to require any payment to be made by the Borrower or such Restricted Subsidiary and (d) will not result in the creation or imposition of any Lien on any Property of the Borrower or any Restricted Subsidiary (other than the Liens created by the Loan Documents).

 

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Section 7.04                            Financial Condition; No Material Adverse Change.

 

(a)                                 The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) contained in its Form 10-K as of and for the fiscal year ended 2013 filed with the SEC, with a report by Deloitte & Touche LLP, independent public accountants, and (ii) as contained in its Form 10-Q as of and for each fiscal quarter and the portion of such fiscal year ended June 30, 2014 filed with the SEC.  Such Financial Statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the unaudited quarterly Financial Statements.

 

(b)                                 Since December 31, 2013, (i) there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect and (ii) the business of the Borrower and its Restricted Subsidiaries has been conducted only in the ordinary course consistent with past business practices.

 

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

 

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

 

Section 7.05                            Litigation.

 

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

 

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

 

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

 

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

 

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

 

(c)                                  there are no claims, demands, suits, orders, inquiries, investigations, requests for information or proceedings concerning any violation of, or any liability (including as a potentially responsible party) under, any applicable Environmental Law that is pending or, to the Borrower’s knowledge, threatened against the Borrower or any Restricted Subsidiary or any of their respective Properties or as a result of any operations at such Properties;

 

(d)                                 none of the Properties of the Borrower or any Restricted Subsidiary contain or have contained any:  (i) underground storage tanks; (ii) asbestos-containing materials; (iii) landfills or dumps; (iv) hazardous waste management units as defined pursuant to RCRA or any comparable state law; or (v) sites on or nominated for the National Priority List promulgated pursuant to CERCLA or any state remedial priority list promulgated or published pursuant to any comparable state law;

 

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

 

(f)                                   neither the Borrower nor any Restricted Subsidiary has received any written notice asserting an alleged liability or obligation under any applicable Environmental Laws with respect to the investigation, remediation, abatement, removal, or monitoring of any Hazardous Materials at, under, or Released or threatened to be Released from any real properties offsite the Borrower’s or any Restricted Subsidiary’s Properties and, to the Borrower’s knowledge, there are no conditions or circumstances that would reasonably be expected to result in the receipt of such written notice;

 

(g)                                  there has been no exposure of any Person or property to any Hazardous Materials as a result of or in connection with the operations and businesses of any of the 

 

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Borrower’s or the Restricted Subsidiaries’ Properties that would reasonably be expected to form the basis for a claim for damages or compensation and, to the Borrower’s knowledge, there are no conditions or circumstances that would reasonably be expected to result in the receipt of notice regarding such exposure;

 

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

 

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

 

(a)                                 Each of the Borrower and each Restricted Subsidiary is in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and other governmental authorizations necessary for the ownership of its Property and the conduct of its business, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

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

 

(c)                                  No Default has occurred and is continuing.

 

Section 7.08                            Investment Company Act.  Neither the Borrower nor any Restricted Subsidiary is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.

 

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

 

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by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided for on the books of the relevant Loan Party and (y) Permitted Liens.

 

Section 7.10                            ERISA.

 

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

 

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

 

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

 

(d)                                 Full payment when due has been made of all amounts which the Borrower, the Restricted Subsidiaries or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan as of the date hereof, and no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan.

 

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

 

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

 

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

 

Section 7.11                            Disclosure; No Material Misstatements.  The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Restricted Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower or any Restricted Subsidiary to the Administrative Agent or any Lender or any of their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements 

 

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therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.  There is no fact peculiar to the Borrower or any Restricted Subsidiary which could reasonably be expected to have a Material Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which has not been set forth in this Agreement or the Loan Documents or the other documents, certificates and statements furnished to the Administrative Agent or the Lenders by or on behalf of the Borrower or any Restricted Subsidiary prior to, or on, the date hereof in connection with the transactions contemplated hereby.  There are no statements or conclusions in any Reserve Report which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that projections concerning volumes attributable to the Borrowing Base Properties and related production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and that the Borrower and the Restricted Subsidiaries do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

 

Section 7.12                            Insurance.  The Borrower has, and has caused all of its Restricted Subsidiaries to have, (a) all insurance policies sufficient for the compliance by each of them with all material Governmental Requirements and all material agreements and (b) insurance coverage in at least amounts and against such risk (including, without limitation, public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Borrower and its Restricted Subsidiaries.  The Administrative Agent and the Lenders have been named as additional insureds in respect of such liability insurance policies, and the Administrative Agent has been named as loss payee with respect to Property loss insurance.

 

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

 

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

 

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Section 7.15                            Location of Business and Offices.  The Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in the public records of its jurisdiction of organization is Eagle Rock Energy Partners L.P., and the organizational identification number of the Borrower in its jurisdiction of organization is 4164963 (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(m) in accordance with Section 12.01).  The Borrower’s principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(m) and Section 12.01(c)).  .

 

Section 7.16                            Properties; Titles, Etc.

 

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

 

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

 

(c)                                  [Reserved].

 

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

 

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

 

(f)                                   All of the Properties of the Borrower and the Restricted Subsidiaries which are reasonably necessary for the operation of their businesses are in good working condition and are maintained in accordance with prudent business standards except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

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

 

Section 7.17                            Maintenance of Properties.  Except for such acts or failures to act as could not be reasonably expected to have a Material Adverse Effect, the offices, plants, wells, gas processing plants, platforms, improvements, fixtures, equipment, and other Property (other than Oil and Gas Properties) owned, leased or used by the Borrower and its Restricted Subsidiaries in the conduct of their businesses are (i) structurally sound with no known defects, and (ii) sufficient for the operation of the businesses of the Borrower and its Restricted Subsidiaries as currently conducted.

 

Section 7.18                            Gas Imbalances, Prepayments.  Except as set forth on Schedule 7.18 or on the most recent certificate delivered pursuant to Section 8.12(c), on a net basis there are no gas imbalances, take or pay or other prepayments which would require the Borrower or any of its Restricted Subsidiaries to deliver Hydrocarbons produced from the Borrowing Base Properties of the Borrower or any Restricted Subsidiary at some future time without then or thereafter receiving full payment therefor exceeding one bcf of gas (on an mcf equivalent basis) in the aggregate.

 

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

 

Section 7.20                            Security Instruments.

 

(a)                                 Guaranty and Collateral Agreement.  The provisions of the Guaranty and Collateral Agreement are effective to create, in favor of the Administrative Agent for the benefit 

 

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of the Secured Parties, a legal, valid and enforceable Lien on, and security interest in, all of the Collateral described thereon, and (i) when financing statements and other filings in appropriate form are filed in the offices specified in the Guaranty and Collateral Agreement and (ii) upon the taking of possession or control by the Administrative Agent of the Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Administrative Agent to the extent possession or control by the Administrative Agent is required by the Guaranty and Collateral Agreement), the Liens created by the Guaranty and Collateral Agreement shall constitute fully perfected first priority Liens on, and security interests in, all right, title and interest of the Loan Parties in the Collateral covered thereby (other than such Collateral in which a security interest cannot be perfected by filing, possession or control under the Uniform Commercial Code as in effect at the relevant time in the relevant jurisdiction), in each case free of all Liens other than Excepted Liens, and prior and superior to all other Liens other than Excepted Liens.

 

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

 

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

 

Section 7.21                            Hedging Agreements.  Schedule 7.21, as of the date hereof, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(e), sets forth, a true and complete list of all Hedging Agreements of the Borrower and each Restricted Subsidiary (specifying the category of each Hedging Agreement, which categories include commodity Hedging Agreements and Interest Rate Hedges), the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement. The Borrower is a Qualified ECP Guarantor.

 

Section 7.22                            Use of Loans and Letters of Credit.  The proceeds of the Loans and the Letters of Credit shall be used to provide working capital (a) to refinance the Existing Credit Agreement and pay fees and expenses incurred therewith, (b) for Capital Expenditures and acquisitions and (c) for general partnership purposes, including distributions permitted under 

 

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Section 9.04(d).  The Borrower and its Restricted Subsidiaries are not engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board).  No part of the proceeds of any Loan or Letter of Credit will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.  Following the application of any Loan or Letter of Credit, not more than 25% of the value of the assets of the Borrower and its Restricted Subsidiaries will be represented by or made up of margin stock.

 

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

 

Section 7.24                            Anti-Terrorism Laws.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Section 7.25                            Anti-Corruption Laws and Sanctions.  The Borrower has implemented and maintains in effect such policies and procedures, if any, as it deems appropriate using reasonable judgment in light of its business and operations (including any international operations), to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of the Borrower its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.  None of (a) the Borrower, any Subsidiary or any of their respective directors, officers or employees, or (b) to the knowledge of the Borrower, any agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person.   No Borrowing or Letter of Credit, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions.

 

ARTICLE VIII
 AFFIRMATIVE COVENANTS

 

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower (on behalf of itself and its Restricted Subsidiaries) and each Guarantor by its execution of the Guaranty and Collateral Agreement, covenants and agrees with the Lenders, the Agents and the Issuing Banks that:

 

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

 

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

 

(b)                                 Quarterly Financial Statements.  As soon as available, but in any event in accordance with then applicable law and not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the 

 

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balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; provided, that the timely filing with the SEC of the Borrower’s quarterly reports on Form 10-Q will satisfy the reporting requirements of this Section 8.01(b).

 

(c)                                  Certificate of Financial Officer — Compliance.  Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer in substantially the form of Exhibit D-2 hereto (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 9.01 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 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

 

(d)                                 Certificate of Financial Officer — Consolidating Information.  If, at any time, all of the Consolidated Subsidiaries of the Borrower are not Consolidated Restricted Subsidiaries, then concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer setting forth consolidating spreadsheets that show all Consolidated Unrestricted Subsidiaries and the eliminating entries, in such form as would be presentable to the auditors of the Borrower.

 

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

 

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

 

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

 

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

 

(i)                                     Lists of Purchasers.  Within 30 days of a written request by the Administrative Agent, a list of all Persons purchasing Hydrocarbons related to production attributable to the Borrowing Base Properties from the Borrower or any Restricted Subsidiary.

 

(j)                                    Notice of Sales of Borrowing Base Properties.  In the event the Borrower or any Restricted Subsidiary intends to Dispose of any Borrowing Base Properties or any Equity Interests in any Restricted Subsidiary owning Borrowing Base Properties that would trigger a reduction of the Borrowing Base under Section 2.08(e), prior written notice of such Disposition to the Administrative Agent.

 

(k)                                 Notice of Casualty Events.  Prompt written notice, and in any event within three (3) Business Days, of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event, in each case, having a fair market value in excess of $25,000,000.

 

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

 

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

 

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

 

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

 

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

 

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the terms of this Agreement or any other Loan Document, as the Administrative Agent may reasonably request.

 

Section 8.02                            Notices of Material Events.  The Borrower will furnish to the Administrative Agent for further distribution to each Lender prompt written notice (and in any event within five (5) Business Days) of the following:

 

(a)                                 the occurrence of any Default;

 

(b)                                 the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof not previously disclosed in writing to the Lenders or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lenders) that, in either case, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

 

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

 

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

 

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

 

Section 8.03                            Existence; Conduct of Business.  The Borrower will, and will cause each Restricted Subsidiary to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, consents, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which its Properties are located or the ownership of its Properties requires such qualification, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 9.11.

 

Section 8.04                            Payment of Obligations.  The Borrower will, and will cause each Restricted Subsidiary to, pay its obligations, including Tax liabilities of the Borrower and all of its Restricted Subsidiaries before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect or result in the seizure or levy of any Property of the Borrower or any Restricted Subsidiary.

 

Section 8.05                            Performance of Obligations under Loan Documents.  The Borrower will repay the Loans according to the reading, tenor and effect thereof, and the Borrower will, and will cause each Restricted Subsidiary to, do and perform every act and discharge all of the 

 

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obligations to be performed and discharged by them under the Loan Documents, including, without limitation, this Agreement, at the time or times and in the manner specified.

 

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

 

(a)                                 operate its Properties or cause such Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance with all Governmental Requirements, including, without limitation, applicable proration requirements and Environmental Laws, and all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Properties and the production and sale of Hydrocarbons and other minerals therefrom, except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect;

 

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

 

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

 

Section 8.07                            Insurance.  The Borrower will, and will cause each Restricted Subsidiary to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations (including hazard insurance as appropriate).  The loss payable clauses or provisions in said insurance policy or policies insuring any of the Collateral for the Loans shall be endorsed in favor of and made payable to the Administrative Agent as its interests may appear and such policies shall name the Administrative Agent as an “additional insured” and provide that the insurer will endeavor to give at least thirty (30) days’ prior notice of any cancellation to the Administrative Agent.

 

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

 

Section 8.09                            Compliance with Laws.  The Borrower will, and will cause each Restricted Subsidiary to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.  The Borrower will maintain in effect and enforce such policies and procedures, if any, as 

 

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it deems appropriate using reasonable judgment in light of its business and operations (including any international operations), to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

 

Section 8.10                            Environmental Matters.

 

(a)                                 The Borrower shall at its sole expense:  (i) comply, and shall cause its Properties and operations and each Restricted Subsidiary and each Restricted Subsidiary’s Properties and operations to comply, with all applicable Environmental Laws, the breach of which could be reasonably expected to have a Material Adverse Effect; (ii) not dispose of or otherwise release, and shall cause each Restricted Subsidiary not to dispose of or otherwise release, any Hazardous Material on, under, about or from any of the Borrower’s or its Restricted Subsidiaries’ Properties or any other Property to the extent caused by the Borrower’s or any of its Restricted Subsidiaries’ operations except in compliance with applicable Environmental Laws, the disposal or release of which could reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or file, and shall cause each Restricted Subsidiary to timely obtain or file, all notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or its Restricted Subsidiaries’ Properties, which failure to obtain or file could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion, and shall cause each Restricted Subsidiary to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “Remedial Work”) in the event any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other actual or threatened release of any Hazardous Material on, under, about or from any of the Borrower’s or its Restricted Subsidiaries’ Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material Adverse Effect; and (v) establish and implement, and shall cause each Subsidiary to establish and implement, such procedures as may be necessary to continuously determine and assure that the Borrower’s and its Restricted Subsidiaries’ obligations under this Section 8.10(a) are timely and fully satisfied, which failure to establish and implement could reasonably be expected to have a Material Adverse Effect.

 

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

 

(c)                                  The Borrower will, and will cause each Restricted Subsidiary to, provide environmental audits and tests in accordance with American Society of Testing Materials standards upon request by the Administrative Agent and the Lenders and no more than once per 

 

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year in the absence of any Event of Default (or as otherwise required to be obtained by the Administrative Agent or the Lenders by any Governmental Authority), in connection with any future acquisitions of Oil and Gas Properties.

 

Section 8.11                            Further Assurances.

 

(a)                                 The Borrower at its sole expense will, and will cause each Restricted Subsidiary to, promptly execute and deliver to the Administrative Agent all such other documents, agreements and instruments reasonably requested by the Administrative Agent to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements of the Borrower or any Restricted Subsidiary, as the case may be, in the Loan Documents, including the Notes, or to further evidence and more fully describe the Collateral intended as security for the Secured Obligations, or to correct any material omissions in the Security Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary, in the sole discretion of the Administrative Agent, in connection therewith.

 

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

 

Section 8.12                            Reserve Reports.

 

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

 

(b)                                 In the event of an Interim Redetermination, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate (provided, that projections concerning volumes attributable to the Oil and Gas Properties and related production and cost estimates contained in such Reserve Report are necessarily based upon professional opinions, estimates and projections and such opinions, estimates and projections may not ultimately prove accurate) and to have been prepared in accordance with the procedures used in the immediately preceding December 31 Reserve Report.  

 

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For any Interim Redetermination requested by the Administrative Agent or the Borrower pursuant to Section 2.08(b), the Borrower shall provide such Reserve Report with an “as of” date as required by the Administrative Agent as soon as possible, but in any event no later than thirty (30) days following the receipt of such request.

 

(c)                                  With the delivery of each Reserve Report, the Borrower shall provide to the Administrative Agent and the Lenders a certificate from a Responsible Officer certifying that in all material respects:  (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct (provided, that projections concerning volumes attributable to the Oil and Gas Properties and related production and cost estimates contained in such Reserve Report are necessarily based upon professional opinions, estimates and projections and such opinions, estimates and projections may not ultimately prove accurate), (ii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.18 with respect to its Borrowing Base Properties which would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons either generally or produced from such Borrowing Base Properties at some future time without then or thereafter receiving full payment therefor, (iii) none of their Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (iv) attached to the certificate is a list of all marketing agreements entered into subsequent to the later of the date hereof or the most recently delivered Reserve Report which the Borrower could reasonably be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof, and (v) attached thereto is a schedule of the Borrowing Base Properties that are Mortgaged Properties and demonstrating that the percentage of the total value of the Borrowing Base Properties that the value of such Mortgaged Properties represent is in compliance with Section 8.14(a).

 

(d)                                 Concurrently with the delivery of the Reserve Reports in connection with Section 8.12(a) and (b), the Borrower shall furnish to the Administrative Agent and the Lenders a report setting forth, for the period since the last delivery of such information, the volume of production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) during such period from the Oil and Gas Properties, and setting forth the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred during such period.

 

Section 8.13                            Title Information.

 

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

 

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(b)                                 If the Borrower has provided title information for additional Borrowing Base Properties under Section 8.13(a), the Borrower shall, within sixty (60) days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Borrowing Base Properties, either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, or (ii) deliver title information for Borrowing Base Properties not previously reviewed, in form and substance acceptable to the Administrative Agent, so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, satisfactory title information on at least 80% of the value of the Oil and Gas Properties as set forth in the most recent Reserve Report.

 

(c)                                  If the Borrower is unable to cure any title defect requested by the Administrative Agent or the Lenders to be cured within the 60-day period or the Borrower does not comply with the requirements to provide acceptable title information covering 80% of the value of the Borrowing Base Properties, such default shall not be a Default, but instead the Administrative Agent shall have the right to exercise the following remedy in its sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent.  To the extent that the Administrative Agent is 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, and the Administrative Agent may send a notice to the Borrower and the Lenders that the then outstanding Borrowing Base shall be reduced by an amount as determined by the Administrative Agent to cause the Borrower to be in compliance with the requirement to provide acceptable title information on 80% of the value of the Borrowing Base Properties.  This new Borrowing Base shall become effective immediately after receipt of such notice.

 

Section 8.14                            Additional Collateral; Additional Guarantors.

 

(a)                                 In connection with each redetermination of the Borrowing Base, the Borrower shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.12(c)(iii)) to ascertain whether the Mortgaged Properties represent at least 80% of the total value of the Borrowing Base Properties after giving effect to exploration and production activities, acquisitions, Dispositions and production.  In the event that the Mortgaged Properties do not represent at least 80% of such total value, then the Borrower shall, and shall cause its Restricted Subsidiaries to, grant, within thirty (30) days of delivery of the certificate required under Section 8.12(c), to the Administrative Agent as security for the Secured Obligations a first-priority Lien (provided that Excepted Liens of the type described in clauses (a) to (d) and (f) of the definition thereof may exist, but subject to the provisos at the end of such definition) on additional Borrowing Base Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 80% of such total value.  All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes.  In order to comply with the foregoing, if any Restricted Subsidiary places a Lien on its Oil and Gas Properties and such Restricted Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).

 

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(b)                                 In the event that (i) the Borrower or any Restricted Subsidiary acquires any Material Domestic Subsidiary, (ii) the Borrower determines that any Restricted Subsidiary is a Material Domestic Subsidiary or (iii) any Domestic Subsidiary incurs or guarantees any Indebtedness, the Borrower shall promptly (and in any event within thirty (30) days of such acquisition, determination, incurrence or guaranty) cause such Restricted Subsidiary to guarantee the Secured Obligations pursuant to the Guaranty and Collateral Agreement.  In connection with any guaranty, the Borrower shall, or shall cause such Domestic Subsidiary to, (A) execute and deliver a supplement to the Guaranty and Collateral Agreement executed by such Domestic Subsidiary, (B) cause the owner of the Equity Interests in such Domestic Subsidiary to pledge such Equity Interests (including, without limitation, to the extent certificated, delivery of original stock certificates evidencing the Equity Interests of such Domestic Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof) and (C) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent.

 

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

 

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

 

(e)                                  Notwithstanding any provision in any of the Loan Documents to the contrary, in no event is any Building (as defined in the applicable Flood Insurance Regulations) or Manufactured (Mobile) Home (as defined in the applicable Flood Insurance Regulations) owned by any Loan Party included in the Mortgaged Property and no Building or Manufactured (Mobile) Home shall be encumbered by any Security Instrument; provided, that (A) the applicable Loan Party’s interests in all lands and Hydrocarbons situated under any such Building or Manufactured (Mobile) Home shall be included in the Mortgaged Property and shall be encumbered by the Security Instruments and (B) the Borrower shall not, and shall not permit any 

 

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of its Restricted Subsidiaries to, permit to exist any Lien on any Building or Manufactured (Mobile) Home except Excepted Liens.

 

Section 8.15                            ERISA Compliance.  The Borrower will promptly furnish and will cause the Restricted Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent (a) promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan or any trust created thereunder, (b) immediately upon becoming aware of the occurrence of any ERISA Event or of any “prohibited transaction,” as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by the President or the principal Financial Officer, the Restricted Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action the Borrower, the Restricted Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (c) immediately upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan.  With respect to each Plan (other than a Multiemployer Plan), the Borrower will, and will cause each Restricted Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of section 412 of the Code (determined without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.

 

Section 8.16                            Unrestricted Subsidiaries.  The Borrower:

 

(a)                                 will cause the management, business and affairs of each of the Borrower and its Restricted Subsidiaries to be conducted in such a manner (including, without limitation, by keeping separate books of account, furnishing separate financial statements of Unrestricted Subsidiaries to creditors and potential creditors thereof and by not permitting Properties of the Borrower and its Restricted Subsidiaries to be commingled) so that each Unrestricted Subsidiary will be treated as a legal entity separate and distinct from Borrower and the Restricted Subsidiaries;

 

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

 

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

 

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ARTICLE IX
 NEGATIVE COVENANTS

 

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower (on behalf of itself and its Restricted Subsidiaries) and each Guarantor by its execution of the Guaranty and Collateral Agreement covenants and agrees with the Lenders, the Administrative Agent and the Issuing Banks that:

 

Section 9.01                            Financial Covenants.

 

(a)                                 Total Leverage Ratio.  The Borrower will not, as of the last day of any fiscal quarter, permit the Total Leverage Ratio to be greater than (i) as of the last day of any fiscal quarter that does not occur during a Qualified Acquisition Period, 4.00 to 1.00 and (ii) as of the last day of any fiscal quarter occurring during any Qualified Acquisition Period, 4.50 to 1.00.

 

(b)                                 Current Ratio.  The Borrower will not, as of the last day of any fiscal quarter, permit its ratio of consolidated current assets (including availability under this Credit Agreement up to the total Commitments but excluding non-cash assets under ASC 815) to consolidated current liabilities (excluding non-cash obligations under ASC 815 and current maturities under this Agreement) to be less than 1.00 to 1.00.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(k)                                 Indebtedness under Treasury Management Agreements;

 

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

 

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

 

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

 

(a)                                 Liens securing the payment of any Secured Obligations pursuant to the Security Instruments;

 

(b)                                 Excepted Liens;

 

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

 

(d)                                 Liens described on Schedule 9.03;

 

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

 

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

 

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

 

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

 

(i)                                     Liens on Property acquired in an acquisition that as of the date of such acquisition secure Hedging Agreements; provided that such Liens shall only be permitted for thirty (30) days after the date such acquisition is consummated;

 

(j)                                    Liens on the Regency Units and any Regency Unit Proceeds; and

 

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

 

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

 

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(a)                                 the Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional shares of its Equity Interests (other than Disqualified Capital Stock);

 

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

 

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

 

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

 

(e)                                  so long as neither (i) any Event of Default under Section 10.01(a), (b), (i) or (j) or (ii) a Borrowing Base Deficiency exists, Borrower may use any Regency Unit Proceeds to make Restricted Payments, return capital to its stockholders, or make distributions to its Equity Interest holders; and

 

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

 

Section 9.05                            Investments, Loans and Advances.  The Borrower will not, and will not permit any Restricted Subsidiary to, make or permit to remain outstanding any Investments in or to any Person, except that the foregoing restriction shall not apply to:

 

(a)                                 Investments which are disclosed to the Lenders in Schedule 9.05;

 

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

 

(c)                                  direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case maturing within one (1) year from the date of creation thereof;

 

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

 

(e)                                  deposits maturing within one (1) year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the date of such bank or trust company’s most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by 

 

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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 (including any Person owning Oil and Gas Properties and any gas gathering systems related thereto that complies with Section 8.14(b) and becomes a Guarantor within the time period set forth therein), (ii) made by any Restricted Subsidiary in or to the Borrower or any Guarantor, and (iii) made by the Borrower or any Restricted Subsidiary in or to all other Restricted Subsidiaries which are not Guarantors in an aggregate amount at any one time outstanding not to exceed $10,000,000;

 

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

 

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

 

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

 

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

 

(l)                                     Investments of the type described in clause (c) of the definition thereof 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;

 

(m)                             so long as neither (i) any Event of Default under Section 10.01(a), (b), (i) or (j) or (ii) a Borrowing Base Deficiency exists. any Investment of any Regency Unit Proceeds; and

 

(n)                                 other Investments not to exceed $50,000,000 in the aggregate at any time.

 

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Section 9.06                            Designation and Conversion of Restricted and Unrestricted Subsidiaries; Indebtedness of Unrestricted Subsidiaries.

 

(a)                                 Unless designated as an Unrestricted Subsidiary on Schedule 7.14 as of the Fifth Amendment Effective Date or thereafter, assuming compliance with Section 9.06(b), any Person that becomes a Subsidiary of the Borrower or any of its Restricted Subsidiaries shall be classified as a Restricted Subsidiary.

 

(b)                                 The Borrower may designate, by written notification thereof to the Administrative Agent, any Restricted Subsidiary, including a newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after giving effect, to such designation, neither a Default nor a Borrowing Base Deficiency would exist and (ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount equal to the fair market value as of the date of such designation of the Borrower’s direct and indirect Equity Interests in such Subsidiary and such Investment would be permitted to be made at the time of such designation under Section 9.05(k).  Except as provided in this Section 9.06(b), no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.  Upon any such redesignation, such Subsidiary shall be released from any and all obligations (and all of its Property shall be released from any and all Liens) under the Security Instruments and other Loan Documents.

 

(c)                                  The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, after giving effect to such designation, (i) the representations and warranties of the Borrower and its Restricted Subsidiaries contained in each of the Loan Documents are true and correct on and as of such date as if made on and as of the date of such redesignation (or, if stated to have been made expressly as of an earlier date, were true and correct as of such date), (ii) no Default would exist and (iii) the Borrower complies with the requirements of Section 8.14, Section 8.16 and Section 9.15.

 

Section 9.07                            Nature of Business.  The Borrower will not, and will not permit any Restricted Subsidiary to, engage (directly or indirectly) in any business other than those businesses in which the Borrower and its Restricted Subsidiaries are engaged on the Fifth Amendment Effective Date (or which are reasonably related thereto or are reasonable extensions thereof).

 

Section 9.08                            Proceeds of Loans.

 

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

 

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(b)                                 The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 9.12                            Sale of Properties.  The Borrower will not, and will not permit any Restricted Subsidiary to Dispose of any Borrowing Base Property (other than a Disposition by a 

 

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Loan Party to another Loan Party), or any Equity Interests in any Subsidiary that owns any Borrowing Base Property, unless (i) 75% of the consideration received in respect of such Disposition is cash or cash equivalents, (ii) the consideration received in respect of such Disposition shall be equal to or greater than the fair market value of such Property, (iii) if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to that effect, and (iv) no Default or Event of Default shall occur as a result of such Disposition; provided that certain Dispositions of Borrowing Base Properties may result in an adjustment to the Borrowing Base as provided in Section 2.08(e).

 

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

 

Section 9.14                            Transactions with Shareholders and Affiliates.  The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than a Loan Party) unless such transactions are otherwise permitted under this Agreement and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate; provided, that the foregoing restriction shall not apply to (a) reasonable and customary fees paid to members of the board of directors (or similar governing body) of the Borrower and its Restricted Subsidiaries, (b) compensation arrangements for directors, officers and other employees of the Borrower and its Restricted Subsidiaries entered into in the ordinary course of business, (c) transactions approved by the Conflicts Committee, and (d) transactions described in Schedule 9.14.

 

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

 

Section 9.16                            Negative Pledge Agreements; Dividend Restrictions.  The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any contract, agreement or understanding (other than (a) this Agreement and the Security Instruments, (b) restrictions with respect to Property securing Indebtedness pursuant to Liens permitted under Section 9.03, (c) customary provisions restricting subletting or assignment of leases or rights thereunder, and (d) temporary restrictions with respect to an Asset Sale otherwise permitted hereunder pending the consummation of such sale), which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Administrative Agent and the Lenders or restricts any Restricted Subsidiary from 

 

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paying dividends or making distributions to the Borrower or any Guarantor, or which requires the consent of or notice to other Persons in connection therewith.

 

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

 

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

 

Section 9.19                            Hedging Agreements.  The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any Hedging Agreements with any Person other than (a) Hedging Agreeements in respect of commodities (i) with an Approved Counterparty and (ii) the notional volumes for which do not exceed, as of the date such Hedging Agreement is executed, the greater of (A) 100% for the two years after the date such Hedging Agreement is executed and 90% thereafter of the reasonably anticipated projected production from proved, developed, producing Oil and Gas Properties for each month during the period during which such Hedging Agreement is in effect for each of crude oil and natural gas, calculated separately and (B) 85% for the two years after the date such Hedging Agreement is executed and 75% thereafter of reasonably anticipated projected production from total proved Oil and Gas Properties for each month during the period during which such Hedging Agreement is in effect for each of crude oil and natural gas, calculated separately; provided that the notional volumes of such Hedging Agreements that constitute commodity puts or floors purchased by the Borrower or any Restricted Subsidiary shall not be included in the calculations described in this clause (ii) and (b) Interest Rate Hedges with an Approved Counterparty and that are not speculative in nature.

 

References in this Section 9.19 to Oil and Gas Properties shall include Oil and Gas Properties anticipated to be acquired by the Borrower pursuant to an executed purchase agreement, to the extent that such properties represent proved developed producing properties; provided, that to the extent the Borrower has entered into Hedging Agreements based upon reasonably anticipated projected production from Oil and Gas Properties anticipated to be acquired pursuant to such purchase agreement, and such purchase agreement is terminated or the Borrower determines that all or a portion of such acquisition will not occur, the Borrower will, not later than 60 days after the earliest to occur of such termination, determination, and the date of entering into such Hedging Agreement (or such longer period as the Administrative Agent may agree, not to exceed 90 days), terminate such Hedging Agreements to the extent of the projected production attributable to the Oil and Gas Properties that will not be so acquired.

 

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

 

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

 

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

 

(c)                                  The Borrower shall not, and shall not permit any Restricted Subsidiary to, make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any outstanding subordinated Indebtedness or other Indebtedness permitted by Section 9.02(h), except (i) so long as neither (A) any Event of Default under Section 10.01(a), (b), (i) or (j) or (B) a Borrowing Base Deficiency exists, prepayments or redemptions of Indebtedness permitted by Section 9.02(h) that is outstanding on the Fifth Amendment Effective Date with any Regency Unit Proceeds and (ii) as otherwise permitted by this Agreement.

 

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

 

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Section 9.22                            Anti-Terrorism Laws.  The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, (a) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 7.24, (b) knowingly deal in, or otherwise engage in any transaction relating to, any Property or interests in Property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (c) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Borrower shall deliver to any Lender any certification or other evidence requested from time to time by such Lender confirming the Borrower’s and the Subsidiaries’ compliance with this Section 9.22).

 

ARTICLE X
 EVENTS OF DEFAULT; REMEDIES

 

Section 10.01                     Events of Default.  One or more of the following events shall constitute an “Event of Default”:

 

(a)                                 The Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof, by acceleration or otherwise.

 

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

 

(c)                                  Any representation or warranty made or deemed made by or on behalf of the Borrower or any Restricted Subsidiary in or in connection with any Loan Document or any amendment or modification of any Loan Document or waiver under such Loan Document, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect, unless otherwise already modified by materiality, when made or deemed made.

 

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

 

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

 

(f)                                   The Borrower or any Restricted Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 10.01(a), Section 10.01(b), Section 10.01(d) or Section 10.01(e)) or any other Loan Document, and such failure shall continue unremedied for a period of thirty (30) days after 

 

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notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender).

 

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

 

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

 

(i)                                     An involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Restricted Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Restricted Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for thirty (30) days or an order or decree approving or ordering any of the foregoing shall be entered.

 

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

 

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

 

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creditor or judgment creditors to attach or levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any such judgment.

 

(l)                                     The Loan Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in all material respects 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 Collateral purported to be covered thereby in any material amount, except to the extent permitted by the terms of this Agreement, or the Borrower or any Restricted Subsidiary or any of their Affiliates shall so state in writing.

 

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

 

(n)                                 A Change in Control shall occur.

 

Section 10.02                     Remedies.

 

(a)                                 In the case of an Event of Default other than one described in Section 10.01(i) or Section 10.01(j), at any time thereafter during the continuance of such Event of Default, the Administrative Agent may, and at the request of the Majority Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(j)), shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(i) or Section 10.01(j), the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.09(j)), shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.

 

(b)                                 In the case of the occurrence of an Event of Default, the Administrative Agent and the Lenders will have all other rights and remedies available at law and equity.

 

(c)                                  All proceeds realized from the liquidation or other Disposition of Collateral or otherwise received after maturity of the Loans, whether by acceleration or otherwise, shall be applied:

 

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

 

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

 

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

 

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

 

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

 

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

 

Notwithstanding the foregoing, amounts received from any Loan Party that is not an “eligible contract participant” under the Commodity Exchange Act shall not be applied to any Excluded Hedging Obligations (it being understood, that in the event that any amount is applied to Secured Obligations other than Excluded Hedging Obligations as a result of this clause, the Administrative Agent shall make such adjustments as it determines are appropriate to distributions pursuant to clause fourth above from amounts received from “eligible contract participants” under the Commodity Exchange Act to ensure, as nearly as possible, that the proportional aggregate recoveries with respect to Secured Obligations described in clause fourth above by the holders of any Excluded Hedging Obligations are the same as the proportional aggregate recoveries with respect to other Secured Obligations pursuant to clause fourth above).

 

ARTICLE XI
 THE AGENTS

 

Section 11.01                     Appointment; Powers.  Each of the Lenders and each Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto.

 

Section 11.02                     Duties and Obligations of Administrative Agent.  The Administrative Agent shall have no duties or obligations except those expressly set forth in the Loan Documents.  Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has 

 

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occurred and is continuing (the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties), (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent shall have no duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity.  The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or as to those conditions precedent expressly required to be to the Administrative Agent’s satisfaction, (vi) the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower and its Subsidiaries or any other obligor or guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or observance of any covenants, agreements or other terms or conditions set forth herein or therein.  For purposes of determining compliance with the conditions specified in Article VI, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed closing date specifying its objection thereto.

 

Section 11.03                     Action by Administrative Agent.  The Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) and in all cases the Administrative Agent shall be 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 

 

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of the Lenders.  If a Default has occurred and is continuing, then the Administrative Agent shall take such action with respect to such Default as shall be directed by the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders.  In no event, however, shall the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement, the Loan Documents or applicable law.  If a Default has occurred and is continuing, no Co-Syndication Agent shall have any obligation to perform any act in respect thereof.  The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or the Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02), and otherwise the Administrative Agent shall not be liable for any action taken or not taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.

 

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

 

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

 

Section 11.06                     Resignation or Removal of Administrative Agent.  Subject to the appointment and acceptance of a successor Administrative Agent as provided in this Section 11.06, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Banks and the Borrower.  Upon any such resignation, the Majority Lenders shall have 

 

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the right, in consultation with the Borrower, to appoint a successor.  If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation or removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the Administrative Agent’s resignation hereunder, the provisions of this Article XI and Section 12.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

 

Section 11.07                     Agents as Lenders.  Each bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

 

Section 11.08                     No Reliance.  Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Agent, any Issuing Bank or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is a party.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Agent, any Issuing Bank or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder.  The Agents shall not be required to keep themselves informed as to the performance or observance by the Borrower or any of its Subsidiaries of this Agreement, the Loan Documents or any other document referred to or provided for herein or to inspect the Properties or books of the Borrower or its Subsidiaries.  Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, neither the Agents nor the Arranger shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of such Agent or Arranger or any of its Affiliates.  In this regard, each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this transaction as special counsel to the Administrative Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document.  Each other party hereto will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein.

 

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Section 11.09                     Administrative Agent May File Proofs of Claim.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Borrower or any of its Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

 

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

 

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

 

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

 

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

 

Section 11.10                     Authority of Administrative Agent to Release Collateral and Liens.  Each Lender and each Issuing Bank hereby authorizes the Administrative Agent to release any Collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents.  Each Lender and each Issuing Bank hereby authorizes the Administrative Agent to execute and deliver to the Borrower, at the Borrower’s sole cost and expense, any and all releases of Liens, termination statements, assignments or other documents reasonably requested by the Borrower in connection with (i) any redesignation of a Restricted Subsidiary as an Unrestricted Subsidiary pursuant to Section 9.06(b) or (ii) any Disposition of Property to the extent such Disposition is permitted by the terms of Section 9.12.

 

Section 11.11                     The Arranger and the Co-Syndication Agents.  The Arranger and the Co-Syndication Agents shall have no duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than their duties, responsibilities and liabilities in their 

 

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capacity as Lenders hereunder.  No Arranger or Co-Syndication Agent shall have or be deemed to have any fiduciary relationship with any Lender.

 

ARTICLE XII
 MISCELLANEOUS

 

Section 12.01                     Notices.

 

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

 

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

 

Eagle Rock Energy Partners, L.P.

1415 Louisiana Street, Suite 2700

Houston, Texas  77002

Attention:  Bob Haines

Phone:  281-408-1203

Fax:  281-715-4157

Email:  r.haines@eaglerockenergy.com

 

with a copy to:

 

Eagle Rock Energy Partners, L.P.

1415 Louisiana Street, Suite 2700

Houston, Texas  77002

Attention:  Charles C. Boettcher

Phone:  (281) 408-1260

Fax:  (281) 715-4142

Email:  c.boettcher@eaglerockenergy.com

 

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

 

Wells Fargo Bank, National Association

1000 Louisiana Street, 9th Floor

Houston, TX 77002

Attention: Michael Real

Phone: (713) 319-1914

Fax: (713) 319-1925

Email: realm@wellsfargo.com

 

with a copy to:

 

Wells Fargo Bank, National Association

 

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1525 West W.T. Harris Blvd - 1B1

Mailcode: MACD1109-019

Charlotte, NC 28262

Attention: Agency Services

Fax: (704) 590-3481

Email: agencyservices.requests@wellsfargo.com

 

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

 

(b)                                 Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II, Article III, Article IV and Article V unless otherwise agreed by the Administrative Agent and the applicable Lender.  The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

 

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

 

Section 12.02                     Waivers; Amendments.

 

(a)                                 No failure on the part of the Administrative Agent, any Issuing Bank or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege, or any abandonment or discontinuance of steps to enforce such right, power or privilege, under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by Section 12.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.

 

(b)                                 Neither this Agreement nor any provision hereof nor any Security Instrument nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by 

 

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the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment, Elected Commitment or the Maximum Credit Amount of any Lender without the written consent of such Lender, (ii) increase the Borrowing Base without the written consent (or deemed consent pursuant to Section 2.08(c)(iii)) of each Lender (other than any Defaulting Lender), decrease or maintain the Borrowing Base without the consent (or deemed consent pursuant to Section 2.08(c)(iii)) of the Required Lenders, or modify in any manner Section 2.08 without the consent of each Lender, (iii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Secured Obligations 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 LC Disbursement, or any interest thereon, or any fees payable hereunder, or any other Secured Obligations hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Termination Date without the written consent of each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (vi) waive or amend Section 8.14 or change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, “Material Domestic Subsidiary” or “Subsidiary”, without the written consent of each Lender, (vii) release any Guarantor (except as set forth in the Guaranty and Collateral Agreement), release all or substantially all of the Collateral (other than as provided in Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less than 80%, without the written consent of each Lender, or (viii) change any of the provisions of this Section 12.02(b) or the definitions of “Required Lenders” or “Majority Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or make any determination or grant any consent hereunder or any other Loan Documents, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any Issuing Bank or the Swingline Lender hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, such Issuing Bank or the Swingline Lender as the case may be.  Notwithstanding the foregoing, (A) any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked as such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the Lenders, (B) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver, or consent hereunder, except that the Commitment, Elected Commitment or Maximum Credit Amount of such Lender may not be increased or extended or the principal amount owed to such Lender reduced or forgiven without the consent of such Lender, except as provided in Section 2.07(d) and (C) the provisions of clause (B) may not be amended without the consent of each Lender (including any Defaulting 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 one counsel for the Administrative Agent and, if necessary, of one local counsel to the Lenders in each necessary jurisdiction retained by the Administrative Agent 

 

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and other outside consultants for the Administrative Agent, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental audits and surveys and appraisals, in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Administrative Agent as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and other charges incurred by the Administrative Agent in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein, (iii) all reasonable out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iv) upon the occurrence and during the continuance of an Event of Default, all out-of-pocket expenses incurred by any Agent, any Issuing Bank, the Swingline Lender or any Lender, including the reasonable fees, charges and disbursements of any counsel, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 12.03, or in connection with the Loans made or Letters of Credit issued hereunder, including, without limitation, all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit; provided, that to the extent that the costs and expenses referred to in this clause (iv) consist of fees, charges and disbursements of counsel, the Borrower shall be obligated to pay such fees, costs and expenses for only one counsel to Administrative Agent and for only on counsel acting for all Lenders (other than Administrative Agent) (absent a conflict of interest, in which case the Lenders may engage and be reimbursed for additional counsel to the affected Lenders similarly situated, taken as a whole.

 

(b)                                 THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, EACH ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY RESTRICTED SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS 

 

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OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY AN ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY 

 

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

 

(c)                                  To the extent that the Borrower fails to pay any amount required to be paid by it to the Agents, the Arranger, any Issuing Bank or the Swingline Lender under Section 12.03(a) or (b), but without affecting such payment obligations of the Borrower, each Lender severally agrees to pay to such Agents, Arranger, Issuing Bank, Swingline Lender, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent, Arranger, Issuing Bank or Swingline Lender in its capacity as such.

 

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

 

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

 

Section 12.04                     Assignments and Participations.

 

(a)                                 The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 12.04.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in Section 12.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

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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 assignees (other than to a natural person or to a Loan Party or any Affiliate of a Loan Party) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

 

(A)                               the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; and

 

(B)                               the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to an assignee that is a Lender immediately prior to giving effect to such assignment.

 

(ii)                                  Assignments shall be subject to the following additional conditions:

 

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

 

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

 

(C)                               the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

 

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

 

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

 

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Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c).

 

(iv)                              The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Maximum Credit Amount and Elected Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

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

 

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

 

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

 

(ii)                                  A Participant shall not be entitled to receive any greater payment under Section 5.01 or Section 5.03 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.03 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 5.03(e) as though it were a Lender.  Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant in such Lender’s Loans and the principal amounts (and stated interest) of each such Participant’s interest in such Lender’s Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of its Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in such Lender’s commitments, loans, letters of credit or its other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the Treasury regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in such Lender’s Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

(d)                                 Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank having jurisdiction over such Lender, and this Section 12.04 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

 

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upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.  The provisions of Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and Article XI shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement, any other Loan Document or any provision hereof or thereof.

 

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

 

Section 12.06                     Counterparts; Integration; Effectiveness.

 

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

 

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

 

(c)                                  Except as provided in Section 6.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed

 

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counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

 

Section 12.07                     Severability.  Any provision of this Agreement or any other Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

 

Section 12.08                     Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind, including, without limitations obligations under Hedging Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any Restricted Subsidiary against any of and all the obligations of the Borrower or any Restricted Subsidiary owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured; provided that notwithstanding anything to the contrary contained herein, the foregoing rights of setoff shall not be available to any Lender or any of its Affiliates with respect to deposits of Regency Units Proceeds held in the Regency Units Proceeds Account unless an Event of Default under Section 10.01(a), (b), (i) or (j) has occurred and is continuing.  The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.

 

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

 

(a)                                 THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.

 

(b)                                 ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE

 

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BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

 

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

 

(d)                                 EACH PARTY HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

 

Section 12.10                     Headings.  Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

 

Section 12.11                     Confidentiality.  Each of the Administrative Agent, the Issuing Banks and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan Document, (e) in connection with the exercise of any remedies hereunder or under any other

 

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Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 12.11, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Hedging Agreement relating to the Borrower and its obligations, (g) with the consent of the Borrower, or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower.  For the purposes of this Section 12.11, “Information” means all information received from the Borrower or any Restricted Subsidiary relating to the Borrower or any Restricted Subsidiary and their businesses, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower or a Restricted Subsidiary; provided that, in the case of information received from the Borrower or any Restricted Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section 12.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

Section 12.12                     Interest Rate Limitation.  It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it.  Accordingly, if the Transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Secured Obligations, it is agreed as follows:  (a) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Loans shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Secured Obligations (or, to the extent that the principal amount of the Secured Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (b) in the event that the maturity of the Loans is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Secured Obligations (or, to the extent that the principal amount of the Secured Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans until payment in full so that the rate or amount of interest on account of any Loans

 

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hereunder does not exceed the maximum amount allowed by such applicable law.  If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.12.

 

Section 12.13                     EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

 

Section 12.14                     Collateral Matters; Hedging Agreements; Treasury Management Agreements.  Notwithstanding anything to the contrary contained herein, the terms and provisions of this Agreement shall not apply to any Hedging Agreements or Treasury Management Agreements, except to the extent necessary for all Secured Hedging Agreements and Secured Treasury Management Agreements to be secured by the Security Instruments on a pari passu basis with other Indebtedness and for the proceeds from the Security Instruments to be applied as set forth in Section 10.02(c) hereof.  No Lender or Affiliate of a Lender shall have any voting rights under any Loan Document as a result of the existence of obligations owed to it under any such Secured Hedging Agreements or Secured Treasury Management Agreements.

 

Section 12.15                     No Third Party Beneficiaries.  This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans and the Issuing Banks to issue, amend, renew or extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person (including, without limitation, any Subsidiary of the Borrower, any obligor,

 

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contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent, any Issuing Bank or any Lender for any reason whatsoever.  There are no third party beneficiaries.

 

Section 12.16                     USA Patriot Act Notice.  Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “USA Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower and its Subsidiaries, which information includes the name and address of the Borrower and its Subsidiaries other information that will allow such Lender to identify the Borrower and its Subsidiaries in accordance with the USA Patriot Act.

 

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

 

Section 12.18                     No Fiduciary Duty.  Each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the “Lenders”), may have economic interests that conflict with those of the Loan Parties, their stockholders and/or their affiliates.  The Loan Parties acknowledge and agree that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Lenders, on the one hand, and the Loan Parties, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in favor of any Loan Party, its stockholders or its affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is currently advising or will advise any Loan Party, its stockholders or its Affiliates on other matters) or any other obligation to any Loan Party except the obligations expressly set forth in the Loan Documents and (y) each Lender is acting solely as principal and not as the agent or

 

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

 

Section 12.19                     Keepwell.  The Borrower hereby guarantees the payment and performance of all Secured Obligations of each Loan Party (other than the Borrower) and absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Loan Party (other than the Borrower) in order for such Loan Party to honor its obligations under the Guaranty and Collateral Agreement including obligations with respect to Hedging Agreements (provided, however, that the Borrower shall only be liable under this Section 12.19 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 12.19, or otherwise under this Agreement or any Loan Document, as it relates to such other Loan Parties, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations and undertakings of the Borrower under this Section 12.19 shall remain in full force and effect until the Secured Obligations have been indefeasibly paid and performed in full and all of the Lenders’ Commitments are terminated.  The Borrower intends this Section 12.19 to constitute, and this Section 12.19 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of, each Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

[SIGNATURES BEGIN NEXT PAGE]

 

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

 

	
BORROWER:
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy GP, L.P.
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy G&P, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
								

 

 

	
ADMINISTRATIVE   AGENT
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION,
    
	
and   LENDER
    	
as   Administrative Agent and Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

[OTHER SIGNATURE PAGES INTENTIONALLY OMITTED]

 

 

Annex I

 

	
NAME OF LENDER
    	
 
    	
APPLICABLE
   PERCENTAGE
    	
 
    	
ELECTED
   COMMITMENT
    	
 
    	
MAXIMUM CREDIT
   AMOUNT
    	
 
    
	
Wells Fargo Bank, N.A.
    	
 
    	
16.78125000
    	
%
    	
$
    	
53,700,000.00
    	
 
    	
$
    	
201,375,000.00
    	
 
    
	
Bank of America, N.A.
    	
 
    	
10.15625000
    	
%
    	
$
    	
32,500,000.00
    	
 
    	
$
    	
121,875,000.00
    	
 
    
	
The Royal Bank of Scotland plc
    	
 
    	
10.15625000
    	
%
    	
$
    	
32,500,000.00
    	
 
    	
$
    	
121,875,000.00
    	
 
    
	
ING Capital LLC 
    	
 
    	
8.59375000
    	
%
    	
$
    	
27,500,000.00
    	
 
    	
$
    	
103,125,000.00
    	
 
    
	
Comerica Bank 
    	
 
    	
7.81250000
    	
%
    	
$
    	
25,000,000.00
    	
 
    	
$
    	
93,750,000.00
    	
 
    
	
Royal Bank of Canada 
    	
 
    	
7.81250000
    	
%
    	
$
    	
25,000,000.00
    	
 
    	
$
    	
93,750,000.00
    	
 
    
	
Compass Bank
    	
 
    	
7.81250000
    	
%
    	
$
    	
25,000,000.00
    	
 
    	
$
    	
84,375,000.00
    	
 
    
	
Capital One, National Association
    	
 
    	
6.25000000
    	
%
    	
$
    	
20,000,000.00
    	
 
    	
$
    	
75,000,000.00
    	
 
    
	
Regions Bank
    	
 
    	
6.25000000
    	
%
    	
$
    	
20,000,000.00
    	
 
    	
$
    	
75,000,000.00
    	
 
    
	
Citibank, N.A.
    	
 
    	
6.25000000
    	
%
    	
$
    	
20,000,000.00
    	
 
    	
$
    	
75,000,000.00
    	
 
    
	
BMO Harris Bank N.A.
    	
 
    	
6.25000000
    	
%
    	
$
    	
20,000,000.00
    	
 
    	
$
    	
75,000,000.00
    	
 
    
	
Whitney Bank
    	
 
    	
5.62500000
    	
%
    	
$
    	
18,000,000.00
    	
 
    	
$
    	
67,500,000.00
    	
 
    
	
Goldman Sachs Lending Partners LLC
    	
 
    	
0.25000000
    	
%
    	
$
    	
800,000.00
    	
 
    	
$
    	
3,000,000.00
    	
 
    
	
TOTAL:  
    	
 
    	
100.000000000
    	
%
    	
$
    	
320,000,000.00
    	
 
    	
$
    	
1,200,000,000.00
    	
 
    

 

 

EXHIBIT A
 FORM OF NOTE

 

	
$[                ]
    	
[                    ],   20[    ]
    

 

FOR VALUE RECEIVED, Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Borrower”), hereby promises to pay to [                      ] (the “Lender”), at the principal office of Wells Fargo Bank, National Association (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, Type, 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 Amended and Restated Credit Agreement dated as of June 22, 2011 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 and not defined herein have the respective meanings assigned to them in the Credit Agreement.

 

This Note is issued pursuant to 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.

 

	
 
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
By:
    	
Eagle   Rock Energy GP, L.P., its general partner
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy G&P, LLC, its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

 

EXHIBIT B
 FORM OF BORROWING REQUEST

 

[                      ], 20[    ]

 

Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Borrower”), pursuant to Section 2.03 of the Amended and Restated Credit Agreement dated as of June 22, 2011 (together with all amendments, restatements, supplements or other modifications thereto, the “Credit Agreement”) among the Borrower, Wells Fargo Bank, National Association, as Administrative Agent, the other agents party thereto, and the 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:

 

1.              Aggregate amount of the requested Borrowing is $[                        ];

 

2.              Date of such Borrowing is [                                ], 201[    ];

 

3.              Requested Borrowing is to be [an ABR Borrowing] [a Eurodollar Borrowing];

 

4.              In the case of a Eurodollar Borrowing, the initial Interest Period applicable thereto is [                        ];

 

5.              Total Credit Exposures on the date hereof (without giving effect to the requested Borrowing) (i.e., outstanding principal amount of Loans, total LC Exposure and total Swingline Exposure) is $[                        ];

 

6.              Pro forma total Credit Exposures (giving effect to the requested Borrowing) is $[                        ]; and

 

7.              The Borrowing Base is $[                          ] and the Aggregate Elected Commitment Amount is $[                          ].

 

The undersigned certifies that he/she is the [                                ] of Eagle Rock Energy G&P, LLC, the general partner of Eagle Rock Energy GP, L.P., the general partner of the Borrower, and that as such he/she is authorized to execute this certificate on behalf of each such general partner and the Borrower.  The undersigned further certifies, represents and warrants on behalf of each such general partner and the Borrower that the conditions to lending specified in Section 6.02 of the Credit Agreement are satisfied as of the date hereof and that the Borrower is entitled to receive the requested Borrowing under the terms and conditions of the Credit Agreement.

 

[Signature page follows]

 

 

	
 
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
By:
    	
Eagle   Rock Energy GP, L.P., its general partner
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy G&P, LLC, its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

 

EXHIBIT C
 FORM OF INTEREST ELECTION REQUEST

 

[                      ], 201[    ]

 

Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Borrower”), pursuant to Section 2.05 of the Amended and Restated Credit Agreement dated as of June 22, 2011 (together with all amendments, restatements, supplements or other modifications thereto, the “Credit Agreement”) among the Borrower, Wells Fargo Bank, National Association, as Administrative Agent, the other agents party thereto, and the 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 makes an Interest Election Request as follows:

 

1.                                      The Borrowing to which this Interest Election Request applies is [                                ];(1)

 

[a].                         Eurodollar Loan Continuation/Conversion for Eurodollar Loan maturing on [                        ]:

 

[b].                         Aggregate amount to be continued as a Eurodollar Loan is $[                        ].

 

[c].                          In the case of a continued Eurodollar Loan, the length of the Interest Period is [                        ].

 

2.                                      Aggregate amount to be converted to ABR Loans is $[                        ].](2)

 

[3.                                  Conversion of outstanding ABR Loans to Eurodollar Loans:

 

(a)                                 Convert $[                        ] of the outstanding ABR Loans to a Eurodollar Loan on [                        ] with an Interest Period of [                        ].](3)

 

[4].                              The effective date of the election made pursuant to this Interest Election Request is [                                ], 201[    ].

 

The undersigned certifies that he/she is the [                              ] of Eagle Rock Energy G&P, LLC, the general partner of Eagle Rock Energy GP, L.P., the general partner of the Borrower, and that as such he/she is authorized to execute this certificate on behalf of each such general partner and the Borrower.  The undersigned further certifies, represents and warrants on behalf of each such general partner and the Borrower that the Borrower is entitled to receive the requested continuation or conversion under the terms and conditions of the Credit Agreement.

 

(1)    If different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing, Sections 1, 2 and 3 shall be completed (as applicable) with respect to each such portion.

(2)    Insert Section 2 for continuations or conversions of Eurodollar Loans.

(3)    Insert Section 3 for conversions of ABR Loans.

 

 

	
 
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
By:
    	
Eagle   Rock Energy GP, L.P., its general partner
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy G&P, LLC, its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

 

EXHIBIT D-1
 FORM OF
 COMPLIANCE CERTIFICATE (EFFECTIVE DATE)

 

[Intentionally Omitted]

 

 

EXHIBIT D-2
 FORM OF
 COMPLIANCE CERTIFICATE (ONGOING)

 

The undersigned hereby certifies, as of [                    ], 201[    ], that he/she is the [                    ](1) of Eagle Rock Energy G&P, LLC, the general partner of Eagle Rock Energy GP, L.P., the general partner of Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Borrower”), and that as such he/she is authorized to execute this certificate on behalf of each such general partner and the Borrower.  With reference to the Amended and Restated Credit Agreement dated as of June 22, 2011 (together with all amendments, restatements, supplements or other modifications thereto being the “Credit Agreement”) among the Borrower, Wells Fargo Bank, National Association, as Administrative Agent, the other agents party thereto, and the lenders (the “Lenders”) which are or become a party thereto, the undersigned represents and warrants as follows (each capitalized term used herein having the same meaning given to it in the Credit Agreement unless otherwise specified):

 

(a)                                 [Except as set forth below,] [N]o change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 7.04 of the Credit Agreement.

 

(b)                                 [Except as set forth in the financial statements attached hereto,] [N]o Default has occurred and is continuing.

 

(c)                                  Attached hereto are the detailed computations necessary to determine whether the Borrower is in compliance with Section 9.01 of the Credit Agreement as of the end of the [fiscal quarter][fiscal year] ending [                    ].(2)

 

[Signature page follows]

 

(1)  Signatory must be a Financial Officer.

(2)  Insert the most recent fiscal quarter or fiscal year for which financial statements are available.

 

 

EXECUTED AND DELIVERED as of the first date set forth above.

 

	
 
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
By:
    	
Eagle   Rock Energy GP, L.P., its general partner
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy G&P, LLC, its general partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
 
    

 

 

EXHIBIT E
 FORM OF GUARANTY AND COLLATERAL AGREEMENT

 

[attached]

 

 

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 Credit Agreement identified below (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 any letters of credit and 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](6)]
    
	
 
    	
 
    	
 
    
	
3.
    	
Borrower:
    	
Eagle   Rock Energy Partners, L.P.
    
	
 
    	
 
    	
 
    
	
4.
    	
Administrative   Agent: Wells Fargo Bank, National Association, as the administrative agent   under the Credit Agreement
    
	
 
    	
 
    	
 
    
	
5.
    	
Credit   Agreement:
    	
The   Amended and Restated Credit Agreement dated as of June 22, 2011 among   Eagle Rock Energy Partners, L.P., the Lenders party thereto, Wells Fargo   Bank, National Association, as 
    

 

(6) Select as applicable.

 

 

	
 
    	
 
    	
Administrative   Agent and the other agents party thereto (as the same may be amended,   restated, supplemented or modified from time to time)
    
	
6.
    	
Assigned   Interest:
    	
 
    

 

	
Maximum Credit
   Amount Assigned
    	
 
    	
Elected Commitment
   Assigned
    	
 
    	
Percentage Assigned of
   Aggregate Maximum Credit
   Amount and Aggregate
   Elected Commitment
   Amount
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

Effective Date:                                    , 201     [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:
    

 

 

	
[Consented to and](7) Accepted:
    	
 
    
	
 
    	
 
    
	
WELLS FARGO BANK, NATIONAL ASSOCIATION, as
    	
 
    
	
Administrative Agent
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
[Consented to:](8)
    	
 
    
	
 
    	
 
    	
 
    
	
[NAME OF RELEVANT PARTY]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

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

(8)  To be added only if the consent of the Borrower and/or other parties (i.e. Issuing Bank) 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 has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant thereto, and such other documents and information as it has deemed appropriate 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 (v) 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 ELECTED COMMITMENT INCREASE CERTIFICATE

 

[               ], 20[    ]

 

To:                             Wells Fargo Bank, National Association,

as Administrative Agent

 

The Borrower, the Administrative Agent and certain Lenders and other agents have heretofore entered into an Amended and Restated Credit Agreement, dated as of June 22, 2011 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).  Capitalized terms not otherwise defined herein shall have the meaning given to such terms in the Credit Agreement.

 

This Elected Commitment Increase Certificate is being delivered pursuant to Section 2.07(e) of the Credit Agreement.

 

Please be advised that the undersigned Lender has agreed (a) to increase its Elected Commitment under the Credit Agreement effective [            ], 20[    ] from $[               ] to $[               ] and (b) that it shall continue to be a party in all respects to the Credit Agreement and the other Loan Documents.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Eagle   Rock Energy GP, L.P., its general partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy G&P, LLC, its general partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
 
    

 

 

	
Accepted and Agreed:
    	
 
    
	
 
    	
 
    
	
WELLS FARGO BANK, NATIONAL ASSOCIATION, as
    	
 
    
	
Administrative Agent
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
[NAME OF INCREASING LENDER]
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

EXHIBIT H

FORM OF ADDITIONAL LENDER CERTIFICATE

 

[               ], 20[    ]

 

To:                             Wells Fargo Bank, National Association,

as Administrative Agent

 

The Borrower, the Administrative Agent and certain Lenders and other agents have heretofore entered into an Amended and Restated Credit Agreement, dated as of June 22, 2011 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).  Capitalized terms not otherwise defined herein shall have the meaning given to such terms in the Credit Agreement.

 

This Additional Lender Certificate is being delivered pursuant to Section 2.07(e) of the Credit Agreement.

 

Please be advised that the undersigned Additional Lender has agreed (a) to become a Lender under the Credit Agreement effective [               ], 20[    ] with a Maximum Aggregate Credit Amount of $[               ] and an Elected Commitment of $[            ] and (b) that it shall be a party in all respects to the Credit Agreement and the other Loan Documents.

 

This Additional Lender Certificate is being delivered to the Administrative Agent together with (i) if the Additional Lender is a Foreign Lender, any documentation required to be delivered by such Additional Lender pursuant to Section 5.03(e) of the Credit Agreement, duly completed and executed by the Additional Lender, and (ii) an Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by the Additional Lender.  [The Borrower shall pay the fee payable to the Administrative Agent pursuant to Section 2.07(e)(ii)(G) of the Credit Agreement.]

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
EAGLE   ROCK ENERGY PARTNERS, L.P.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Eagle   Rock Energy GP, L.P., its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Eagle   Rock Energy G&P, LLC, its general partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
 
    

 

 

	
Accepted and Agreed:
    	
 
    
	
 
    	
 
    	
 
    
	
WELLS FARGO BANK, NATIONAL ASSOCIATION, as
    	
 
    
	
Administrative Agent
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
[NAME OF ADDITIONAL LENDER]
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

SCHEDULE 1.01(a)
 EXISTING LETTERS OF CREDIT

 

	
Vendor
    	
 
    	
Amount
    	
 
    	
Effective Date
    	
 
    	
Expiration Date
    	
 
    	
Business Segment
    	
 
    
	
Northern Natural Gas
    	
 
    	
$
    	
150,000.00
    	
 
    	
2/2/2011
    	
 
    	
2/1/2011
    	
 
    	
EROC Gas Gathering
    	
 
    
	
Quantum
    	
 
    	
$
    	
541,200.00
    	
 
    	
12/1/2010
    	
 
    	
8/1/2011
    	
 
    	
EROC Marketing
    	
 
    
	
DAMSCO
    	
 
    	
$
    	
2,650,000.00
    	
 
    	
1/3/2011
    	
 
    	
8/1/2011
    	
 
    	
EROC Marketing
    	
 
    
	
 
    	
 
    	
$
    	
3,341,200.00
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

1

 

SCHEDULE 7.05

LITIGATION

 

None.

 

1

 

SCHEDULE 7.06

ENVIRONMENTAL MATTERS

 

None.

 

1

 

SCHEDULE 7.14
 SUBSIDIARIES AS OF THE FIFTH AMENDMENT EFFECTIVE DATE

 

	
Entity Name
    	
 
    	
Jurisdiction of
   Incorporation
    	
 
    	
Organizational
   Identification
   Number
    	
 
    	
Principal Place
   of Business
    	
 
    	
Restricted/
   Unrestricted
    
	
Eagle   Rock Energy G&P Holding, Inc.
    	
 
    	
Delaware
    	
 
    	
4853183
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Energy G&P, LLC
    	
 
    	
Delaware
    	
 
    	
4164953
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Energy GP, L.P.
    	
 
    	
Delaware
    	
 
    	
4164959
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Energy Finance Corp.
    	
 
    	
Delaware
    	
 
    	
4674296
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Energy Acquisition Co. II, Inc.
    	
 
    	
Delaware
    	
 
    	
4537128
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Upstream Development Company II, Inc.
    	
 
    	
Delaware
    	
 
    	
3843535
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Acquisition Partnership II, L.P.
    	
 
    	
Delaware
    	
 
    	
4541467
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Energy Acquisition Co., Inc.
    	
 
    	
Delaware
    	
 
    	
4393164
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Upstream Development Company, Inc.
    	
 
    	
Delaware
    	
 
    	
3779972
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Acquisition Partnership, L.P.
    	
 
    	
Delaware
    	
 
    	
4404235
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
EROC   Production, LLC
    	
 
    	
Delaware
    	
 
    	
4341388
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Upstream Development II, L.P.
    	
 
    	
Texas
    	
 
    	
800585369
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Escambia   Operating Co. LLC
    	
 
    	
Delaware
    	
 
    	
4164275
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Escambia   Asset Co. LLC
    	
 
    	
Delaware
    	
 
    	
4154040
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Mid-Continent Holding, LLC
    	
 
    	
Delaware
    	
 
    	
4171381
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Mid-Continent Operating, LLC
    	
 
    	
Delaware
    	
 
    	
4171383
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, 
    	
 
    	
Restricted
    

 

1

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Texas   77002
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eagle   Rock Mid-Continent Asset, LLC
    	
 
    	
Delaware
    	
 
    	
4171382
    	
 
    	
1415   Louisiana Street, Suite 2700, Houston, Texas 77002
    	
 
    	
Restricted
    

 

2

 

SCHEDULE 7.18

GAS IMBALANCES

 

None.

 

1

 

SCHEDULE 7.19

MARKETING CONTRACTS

 

None.

 

1

 

SCHEDULE 7.21

HEDGING AGREEMENTS

 

 

1

 

SCHEDULE 9.02
 EXISTING INDEBTEDNESS

 

None.

 

1

 

SCHEDULE 9.03

EXISTING LIENS

 

None.

 

1

 

SCHEDULE 9.05

EXISTING INVESTMENTS

 

None.

 

1

 

SCHEDULE 9.14

CERTAIN SHAREHOLDER AND AFFILIATE TRANSACTIONS

 

Any transactions with Affiliates of the Borrower disclosed in public filings prior to the date hereof.

 

1EX. 10.1 - Employment Agreement_S.Stephens

                                                                                                                                    Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of October 14, 2014, is made by and between Associated Materials LLC, a Delaware limited liability company (the “Company”), and Scott Stephens (“Executive”).
WHEREAS, the Company desires to employ Executive, and Executive desires to accept such employment, on the terms and subject to the conditions set forth in this Agreement.  
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Agreement hereby agree as follows:
1.Employment.  On the terms and subject to the conditions set forth herein, the Company hereby employs Executive as the Company’s Executive Vice President and Chief Financial Officer and Executive accepts such employment, for the Employment Term (as defined in Section 3).  During the Employment Term, Executive shall report to the Chief Executive Officer of the Company, performing such duties as shall be reasonably required of an executive vice president and chief financial officer of a corporation of a similar size and nature to the Company, and shall have such other powers and perform such other duties as may from time to time be assigned to him by the Chief Executive Officer of the Company and the Board of Directors of Associated Material Group, Inc., a Delaware corporation (“Parent”).  To the extent requested by the Company’s Chief Executive Officer or the Board of Directors of Parent (the “Board”), Executive shall also serve on any committees of the Board and/or as a director, officer or employee of Parent or any other person or entity which, from time to time, is a direct or indirect subsidiary of Parent (Parent and each such subsidiary, person or entity, other than the Company, are hereinafter referred to collectively as the “Affiliates,” and individually as an “Affiliate”). Executive’s service as a director of the Company or as a director, officer or employee of any Affiliate shall be without additional compensation.
2.Performance.  Executive will serve the Company faithfully and to the best of his ability and will devote his full business time, energy, experience and talents to the business of the Company and the Affiliates; provided, that it shall not be a violation of this Agreement for Executive to manage his personal investments and business affairs, or to engage in or serve such civic, community, charitable, educational, or religious organizations as he may reasonably select so long as such service does not interfere with Executive’s performance of his duties hereunder. 
3.Employment Term.  Subject to earlier termination pursuant to Section 6, Executive’s term of employment hereunder shall commence on October 14, 2014 (the “Commencement Date”), and continue through the date which is three (3) years following the Commencement Date; provided, that beginning on the third anniversary of the Commencement Date, and on each subsequent anniversary of the Commencement Date, such term shall be automatically extended by an additional one year beyond the end of the then-current term, unless, at least ninety (90) days before such third anniversary of the Commencement Date, or ninety (90) days before any such subsequent anniversary of the Commencement Date, the Board gives written notice to Executive that the Company does not desire to extend the term of this Agreement, in which case, the term of employment hereunder shall terminate as of the third anniversary of the Commencement Date or the end of the then-current term, as applicable (the term of employment hereunder, including any extensions, in accordance with this Section 3, shall be referred to herein as the “Employment Term”).
4.Compensation and Benefits. 
(a)Salary.  As compensation for his services hereunder and in consideration of Executive’s other agreements hereunder, during the Employment Term, the Company shall pay Executive a base salary, payable in equal installments in accordance with the Company’s payroll procedures, at an 

annual rate of $425,000 (the “Base Salary”), subject to annual review by the Board (or its compensation committee) which may increase, but not decrease, Executive’s Base Salary. 

(b)Annual Incentive Bonus.  Commencing on the Commencement Date, Executive shall be entitled to participate in an annual incentive bonus arrangement established by the Company on terms and conditions substantially as set forth in Exhibit A hereto.  Any annual incentive bonus to which Executive is entitled under this Agreement for any fiscal year shall be paid in a cash lump-sum within thirty (30) days following the close of books of the Company and completion of the Company’s annual audit by its external accountants for such fiscal year but in any event shall not be paid later than March 15th of the fiscal year immediately following the fiscal year to which the bonus relates.  

(c)Signing Bonus.  The Company shall pay Executive a signing bonus of $225,000 on the first payroll date following the Commencement Date.  If Executive’s employment is terminated due to Executive’s resignation for any reason or by the Company for Cause (as defined in Section 6) prior to December 31, 2015, Executive will promptly repay such signing bonus to the Company. 

(d)Retirement, Medical, Dental and Other Benefits.  During the Employment Term, Executive shall, in accordance with the terms and conditions of the applicable plan documents and all applicable laws, be eligible to participate in the various retirement, medical, dental and other employee benefit plans made available by the Company, from time to time, for its executives. 

(e)Vacation; Sick Leave.  During the Employment Term, Executive shall be entitled to not less than four (4) weeks of vacation during each calendar year and sick leave in accordance with the Company’s policies and practices with respect to its executive officers. 

(f)Business Expenses.  The Company shall reimburse or advance payment to Executive for all reasonable expenses actually incurred by him in connection with the performance of his duties hereunder in accordance with policies established by the Company from time to time and subject to receipt by the Company of appropriate documentation. 

(g)Living Expenses.  The Company shall pay Executive a monthly stipend of $4,000 to cover monthly living expenses and shall reimburse Executive for airfare and other transportation expenses incurred in commuting from his residence in Illinois to the Company’s headquarters in Northern Ohio for a period of nine (9) months beginning on the Commencement Date.  In the event that Executive decides to permanently relocate to Northern Ohio at any time during the Employment Term, the Company shall extend to Executive the Company’s then applicable relocation policy; provided, that the monthly stipend of $4,000 shall terminate upon the earlier of (i) Executive’s relocation or (ii) the 9-month anniversary of the Commencement Date.

5.Covenants of Executive.  Executive acknowledges that in the course of his employment with the Company he will become familiar with the Company’s and its Affiliates’ (collectively, the “Company Group”) trade secrets and with other confidential information concerning the Company Group, and that his services are of special, unique and extraordinary value to the Company Group. Therefore, the Company and Executive mutually agree that it is in the interest of both parties for Executive to enter into the restrictive covenants set forth in this Section 5 and that such restrictions and covenants are reasonable given the nature of Executive’s duties and the nature of the Company Group’s business. 

(a)Noncompetition.  During the Employment Term and for the two (2) year period following termination of the Employment Term (the “Restricted Period”), Executive shall not, within any jurisdiction or marketing area in which the Company Group is doing business (or has made specific plans to do business in the future and as to which Executive was aware of such planning at or prior to the time Executive’s employment is terminated), directly or indirectly, own, manage, operate, control, be employed by or participate in the ownership, management, operation or control of, or be connected in any 

manner with, any Business (as hereinafter defined); provided, that Executive’s ownership of securities of two percent (2%) or less of any class of securities of a public company shall not, by itself, be considered to be competition with the Company Group. For purposes of this Agreement, “Business” shall mean the manufacturing, production, distribution or sale of exterior residential building products, including, without limitation, vinyl siding, windows, fencing, decking, railings and garage doors, or any other business of a type and character engaged in by the Company Group during the Employment Term (including, without limitation, any business in which the Company Group has specific plans to conduct in the future and as to which Executive was aware of such planning at or prior to the time Executive’s employment is terminated).  

(b)Nonsolicitation.  During the Employment Term and the Restricted Period, Executive shall not, directly or indirectly, (i) hire or employ, solicit for employment or otherwise contract for the services of any individual who is or was an employee or consultant of the Company Group; (ii) otherwise induce or attempt to induce any employee or consultant of the Company Group to leave the employ or service of the Company Group, or in any way interfere with the relationship between the Company Group and any employee or consultant respectively thereof; or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company Group to cease doing business with the Company Group, or interfere in any way with the relationship between any such customer, supplier, licensee or business relation and the Company Group. 

(c)Nondisclosure; Inventions.  For the Employment Term and at all times thereafter, (i) Executive shall not divulge, transmit or otherwise disclose (except as legally compelled by court order, and then only to the extent required, after prompt notice to the Board of any such order), directly or indirectly, other than in the regular and proper course of business of the Company Group, any customer lists, trade secrets or other confidential knowledge or information with respect to the operations or finances of the Company Group or with respect to confidential or secret processes, services, techniques, customers or plans with respect to the Company Group, including, without limitation, any know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals concerning the past, current or future business, activities and operations of the Company Group (all of the foregoing collectively hereinafter referred to as “Confidential Information”), and (ii) Executive will not use, directly or indirectly, any Confidential Information for the benefit of anyone other than the Company Group; provided, that Executive has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the general public other than through disclosure by Executive. All Confidential Information, new processes, techniques, know-how, methods, inventions, plans, products, patents and devices developed, made or invented by Executive, alone or with others, while an employee of the Company which are related to the business of the Company Group shall be and become the sole property of the Company, unless released in writing by the Board, and Executive hereby assigns any and all rights therein or thereto to the Company. 

(d)Nondisparagement.  During the Employment Term and at all times thereafter, Executive shall not take any action to disparage or criticize the Company Group or their respective employees, directors, owners or customers or to engage in any other action that injures or hinders the business relationships of the Company Group. Nothing contained in this Section 5(d) shall preclude Executive from enforcing his rights under this Agreement. 

(e)Return of Company Property.  All Confidential Information, files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company Group, whether prepared by Executive or otherwise coming into his possession in the course of the performance of his services under this Agreement, shall be the exclusive property of the Company and shall be delivered to the Company, and 

not retained by Executive (including, without limitations, any copies thereof), promptly upon request by the Company and, in any event, promptly upon termination of the Employment Term. 

(f)Enforcement.  Executive acknowledges that a breach of his covenants contained in this Section 5 may cause irreparable damage to the Company Group, the exact amount of which would be difficult to ascertain, and that the remedies at law for any such breach or threatened breach would be inadequate. Accordingly, Executive agrees that if he breaches or threatens to breach any of the covenants contained in this Section 5, in addition to any other remedy which may be available at law or in equity, the Company Group shall be entitled to specific performance and injunctive relief to prevent the breach or any threatened breach thereof without bond or other security or a showing that monetary damages will not provide an adequate remedy. 

(g)Scope of Covenants.  The Company and Executive further acknowledge that the time, scope, geographic area and other provisions of this Section 5 have been specifically negotiated by sophisticated commercial parties and agree that all such provisions are reasonable under the circumstances of the activities contemplated by this Agreement. In the event that the agreements in this Section 5 shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, they shall be interpreted to extend only over the maximum period of time for which they may be enforceable and/or over the maximum geographical area as to which they may be enforceable and/or to the maximum extent in all other respects as to which they may be enforceable, all as determined by such court in such action.

6.Termination.  The employment of Executive hereunder shall automatically terminate at the end of the Employment Term. The employment of Executive hereunder and the Employment Term may also be terminated at any time by the Company with or without Cause. For purposes of this Agreement, “Cause” shall mean: (i) embezzlement, theft or misappropriation by Executive of any property of the Company Group; (ii) any breach by Executive of Executive’s covenants under Section 5; (iii) any breach by Executive of any other material provision of this Agreement which breach is not cured, to the extent susceptible to cure, within thirty (30) days after the Company has given written notice to Executive describing such breach; (iv) willful failure by Executive to perform the duties of his employment hereunder which continues for a period of fourteen (14) days following written notice thereof by the Company to Executive; (v) the conviction of, or a plea of nolo contendere (or a similar plea) to, any criminal offense that is a felony or involves fraud, or any other criminal offense punishable by imprisonment of at least one year or materially injurious to the business or reputation of the Company Group involving theft, dishonesty, misrepresentation or moral turpitude; (vi) gross negligence or willful misconduct on the part of Executive in the performance of his duties as an employee, officer or director of the Company Group; (vii) Executive’s breach of his fiduciary obligations to the Company Group; (viii) Executive’s commission of intentional, wrongful damage to property of the Company Group; (ix) any chemical dependence of Executive which adversely affects the performance of his duties and responsibilities to the Company Group; or (x) Executive’s violation of the Company Group’s code of ethics, code of business conduct or similar policies applicable to Executive. The existence or non-existence of Cause shall be determined in good faith by the Board. The employment of Executive may also be terminated at any time by Executive by notice of resignation delivered to the Company not less than ninety (90) days prior to the effective date of such resignation. 

7.Severance for Terminations.  Subject to Section 8 and to Executive’s continued compliance with the covenants set forth in Section 5, if Executive’s employment hereunder is terminated during the Employment Term by the Company or is terminated due to expiration of the Employment Term following notice by the Company not to extend the Employment Term in accordance with Section 3, in each case other than (x) for Cause, (y) due to disability (as determined in the good faith discretion of the Board) or (z) death, Executive shall be entitled to receive as severance: (i) an amount equal to Executive’s Base Salary pursuant to Section 4(a) (at the rate in effect immediately prior to the Termination Date), which 

amount shall be payable, commencing no earlier than the sixty-first day following such termination, in twelve (12) equal monthly installments (other than the first such installment, which shall include all amounts that would otherwise have been paid to Executive if payment had commenced immediately following such termination of employment) in accordance with the Company’s payroll procedures over the 12-month period following the date of Executive’s termination (such 12-month period, the “Severance Period”); (ii) continued medical and dental benefits described in Section 4(c) for the Severance Period, at the same rate of employee and Company shared costs of such coverage as in effect from time to time for active employees of the Company; and (iii) a pro rata portion (based on the number of days Executive was employed by the Company during the fiscal year of termination) of any annual incentive bonus otherwise payable in accordance with Section 4(b) for the year of termination of Executive’s employment, payable no earlier than the date on which such bonus, if any, would have been paid under the applicable plan or policy of the Company absent such termination of employment, but no later than March 15th of the fiscal year immediately following the fiscal year of such termination. With respect to any such continued medical and dental benefits described in clause (ii) of the first sentence of this Section 7 for which Executive is eligible, (I) if the Company cannot continue such benefits without adverse tax consequences to Executive or the Company or for any other reason, the Company shall pay Executive for the cost of such benefits; (II) such benefits shall be discontinued in the event Executive becomes eligible for similar benefits from a successor employer (and Executive’s eligibility for any such benefits shall be reported by Executive to the Company); and (III) Executive’s period of “continuation coverage” for purposes of Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), shall be deemed to commence on the date of Executive’s termination of employment. 

8.Termination of Compensation and Benefits; Execution of Release; Coordination of Provisions.  If Executive’s employment terminates otherwise than in a termination entitling him to severance pay and benefits pursuant to Section 7, Executive shall not be entitled to any severance, termination pay or similar compensation or benefits, provided, that Executive shall be entitled to any benefits then due or accrued in accordance with the applicable employee benefit plans of the Company or applicable law, including “continuation coverage” under the Company’s group health plans for purposes of Section 4980B of the Code.  As a condition of receiving any severance compensation for which Executive otherwise qualifies under Section 7, Executive agrees to execute within sixty (60) days following the date of Executive’s termination of employment a general release in favor of the Company in substantially the form set forth hereto as Exhibit B, such release to be delivered, and to have become fully irrevocable, on or before the end of such 60-day period.  It is expressly agreed and understood that if such a release has not been executed and delivered and become fully irrevocable by the end of such 60-day period, no amounts or benefits under Section 7 shall be or become payable (except that any continued medical, dental or life insurance benefits may be provided during such 60-day period pursuant to Section 7, as the case may be, but will cease to be provided on the last day of such period).  Executive acknowledges and agrees that, except as specifically described in Section 7, all of Executive’s rights to any compensation, benefits (other than Base Salary earned through the date of termination of employment and any benefits due or accrued prior to termination of employment in accordance with the applicable employee benefit plans of the Company or applicable law), bonuses or severance from the Company Group after termination of the Employment Term shall cease upon such termination.

9.Limitation on Payments and Benefits.  Notwithstanding any provision of this Agreement to the contrary, no amount or benefit shall be paid or provided under this Agreement or otherwise to an extent or in a manner that would result in payments or benefits (or other compensation) not being fully deductible by the Company Group for federal income tax purposes because of Section 280G of the Code, or any successor provision thereto (or that would result in Executive being subject to the excise tax imposed by Section 4999 of the Code, or any successor provision thereto).  The determination of whether any such payments or benefits to be provided under this Agreement or otherwise would not be so deductible (or whether Executive would be subject to such excise tax) shall be made at the expense of the Company, if requested by either Executive or the Company, by a firm of independent accountants or a law firm selected by the Company and reasonably acceptable to Executive. In the event that any payment or 

benefit intended to be provided under this Agreement or otherwise would constitute a “parachute payment,” as defined in Section 280G of the Code, the Company shall designate the payments and/or benefits (beginning with cash payments) to be reduced or modified so that the Company Group is not denied any federal income tax deductions for any such parachute payment because of Section 280G of the Code (or so that Executive is not subject to the excise tax imposed by Section 4999 of the Code). 

10.Notice.  Any notices required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered or when mailed, certified or registered mail, or sent by reputable overnight courier, postage prepaid, to the addresses set forth as follows: 
If to the Company:

Associated Materials LLC
3773 State Road
Cuyahoga Falls, OH 44223
Attention: Corporate Secretary

With copies, which shall not constitute notice, to:

Associated Materials Group, Inc.
c/o Hellman & Friedman LLC
One Maritime Plaza, 12th Floor
San Francisco, CA 94111
Attention: Erik Ragatz and Arrie Park, Esq.

-and-

Simpson Thacher & Bartlett LLP
450 Lexington Avenue
New York, NY 10017
Attention:     David Rubinsky, Esq.

If to Executive, to such address as shall most currently appear on the records of the Company.
or to such other address as shall be furnished in writing by either party to the other party; provided that such notice or change in address shall be effective only when actually received by the other party. 
11.Indemnification.  Subject to applicable law, Executive will be provided indemnification to the maximum extent permitted by the Company’s Articles of Incorporation and/or Bylaws, including directors’ and officers’ insurance policies, with such indemnification to be on terms determined by the Board or any of its committees, but on terms no less favorable than provided to any other Company executive officer or director and subject to the terms of any separate written indemnification agreement.

12.General. 

(a)GOVERNING LAW; CONSENT TO JURISDICTION, JURY TRIAL WAIVER.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED.  IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S 

CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.  ANY ACTION TO ENFORCE THIS AGREEMENT AND/OR THE EXHIBITS HERETO MUST BE BROUGHT IN, AND THE PARTIES HEREBY CONSENT TO THE JURISDICTION OF, A COURT SITUATED IN OHIO.  EACH PARTY HEREBY WAIVES THE RIGHTS TO CLAIM THAT ANY SUCH COURT IS AN INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.  EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY. 

(b)Construction and Severability.  If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and the parties undertake to implement all efforts which are necessary, desirable and sufficient to amend, supplement or substitute all and any such invalid, illegal or unenforceable provisions with enforceable and valid provisions which would produce as nearly as may be possible the result previously intended by the parties without renegotiation of any material terms and conditions stipulated herein. 

(c)Assignability.  Executive may not assign his interest in or delegate his duties under this Agreement. This Agreement is for the employment of Executive, personally, and the services to be rendered by him under this Agreement must be rendered by him and no other person. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the Company and its successors and assigns. Without limiting the foregoing and notwithstanding anything else in this Agreement to the contrary, the Company may assign this Agreement to, and all rights hereunder shall inure to the benefit of, any subsidiary of the Company or any person, firm or corporation resulting from the reorganization of the Company or succeeding to the business or assets of the Company by purchase, merger, consolidation or otherwise. 

(d)Compliance with IRC Section 409A.  Notwithstanding anything herein to the contrary, (i) if at the time of Executive’s termination of employment with the Company, Executive is a “specified employee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive) to the extent necessary to comply with the requirements of Section 409A of the Code until the first business day that is more than six (6) months following Executive’s termination of employment with the Company (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax.  In the event that payments under this Agreement are deferred pursuant to this Section 12(d) in order to prevent any accelerated tax or additional tax under Section 409A of the Code, then such payments shall be paid at the time specified under this Section 12(d) without any interest thereon.  The Company shall consult with Executive in good faith regarding the implementation of this Section 12(d); provided, that neither the Company nor any of its Affiliates, employees or representatives shall have any liability to Executive with respect to the imposition of any early or additional tax under Section 409A of the Code.  Notwithstanding anything to the contrary herein, to the extent required by Section 409A of the Code, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Section 409A of the Code and, for purposes of 

any such provision of this Agreement, references to a “resignation,” “termination,” “termination of employment” or like terms shall mean “Separation from Service.”  For purposes of Section 409A of the Code, each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A of the Code.  Notwithstanding anything to the contrary herein, except to the extent any expense, reimbursement or in-kind benefit provided pursuant to this Agreement does not constitute a “deferral of compensation” within the meaning of Section 409A of the Code, (x) the amount of expenses eligible for reimbursement or in-kind benefits provided to Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to Executive in any other calendar year, (y) the reimbursements for expenses for which Executive is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred and (z) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.

(e)Warranty by Executive.  Executive represents and warrants to the Company that Executive is not subject to any contract, agreement, judgment, order or decree of any kind, or any restrictive agreement of any character, that restricts Executive’s ability to perform his obligations under this Agreement or that would be breached by Executive upon his performance of his duties pursuant to this Agreement, and Executive shall indemnify and hold harmless the Company Group from and against any and all liabilities, losses, claims, obligations or the like arising from or in connection with any breach of, or inaccuracy in, Executive’s representations and warranties contained in this sentence.  

(f)Compliance with Rules and Policies.  Executive shall perform all services in accordance with the lawful policies, procedures and rules established by the Company and the Board. In addition, Executive shall comply with all laws, rules and regulations that are generally applicable to the Company or its subsidiaries and their respective employees, directors and officers. 

(g)Withholding Taxes.  All amounts payable hereunder shall be subject to the withholding of all applicable taxes and deductions required by any applicable law. 

(h)Entire Agreement; Modification. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, supersedes all prior agreements and undertakings, both written and oral, and may not be modified or amended in any way except in writing by the parties hereto. 

(i)Duration.  Notwithstanding the Employment Term hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement. 

(j)Termination On or After Expiration of the Employment Term. Unless the Company and Executive otherwise agree in writing, any continuation of Executive’s employment with the Company Group beyond the expiration of the Employment Term shall be deemed an employment “at will” and shall not be deemed to extend any of the provisions of this Agreement (other than as provided in Section 12(k) below), and Executive’s employment may thereafter be terminated “at will” by Executive or the Company.
(k)Survival.  The covenants set forth in Section 5 and the parties’ respective rights and obligations under Section 7 shall survive and shall continue to be binding upon Executive and the Company, as the case may be, in accordance with their terms, notwithstanding the termination or expiration of this Agreement or the termination of Executive’s employment for any reason whatsoever. 

(l)Waiver.  No waiver by either party hereto of any of the requirements imposed by this Agreement on, or any breach of any condition or provision of this Agreement to be performed by, the other party shall be deemed a waiver of a similar or dissimilar requirement, provision or condition of this Agreement at the same or any prior or subsequent time. Any such waiver shall be express and in writing, and there shall be no waiver by conduct. Pursuit by either party of any available remedy, either in law or 

equity, or any action of any kind, does not constitute waiver of any other remedy or action. Such remedies are cumulative and not exclusive. 

(m)Counterparts.  This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument. 

(n)Section References.  The words Section and paragraph herein shall refer to provisions of this Agreement unless expressly indicated otherwise. 

[Signature page follows]

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto
executed this Agreement as of the day and year first written above.

ASSOCIATED MATERIALS LLC

/s/ James Kenyon                               
By: James Kenyon
Its:  SVP of Human Resources

EXECUTIVE

/s/ Scott Stephens                              
Scott Stephens

EXHIBIT A

Annual Incentive Bonus

Executive is eligible to receive an annual bonus under the Company’s Senior Executive Incentive Compensation Program, with a target bonus equal to 75% of Base Salary (the “Target Bonus”) and a maximum bonus of 300% of the Target Bonus.  With respect to each fiscal year commencing with the 2015 fiscal year, the amount of annual bonus payable will be based upon the achievement of both (i) an Adjusted EBITDA goal (the “EBITDA Bonus”) and (ii) other operating metrics (the “OM Bonus”).  The EBITDA Bonus will constitute at least 50% of the Target Bonus.  For the OM Bonus, the applicable operating metrics for each fiscal year, as well as the bonus ranges for these metrics, will be established by the compensation committee of the Board within the first ninety (90) days of each such fiscal year.  For the 2014 fiscal year, Executive shall receive a guaranteed bonus equal to the Target Bonus pro-rated based on the actual number of days Executive is employed by the Company in 2014, subject to his continued employment on the date such bonus is paid.   
For purposes of Executive’s annual incentive bonus and the computation thereof: 
		
	1.
	Base Salary shall mean the annual rate of Base Salary in effect under this Agreement as of the last day of the fiscal year to which the bonus relates.

		
	2.
	“Adjusted EBITDA” means the “EBITDA” of the Company for the applicable fiscal year, as such term is as defined in the Indenture, except that clause (1)(i) of such definition shall not apply for purposes of this Agreement. “Indenture” means the Indenture dated as of October 13, 2010 among AMH Acquisition Corp., AMH New Finance, Inc. (formerly known as Carey New Finance, Inc.), Associated Materials, LLC, Wells Fargo Bank, National Association and the other parties thereto, as amended from time to time.\

		
	3.
	Adjusted EBITDA targets will be adjusted by the Board (or its compensation committee) in good faith to reflect each acquisition or disposition by the Company or any of its Affiliates subsequent to the Commencement Date of any business, operation, entity (including the acquisition of only a portion of an entity whose results will be consolidated by the Company in accordance with generally accepted accounting principles), division of any entity or any assets outside the ordinary course of business.  If the Company or any Affiliate makes such an acquisition or disposition in a given fiscal year, the Adjusted EBITDA target for such fiscal year and subsequent fiscal years, if applicable, shall be proportionately adjusted, fairly and appropriately, and only to the extent deemed necessary by the Board (or its compensation committee) (after consultation with the Company’s accountants), in the exercise of its good faith judgment, in order to accurately reflect the direct and measurable effect such acquisition or disposition has or is reasonably expected to have on such Adjusted EBITDA target(s).  In addition, to the extent applicable, Adjusted EBITDA target(s) will be adjusted by the Board (or its compensation committee) (after consultation with the Company’s accountants) in good faith to reflect any changes in generally accepted accounting principles promulgated by accounting standard setters in order to accurately reflect the effect of such changes on such Adjusted EBITDA target(s).  The intent of such adjustments is to keep the probability of achieving the Adjusted EBITDA targets the same as if the event triggering such adjustment had not occurred.  The Board’s (or its compensation committee’s) determination of such necessary adjustment(s) shall be made within 90 days following the completion or closing of such event, as applicable, and shall be based on the Company’s accounting as set forth in its books and records and on the Company’s financial plan pursuant to which the Adjusted EBITDA targets were originally established.  Any such adjustment(s) made in good faith shall be final and binding on all persons.

EXHIBIT B

GENERAL RELEASE

THIS AGREEMENT AND RELEASE, dated as of _______, 20__ (this “Agreement”), is entered into by and between Scott Stephens (“Executive”) and Associated Materials LLC (the “Company”).
WHEREAS, Executive entered into an employment agreement by and between Executive and the Company, dated as of October 14, 2014 (the “Employment Agreement”); and
WHEREAS, Executive’s employment with the Company will terminate effective as of ____, 20__;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement and other good and valuable consideration, Executive and the Company hereby agree as follows:
1.Executive shall be provided severance pay and other benefits (the “Severance Benefits”) in accordance with the terms and conditions of Section 7 of the Employment Agreement; provided that, no such Severance Benefits shall be paid or provided if Executive revokes this Agreement pursuant to Section 4 below.

2.Executive, for and on behalf of himself and Executive’s heirs, successors, agents, representatives, executors and assigns, hereby waives and releases any common law, statutory or other complaints, claims, demands, expenses, damages, liabilities, charges or causes of action (each, a “Claim”) arising out of or relating to Executive’s employment or termination of employment with, Executive’s serving in any capacity in respect of, or Executive’s status at any time as a holder of any securities of, any of the Company and any of its affiliates (collectively, the “Company Group”), both known and unknown, in law or in equity, which Executive  may now have or ever had against any member of the Company Group or any equityholder, agent, representative, administrator, trustee, attorney, insurer, fiduciary, employee, director or officer of any member of the Company Group, including their successors and assigns (collectively, the “Company Releasees”), including, without limitation, any claim for any severance benefit which might have been due Executive under any previous agreement executed by and between any member of the Company Group and Executive, and any complaint, charge or cause of action arising out of his employment with the Company Group under the Age Discrimination in Employment Act of 1967 (“ADEA,” a law which prohibits discrimination on the basis of age against individuals who are age 40 or older), the National Labor Relations Act, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Family Medical Leave Act, the Equal Pay Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Rehabilitation Act of 1973, the Worker Adjustment and Retraining Notification Act, and Ohio’s Fair Employment Practices Act, all as amended; and all other federal, state and local statutes, ordinances and regulations.  By signing this Agreement, Executive acknowledges that Executive intends to waive and release any rights known or unknown Executive may have against the Company Releasees under these and any other laws; provided that, Executive does not waive or release Claims (i) with respect to the right to enforce this Agreement or those provisions of the Employment Agreement that expressly survive the termination of Executive’s employment with the Company, (ii) with respect to any vested right Executive may have under any employee pension or welfare benefit plan of the Company Group, or (iii) any rights to indemnification under any applicable indemnification agreement, any D&O insurance policy applicable to Executive and/or the Company’s certificates of incorporation, charter and by-laws, or (iv) with respect to any claims that cannot legally be waived.

3.Executive acknowledges that Executive has been given twenty-one (21) days from the date of receipt of this Agreement to consider all of the provisions of the Agreement and, to the extent he has not used the entire 21-day period prior to executing the Agreement, he does hereby knowingly and voluntarily 

waive the remainder of said 21-day period.  EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO CONSULT AN ATTORNEY, AND FULLY UNDERSTANDS THAT BY SIGNING BELOW HE IS GIVING UP CERTAIN RIGHTS WHICH HE MAY HAVE TO SUE OR ASSERT A CLAIM AGAINST ANY OF THE COMPANY RELEASEES, AS DESCRIBED HEREIN AND THE OTHER PROVISIONS HEREOF.  EXECUTIVE ACKNOWLEDGES THAT HE HAS NOT BEEN FORCED OR PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS AGREEMENT AND EXECUTIVE AGREES TO ALL OF ITS TERMS VOLUNTARILY.

4.Executive shall have seven (7) days from the date of Executive’s execution of this Agreement to revoke the release, including with respect to all claims referred to herein (including, without limitation, any and all claims arising under ADEA).  If Executive revokes the Agreement, Executive will be deemed not to have accepted the terms of this Agreement.

[Signature page follows]

        

    

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

ASSOCIATED MATERIALS LLC

_________________________
By:
Its:

EXECUTIVE

_________________________
Scott Stephens

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