Document:

Unassociated Document

EXECUTION VERSION

 

 

 

 

	 	 	 
	 	 	 
	 	 	 
	 	 CREDIT AGREEMENT	 
	 	 	 
	 	 dated as of January 27, 2011	 
	 	 	 
	 	 among	 
	 	 	 
	 	 CARRIZO OIL & GAS, INC.,	 
	 	 as Borrower,	 
	 	 	 
	 	 BNP PARIBAS,	 
	 	 as Administrative Agent,	 
	 	 	 
	 	 CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK	 
	 	  and	 
	 	  ROYAL BANK OF CANADA,	 
	 	 as Co-Syndication Agents,	 
	 	 	 
	 	 CAPITAL ONE, N.A.	 
	 	 and	 
	 	 COMPASS BANK,	 
	 	 as Co-Documentation Agents,	 
	 	 	 
	 	 and	 
	 	 	 
	 	 The Lenders Party Hereto	 
	 	 	 
	 	 	 
	 	 	 
	 	 BNP PARIBAS SECURITIES CORP.	 
	 	 Sole Lead Arranger and Sole Bookrunner	 
	 	 	 
	 	 	 

 

 

  

  

  

 

TABLE OF CONTENTS

 

Page

 

 

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

 

	 Section 1.01	 Terms Defined Above	1 
	 Section 1.02	 Certain Defined Terms	1 
	 Section 1.03	 Types of Loans and Borrowings	25 
	 Section 1.04	 Terms Generally; Rules of Construction	 25  
	 Section 1.05	 Accounting Terms and Determinations; GAAP	 25  

 

ARTICLE II

THE CREDITS

 

	 Section 2.01	 Commitments	 26
	 Section 2.02 	 Loans and Borrowings	 26
	 Section 2.03	 Requests for Borrowings	 27
	 Section 2.04	 Interest Elections	 28
	 Section 2.05	 Funding of Borrowings	 29
	 Section 2.06	 Termination and Reduction of Aggregate Maximum Credit Amounts	 30
	 Section 2.07	 Borrowing Base	 31
	 Section 2.08	 Letters of Credit	 33

 

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

	 Section 3.01	 Repayment of Loans	 38
	 Section 3.02	 Interest	 38
	 Section 3.03	 Alternate Rate of Interest	 39
	 Section 3.04	 Prepayments	 40
	 Section 3.05	 Fees	 42

 

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

 

	 Section 4.01	 Prepayments Generally; Pro Rata Treatment; Sharing of Set-offs	 43
	 Section 4.02	 Presumption of Payment by the Borrower	 44
	 Section 4.03	 Payments and Deductions to a Defaulting Lender	 44
	 Section 4.04	 Disposition of Proceeds	 46

 

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

 

 

	 Section 5.01	 Increased Costs	 47
	 Section 5.02	 Break Funding Payments	 48
	 Section 5.03	 Taxes	 48
	 Section 5.04	 Mitigation Obligations; Replacement of Lenders	 50
	 Section 5.05	 Illegality	 51

 

 

i

Index

 

ARTICLE VI

CONDITIONS PRECEDENT

 

	 Section 6.01	 Effective Date	 52
	 Section 6.02	 Each Credit Event	 54

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

 

	 Section 7.01	 Organization; Powers	 55
	 Section 7.02	 Authority; Enforceability	 55
	 Section 7.03	 Approvals; No Conflict	 55
	 Section 7.04	 Financial Condition; No Material Adverse Change	 56
	 Section 7.05	 Litigation	 56
	 Section 7.06	 Environmental Matters	 57
	 Section 7.07	 Compliance with Laws; No Defualt	 58
	 Section 7.08	 Investment Company Act	 58
	 Section 7.09	 Taxes	 58
	 Section 7.10	 ERISA	 59
	 Section 7.11	 Disclosure; No Material Misstatements	 59
	 Section 7.12	 Insurance	 60
	 Section 7.13	 Restriction on Liens	 60
	 Section 7.14	 Subsidiaries	 60
	 Section 7.15	 Location of Business and Offices	 60
	 Section 7.16	 Properties; Titles, Etc.	 61
	 Section 7.17	 Maintenance of Properties	 62
	 Section 7.18	 Gas Imbalances Prepayments	 62
	 Section 7.19	 Marketing of Production	 63
	 Section 7.20	 Hedge Agreements	 63
	 Section 7.21	 Use of Loans and Letters of Credit	 63
	 Section 7.22	 Solvency	 63

 

ARTICLE VIII

AFFIRMATIVE COVENANTS

 

 

	 Section 8.01	 Financial Statements; Other Information	 64
	 Section 8.02	 Notices of Material Events	 67
	 Section 8.03	 Existence; Conduct of Business	 67
	 Section 8.04	 Payment of Taxes	 68
	 Section 8.05	 Operation and Maintenance of Properties	 68
	 Section 8.06	 Insurance	 69
	 Section 8.07	 Books and Records; Inspection Rights	 69
	 Section 8.08	 Compliance with Laws	 69
	 Section 8.09	 Environmental Matters	 69
	 Section 8.10	 Further Assurances	 71
	 Section 8.11	 Reserve Reports	 71
	 Section 8.12	 Title Information	 72
	 Section 8.13	 Additional Collateral; Additional Guarantors	 73
	 Section 8.14	 ERISA Compliance	 74

 

 

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Index

 

	 Section 8.15	 Marketing Activities	 75
	 Section 8.16	 Unrestricted Subsidiaries	 75

 

ARTICLE IX

NEGATIVE COVENANTS

 

	 Section 9.01	 Financial Covenants	 76
	 Section 9.02	 Debt	 76
	 Section 9.03	 Liens	 78
	 Section 9.04	 Dividends, Distribution and Redemptions; Repayment of Senior Notes	 78
	 Section 9.05	 Investments, Loan and Advances	 80
	 Section 9.06	 Nature of Business	 82
	 Section 9.07	 Proceeds of Notes	 83
	 Section 9.08	 ERISA Compliance	 83
	 Section 9.09	 Sale or Discount of Receivables	 83
	 Section 9.10	 Mergers, Etc.	 84
	 Section 9.11	 Sale of Oil and Gas Properties	 84
	 Section 9.12	 Environmental Matters	 85
	 Section 9.13	 Transactions with Affiliates	 85
	 Section 9.14	 Negative Pledge Agreements; Dividend Restrictions	 86
	 Section 9.15	 Hedge Agreements	 86
	 Section 9.16	 Unrestricted Subsidiaries	 88
	 Section 9.17	 Gas Imbalances, Take-or-Pay or Other Prepayments	 88

 

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

 

	 Section 10.01	 Events of Default	 88
	 Section 10.02	 Remedies	 90

 

ARTICLE XI

THE AGENTS

 

	 Section 11.01	 Appointment; Powers	 92
	 Section 11.02	 Duties and Obligations of Administrative Agent	 92
	 Section 11.03	 Action by Administrative Agent	 93
	 Section 11.04	 Reliance by Administrative Agent	 93
	 Section 11.05	 Subagents	 94
	 Section 11.06	 Resignation or Removal of Administrative Agent	 94
	 Section 11.07	 Agents as Lenders	 94
	 Section 11.08	 No Reliance	 94
	 Section 11.09	 Administrative Agent May File Proofs of Claim	 95
	 Section 11.10	 Authority of Administrative Agent to Release Collateral and Liens	 96
	 Section 11.11	 The Arranger, the Co-Syndication Agents and the Co-Documentation Agents	 96

 

ARTICLE XII

MISCELLANEOUS

 

 

	 Section 12.01	 Notices	 96
	 Section 12.02	 Waivers; Amendments	 97

 

 

iii

Index

 

 

	 Section 12.03	 Expenses, Indemnity; Damage Waiver	 98
	 Section 12.04	 Successors and Assigns	 101
	 Section 12.05	 Survival; Revival; Reinstatement	 104
	 Section 12.06	 Counterparts; Integration; Effectiveness	 104
	 Section 12.07	 Severability	 105
	 Section 12.08	 Right of Setoff	 105
	 Section 12.09	 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS	 105
	 Section 12.10	 Headings	 107
	 Section 12.11	 Confidentiality	 107
	 Section 12.12	 Interest Rate Limitation	 107
	 Section 12.13	 Collateral Matters; Hedge Agreements	 108
	 Section 12.14	 No Third Party Beneficiaries	 109
	 Section 12.15	 USA Patriot Act Notice	 109
	 Section 12.16	 EXCULPATION PROVISIONS	 109

 

 

iv

Index

 

 

 

ANNEXES, EXHIBITS AND SCHEDULES

 

 

 

 

	 Annex I  	 List of Maximum Credit Amounts
	 	 
	 Exhibit A 	 Form of Note
	 Exhibit B	 Form of Borrowing Request
	 Exhibit C  	 Form of Interest Election Request
	 Exhibit D      	 Form of Compliance Certificate
	 Exhibit E	 Form of Legal Opinion of Baker Botts L.L.P., special counsel to the Borrower
	 Exhibit F-1    	 Security Instruments
	 Exhibit F-2	 Form of Guaranty and Pledge Agreement
	 Exhibit G	 Form of Assignment and Assumption
	 Exhibit H  	 Form of Reserve Report Certificate
	 	 
	 	 
	 Schedule 1.02	 Approved Counterparties
	 Schedule 7.05     	 Litigation
	 Schedule 7.06 	 Environmental Matters
	 Schedule 7.10(e) 	 ERISA Matters
	 Schedule 7.14   	 Subsidiaries and Partnerships
	 Schedule 7.15 	 Location of Subsidiaries
	 Schedule 7.18	 Gas Imbalances
	 Schedule 7.19	 Marketing Contracts
	 Schedule 7.20 	 Hedge Agreements
	 Schedule 9.02	 Existing Debt
	 Schedule 9.03 	 Existing Liens
	 Schedule 9.05 	 Existing Investments
	 Schedule 9.08(c) 	 ERISA Compliance Matters
	 Schedule 9.13	 Affiliate Transactions

 

v

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THIS CREDIT AGREEMENT dated as of January 27, 2011 is among: Carrizo Oil & Gas, Inc., a corporation duly formed and existing under the laws of the State of Texas (the “Borrower”); each of the Lenders from time to time party hereto; BNP Paribas (in its individual capacity, “BNP”), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”); Credit Agricole Corporate and Investment Bank and Royal Bank of Canada, as co-syndication agents for the Lenders (each in such capacity, together with its successors in such capacity, a “Co-Syndication Agent” and, collectively, the “Co-Syndication Agents”); and Capital One, N.A. and Compass Bank, as co-documentation agents for the Lenders (each in such capacity, together with its successors in such capacity, a “Co-Documentation Agent” and, collectively, the “Co-Documentation Agents”).

 

R E C I T A L S

 

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

 

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

 

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

 

ARTICLE I

 

Definitions and Accounting Matters

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

  

Index

 

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

 

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the Maximum Credit Amounts, as the same may be reduced or terminated pursuant to Section 2.06.

 

“Agreement” means this 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 1.0% and (c) the Adjusted LIBO Rate for a three month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.0%.  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.

 

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

 

	
Borrowing Base Utilization Grid

	
Borrowing Base 

Utilization 

Percentage

	
<25%

	
3 25% but 

<50%

	
3 50% but  

<75%

	
3 75% but  

<90%

	
3 90%

	
   Eurodollar Loans

	
2.00%

	
2.25%

	
2.50%

	
2.75%

	
3.00%

	
   ABR Loans

	
1.00%

	
1.25%

	
1.50%

	
1.75%

	
2.00%

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, provided, however, that if at any time the Borrower fails to deliver a Reserve Report required to be delivered pursuant to Section 8.11(a), and for each day during the period from and including the date on which such Reserve Report was required to be delivered to but excluding the date on which such Reserve Report is delivered, the “Applicable Margin” means the rate per annum set forth on the above Borrowing Base Utilization Grid when the Borrowing Base Utilization Percentage is at its highest level.

 

“Applicable Percentage” means, with respect to any Lender at any time, the percentage of the Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit Amount at such time; provided that if the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect; provided further that, at any time that a Defaulting Lender shall exist, “Applicable Percentage” shall mean the percentage of the Aggregate Maximum Credit Amounts (disregarding any Defaulting Lenders’ Maximum Credit Amounts at such time) represented by 

 

 

2

Index

 

such Lender’s Maximum Credit Amount at such time.  The Applicable Percentages of the Lenders as of the Effective Date are set forth on Annex I.

 

“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 (at the time the Hedge Agreement is entered into) and (c) any other Person listed on Schedule 1.02.

 

“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, L.P., (c) Cawley, Gillespie & Associates, Inc., (d) Fairchild and Wells, Inc. (e) DeGolyer and MacNaughton, (f) LaRoche Petroleum Consultants Ltd. and (g) any other independent petroleum engineers reasonably acceptable to the Administrative Agent.

 

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

 

“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 G or any other form approved by the Administrative Agent.

 

“Availability” means, at any time, the amount by which the Borrowing Base exceeds the total Revolving Credit Exposures at such time.

 

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

 

“Avista” means Avista Capital Partners II, L.P., a Delaware limited partnership, and its successors and permitted assigns.

 

“Avista JV Partner” means ACP II Marcellus LLC, a Delaware limited liability company, and its successors and permitted assigns.

 

“Avista Marcellus Joint Venture” means that certain joint venture between Carrizo (Marcellus) LLC (or other wholly owned Subsidiaries of the Company), Avista Capital Partners II, L.P. and Avista JV Partner pursuant to that certain Amended and Restated Participation Agreement effective as of October 1, 2010 and the other documents delivered in connection therewith, in each case as in effect on the Effective Date, together with (i) any amendments, restatements, supplements or other modifications thereto made after the Effective Date and (ii) any other documents delivered in connection therewith after the Effective Date that, in each case, are not materially adverse to the Lenders.

 

 

3

Index

 

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

 

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

 

“Borrowing Base” means at any time an amount equal to the amount determined in accordance with Section 2.07, as the same may be adjusted from time to time pursuant to Sections 2.07(e), 2.07(f), 8.12(c) or 9.11.

 

“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit Exposures exceeds 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 sum of the Revolving Credit Exposures of the Lenders on such day, and the denominator of which is the Borrowing Base in effect on such day.

 

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

 

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

 

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

 

“Carrizo UK Facility” means that certain $84,000,000 Senior Secured Multicurrency Credit Facility Agreement, to be dated on or about January 28, 2011, among the Borrower, as parent, Carrizo UK Huntington, as borrower, and, in various capacities, BNP Paribas and Societe Generale.

 

“Carrizo UK Huntington” means Carrizo UK Huntington Ltd, a company incorporated under the laws of England and Wales.

 

“Carrizo UK Huntington Project” means the development, operation and related financing of the Huntington Petroleum Field and the facilities and infrastructure associated therewith, including the floating production and storage and offloading facility, by Carrizo UK Huntington.

 

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or “group” (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date 

 

 

4

Index

 

hereof), of Equity Interests representing more than fifty percent (50.0%) of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated or (c) any “change in control” (or other similar event, howsoever designated) shall occur under (and not be waived in accordance with) any of the Senior Notes.

 

“Change in Law” means (a) the adoption of any law, rule or regulation by any Governmental Authority after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 5.01(b)), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives issued thereunder or in connection therewith by a Governmental Authority and resulting in additional costs or limitations on the making, maintenance or pricing of loans or the participation in, or issuance or maintenance of, letters of credit, shall 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.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.06 and (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b).  The amount representing each Lender’s Commitment shall at any time be the lesser of such Lender’s Maximum Credit Amount and such Lender’s Applicable Percentage of the then effective Borrowing Base.

 

“Consolidated Net Income” means, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated 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 (without duplication): (a) the net income of any Person (including any Unrestricted Subsidiary) in which the Borrower or any Consolidated 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 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 Subsidiary, as the case may be (it being understood that any cash distributions received by the Borrower or any of the Restricted Subsidiaries in respect of its profit interests in Avista JV Partner shall be included in the calculation of Consolidated Net Income for any period of determination to the extent such cash distributions were so received 

 

 

5

Index

 

during such period); (b) the net income (but not loss) during such period of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by such Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any extraordinary non-cash gains or losses during such period and (e) any gains or losses attributable to writeups or writedowns of assets, including ceiling test writedowns; and provided further that if, during such period, (i) the Borrower or any Consolidated Subsidiary shall acquire or dispose of any proved producing Oil and Gas Properties in a transaction involving aggregate consideration in an amount in excess of 2% of the Borrower’s proved oil and natural gas properties asset balance as of the end of the most recently ended fiscal quarter or fiscal year for which financial statements have been delivered pursuant to Section 8.01(a) or 8.01(b), as the case may be, or (ii) a Subsidiary which, together with its Subsidiaries, owns proved producing Oil and Gas Properties which represent more than 2% of the Borrower’s proved oil and natural gas properties asset balance as of the end of the most recently ended fiscal quarter or fiscal year for which financial statements have been delivered pursuant to Section 8.01(a) or 8.01(b), as the case may be, shall be redesignated as either an Unrestricted Subsidiary or a Restricted Subsidiary, then Consolidated Net Income shall be calculated after giving pro forma effect to such acquisition, disposition or redesignation, as if such acquisition, disposition or redesignation had occurred on the first day of such period. For the avoidance of doubt, the aggregate of the net income (or loss) attributable to any Unrestricted Subsidiaries shall be excluded in calculating Consolidated Net Income except as otherwise provided in clause (a) of the preceding sentence.

 

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

 

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

 

“Credit Parties” means, collectively, the Borrower and the Guarantors, and “Credit Party” means any of them.

 

“Current Production” means, for each month, the lesser of (a) the highest of the most recent three (3) prior month’s production volume of crude oil, natural gas liquids and natural gas, of the Borrower and the Restricted Subsidiaries and (b) the internally forecasted production of crude oil and natural gas, calculated on a natural gas equivalent basis, of the Borrower and the Restricted Subsidiaries for each month for the next 48 months.

 

“Debt” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar 

 

 

6

Index

 

instruments; (c) all obligations of such Person to pay the deferred purchase price of Property or services (other than (i) accrued pension costs and other employee benefit and compensation obligations arising in the ordinary course of business and (ii) accounts payable incurred in the ordinary course of business which are either (x) current or (y) being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP); (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise to be secured by) a Lien on any Property of such Person, whether or not such Debt has been assumed by such Person, provided that the amount of Debt for purposes of clause (f) shall be an amount equal to the lesser of the unpaid amount of such Debt and the fair market value of the encumbered Property; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in respect of which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments (but only to the extent of such advance payments and only to the extent such commodities, goods or services have not been delivered), other than gas balancing arrangements in the ordinary course of business; (i) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (j) Disqualified Capital Stock of such Person; and (k) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment.  The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

 

“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 three (3) Business Days of the date required to be funded by it hereunder, (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, (c) failed, within three (3) Business Days after request by the Administrative Agent or the Borrower, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans and participations in then outstanding Letters of Credit, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith dispute, or (e) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it or, in the good faith determination of the Administrative Agent or the Borrower, 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 

 

 

7

Index

 

as the result of the acquisition or maintenance of an ownership interest in such Lender or any Person controlling such Lender or the exercise of control over such Lender or any Person controlling such Lender by a Governmental Authority or an instrumentality thereof.

 

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans, LC Exposure or other obligations outstanding under this Agreement 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.

 

“EBITDAX” means, for any period, the sum of (a) Consolidated Net Income for such period, plus (b) the following expenses or charges to the extent deducted in calculating Consolidated Net Income for such period (without duplication): interest expense, income taxes, depreciation, depletion, amortization, exploration expenses, all non-cash charges arising from the write-off of intangible assets and all other noncash charges or expenses, minus (c) all noncash income included in the calculation of Consolidated Net Income for such period.

 

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

 

“Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).

 

“Environmental Laws” means any and all Governmental Requirements pertaining in any way to health, safety, the environment, the preservation or reclamation of natural resources, or the management, Release or threatened Release of any Hazardous Materials, in effect in any and all jurisdictions in which the Borrower or any other Credit Party is conducting, or at any time has conducted, business, or where any Property of the Borrower or any other Credit Party is located, including, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Law, as amended, and other environmental conservation or protection Governmental Requirements.

 

 

8

Index

 

“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 Interest (other than any Debt security which by its terms is convertible at the option of the holder into Equity Interests).

 

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

 

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

 

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

 

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

 

“Excepted Liens” means:  (a) Liens on any Property, including Oil and Gas Properties, 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; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction, customs authorities or other like Liens on Property (including Oil and Gas Properties), 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 more than 90 days past due or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) the terms of the oil and gas leases and lease burdens payable to third parties which are deducted in the calculation of discounted present value in any Reserve Report including, without limitation, any royalty, overriding royalty, net profits interest, production payment, carried interest or reversionary working interest; (e) contractual Liens on Property (including Oil and Gas Properties), 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

 

9

Index

  

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; (f) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies (including any such banker’s liens, rights of set-off or similar rights and remedies that are contractually agreed upon in deposit account agreements, securities account agreements or commodities account agreements entered into in the ordinary course of business) and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by the Borrower or any other Credit Party to provide collateral to the depository institution; (g) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property, including any Oil and Gas 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, zoning restrictions, 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; (h) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business; (i) judgment and attachment Liens on any Property, including Oil and Gas Properties, not giving rise to an Event of Default; (j) consents to assignment, preferential rights to purchase, and similar contractual provisions regarding Oil and Gas Properties; (k) the rights of farmees and similar Persons who have a right to acquire a working interest in Oil and Gas Properties of the Borrower or any of the Restricted Subsidiaries, to the extent disclosed in the most recently delivered Reserve Report; (l) unsubordinated mortgages granted by lessors on Property with respect to which the Borrower or any of the Restricted Subsidiaries owns a Hydrocarbon Interest to the extent such mortgage does not cover any tract of land under which a wellbore is located and (m) Liens on Property, including Oil and Gas Properties, arising from precautionary UCC filings; provided, further that 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.

 

“Exchange Offer” means a registered offer to exchange outstanding Senior Notes for new Senior Notes (the “exchange notes”) having terms substantially identical in all material respects to such outstanding Senior Notes (except that the exchange notes shall not contain any transfer restrictions).

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any 

 

 

10

Index

 

obligation of the Borrower or any Guarantor hereunder or under any other Loan Document, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America or such other jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower or any Guarantor is located, (c) taxes imposed as a result of a present or former connection between the recipient and the taxing jurisdiction (other than connections 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), (d) any backup withholding tax that is withheld from amounts payable to a Lender that has failed to comply with Section 5.03(e), (e) in the case of a Foreign Lender other than an assignee under Section 5.04(a), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability to comply with Section 5.03(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(b), and (f) in the case of any Lender, any withholding taxes that are attributable to such Lender’s failure to comply with FATCA.

 

“Existing 2018 Notes” means the Borrower’s 8.625% Senior Notes due 2018 issued pursuant to the Existing 2018 Notes Indenture, the aggregate outstanding principal amount of which as of the Effective Date is $400,000,000.

 

“Existing 2018 Notes Indenture” means that certain Indenture dated as of May 28, 2008 among the Borrower, certain Subsidiaries of the Borrower and Wells Fargo Bank, National Association, as trustee, as supplemented by the Fourth Supplemental Indenture dated as of November 2, 2010, and as the same may be amended, restated, modified or further supplemented from time to time (to the extent such amendment, restatement, modification or supplement is applicable to the Existing 2018 Notes) in accordance with the terms of this Agreement.

 

“Existing Convertible Notes” means the Borrower’s 4.375% Convertible Senior Notes due 2028 issued on May 28, 2008 pursuant to the Convertible Notes Indenture, the aggregate outstanding principal amount of which as of the Effective Date is $73,750,000.

 

“Existing Convertible Notes Indenture” means that certain Indenture dated as of May 28, 2008 among the Borrower, certain Subsidiaries of the Borrower and Wells Fargo Bank, National Association, as trustee, as supplemented by the First Supplemental Indenture dated as of May 28, 2008, the Second Supplemental Indenture dated as of May 14, 2009, the Fifth Supplemental Indenture dated as of November 2, 2010, and as the same may be amended, restated, modified or further supplemented from time to time (to the extent such amendment, restatement, modification or supplement is applicable to the Convertible Notes) in accordance with the terms of this Agreement.

 

 

11

Index

 

“Existing Credit Agreement” means that certain Credit Agreement dated as of May 25, 2006 among the Borrower, Wells Fargo Bank, N.A., as administrative agent, and others as guarantors, agents and lenders, as amended.

 

“Existing Senior Notes” means the Existing Convertible Notes and the Existing 2018 Notes.

 

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement, and any current or future 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.

 

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

 

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

 

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

 

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

 

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

 

“Governmental Authority” means the government of the United States of America or 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.

 

“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, of any Governmental Authority.

 

“Guarantee” has the meaning set forth in the definition of “Investment”.

 

 

12

Index

 

“Guarantors” means

 

(a)        CLLR, Inc., a Delaware corporation,

 

Bandelier Pipeline Holding, LLC, a Delaware limited liability company,

 

Carrizo Marcellus Holding Inc., a Delaware corporation,

 

Mescalero Pipeline, LLC, a Delaware limited liability company,

 

Hondo Pipeline, Inc., a Delaware corporation,

 

Carrizo (Marcellus) LLC, a Delaware limited liability company, and

 

Carrizo (Marcellus) WV LLC, a Delaware limited liability company, and

 

(b) each Material Domestic Subsidiary that guarantees after the Effective Date the Obligations pursuant to Section 8.13.

 

“Guaranty Agreement” means an agreement executed by the Guarantors in substantially the form of Exhibit F-2 unconditionally guarantying, on a joint and several basis, payment of the Obligations.

 

“Hazardous Material” means any substance regulated or as to which liability might arise under any applicable Environmental Law including:  (a) any chemical, compound, material, product, byproduct, substance or waste defined as or included in the definition or meaning of “hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar meaning or import found in any applicable Environmental Law; (b) Hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and gas waste, crude oil, and any components, fractions, or derivatives thereof; and (c) radioactive materials, explosives, asbestos or asbestos containing materials, polychlorinated biphenyls, radon, infectious or medical wastes.

 

“Hedge 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.

 

“Hedge Bank” means any Person that is party to a Hedge Agreement with the Borrower or any Restricted Subsidiary if either (i) at the time such Hedge Agreement was entered into, such Person was a Lender or Affiliate of a Lender hereunder or (ii) such Hedge Agreement was in effect on the Effective Date and such Person or an Affiliate of such Person was a Lender on the Effective Date.

 

“Hedge Position Cancellation Event” means any assignment, termination, sale or unwinding of any hedge position under any Hedge Agreement upon which the Lenders relied in 

 

 

13

Index

 

determining the then-effective Borrowing Base, or the creation of any off-setting position (whether evidenced by a floor, put or Hedge Agreement) with respect to any hedge position under any Hedge Agreement upon which the Lenders relied in determining the then-effective Borrowing Base, in each case if (a) the effect of such action, after taking into account the net hedging position under all then outstanding Hedge Agreements of the Borrower and the Restricted Subsidiaries taken as a whole (including any other Hedge Agreements executed contemporaneously with the taking of such action), would be to cancel any of the Borrower’s or any of the Restricted Subsidiaries’ positions under all such Hedging Agreements and (b) to the extent the value attributed to such cancelled positions for purposes of determining the then-effective Borrowing Base were excluded from the Borrowing Base at such time, the Borrowing Base would reasonably be expected to be reduced by an amount in excess of 3% thereof.

 

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

 

“Highest Lawful Rate” means, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other 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 nonusurious interest rate than applicable laws allow as of the date hereof.

 

“Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature.

 

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

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indentures” means (a) the Existing Convertible Notes Indenture, (b) the Existing 2018 Notes Indenture and (b) the indentures, supplemental indentures or other agreements under or pursuant to which any Permitted Additional Senior Notes are issued.

 

“Initial Reserve Report” means the reserve report prepared by the Borrower with respect to certain Oil and Gas Properties of the Borrower and the Restricted Subsidiaries as of October 1, 2010.

 

 

14

Index

 

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

 

“Interest Expense” means, for any period, the sum (determined without duplication) of the aggregate interest expense of the Borrower and the Consolidated Subsidiaries for such period paid in cash, including, to the extent included in interest expense under GAAP, (a) the portion of any payments or accruals under Capital Leases allocable to interest expense, plus (b) the portion of any payments or accruals under Synthetic Leases allocable to interest expense, whether or not the same constitutes interest expense under GAAP.

 

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

 

“Interest Period” means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, with the consent of each Lender, nine or twelve months) thereafter, as the Borrower may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to 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.

 

“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).

 

“Interim Redetermination Date” means the date on which a Borrowing Base that has been redetermined pursuant to an Interim Redetermination becomes effective as provided in Section 2.07(d).

 

“Investment” means, as applied to any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests in any other Person; (b) the making of any loan or capital contribution to, assumption of Debt of, or purchase or other acquisition of any other Debt or equity participation or interest in any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business); or (c) the entering into of any guarantee of, or other contingent obligation pursuant to which such Person assures a creditor against loss with respect to, Debt of any other Person (a “Guarantee”);

 

 

15

Index

 

provided that, (i) with respect to the UK Cost Overrun Guarantee, only amounts actually demanded in good faith by or paid to the Person to whom such Debt is owed shall be considered an “Investment” and (ii) with respect to any Guarantee other than the UK Cost Overrun Guarantee, the amount of the Investment represented by such Guarantee shall be the lesser of the amount of the Debt that is the subject of such Guarantee and the maximum stated amount of such Guarantee.

 

“Issuing Bank” means BNP, in its capacity as the issuer of Letters of Credit hereunder.  The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the 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” at any time means Fifteen Million dollars ($15,000,000) or, if less, the Aggregate Maximum Credit Amounts.

 

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

 

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

 

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

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate (rounded upwards, if necessary, to the next 1/100 of 1%) appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate (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

 

 

16

Index

 

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.

 

“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 financing 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 the Credit Parties shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or leases under a financing lease 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, if any, the Letter of Credit Agreements, the Letters of Credit and the Security Instruments.

 

“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 are outstanding, Lenders having more than fifty percent (50.0%) of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC Exposure are outstanding, Lenders holding more than fifty percent (50.0%) 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 the Maximum Credit Amount and the outstanding principal amount of the Loans of, and the participation interests in Letters of Credit held by, each Defaulting Lender (if any) shall be excluded from the determination of Majority Lenders to the extent set forth in Section 4.03(c)(ii).

 

“Material Adverse Effect” means a material adverse change in, or material adverse effect on (a) the business, operations, Property or financial condition of the Borrower and the Restricted Subsidiaries, taken as a whole, (b) the ability of the Borrower and the Guarantors, taken as a whole, to perform their obligations under the Loan Documents, (c) the validity or enforceability of any Loan Document or (d) the rights and remedies of the Administrative Agent, the Issuing Bank or the Lenders under the Loan Documents.

 

“Material Domestic Subsidiary” means, as of any date, any Domestic Subsidiary that (a) is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries, (i) owns Property which represents more than 1% of the consolidated assets of the Borrower and the Consolidated Subsidiaries as of the last day of the most recently ended fiscal quarter of the Borrower for which financial statements have been delivered pursuant to Section 8.01(a) or 8.01(b), or (ii) is responsible for more than 1% of the consolidated revenues of the Borrower and the Consolidated Subsidiaries for the most recently ended period of four consecutive fiscal quarters of the Borrower for which financial statements have been delivered pursuant to Section 8.01(a) or 

 

 

17

Index

 

8.01(b), but excluding (i) the value of the Equity Interests such Domestic Subsidiary owns in any other Domestic Subsidiaries and (ii) intercompany debt owed to such Domestic Subsidiary from any other Domestic Subsidiary or the Borrower.

 

“Material Indebtednesss” means Debt (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedge Agreements, of any one or more Credit Parties in an aggregate principal amount exceeding $10,000,000.  For purposes of determining Material Indebtednesss, the “principal amount” of the obligations of the Borrower or any other Credit Party in respect of any Hedge Agreement at any time shall be the Hedge Termination Value thereof.

 

“Maturity Date” means January 27, 2016.

 

“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 such amount may be, as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amounts pursuant to Section 2.06(b) 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.

 

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

 

“New Borrowing Base Notice” has the meaning assigned such term in Section 2.07(d).

 

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

 

“Non-Recourse Debt” means any Debt of any Unrestricted Subsidiary, in each case in respect of which: (a) the holder or holders thereof (i) shall, except as provided in the immediately succeeding clause (ii), have recourse only to, and shall have the right to require the obligations of such Unrestricted Subsidiary to be performed, satisfied, and paid only out of, the Property of such Unrestricted Subsidiary and/or one or more of its Subsidiaries and the Equity Interests in such Unrestricted Subsidiary and (ii) except for the UK Cost Overrun Guarantee and other Guarantees permitted under Section 9.05(o), shall have no direct or indirect recourse (including by way of guaranty, support or indemnity) to the Borrower or any of the Restricted Subsidiaries or to any Property of the Borrower or any of the Restricted Subsidiaries, whether for principal, interest, fees, expenses or otherwise; and (b) the terms and conditions relating to the non-recourse nature of such Debt are in form and substance reasonably acceptable to the Administrative Agent (it being understood that such terms and conditions with respect to the Carrizo UK Facility are acceptable to the Administrative Agent).

 

“North Sea Properties” means the UK Petroleum Production Licence No. P1114 governing Blocks 22/14b and 22/19b, together with any other licences unitized therewith and all associated property, plant and equipment located on, or related to such licenses.

 

 

18

Index

 

“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.

 

“Obligations” means any and all amounts owing by the Borrower or any of the Restricted Subsidiaries (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, the Issuing Bank or any Lender under any Loan Document; (b) to any Hedge Bank under any Hedge Agreement between the Borrower or any Restricted Subsidiary and such Hedge Bank, in each case, after giving effect to all netting arrangements relating to such Hedge Agreement; (c) obligations under all Treasury Management Agreements with any Lender or any Affiliate of a Lender; and (d) all renewals, extensions and/or rearrangements of any of the above.

 

“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 hereafter 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.

 

“Organizational Documents” means, with respect to any Person, (a) in the case of any corporation, the certificate of incorporation and by-laws (or similar documents) of such Person, (b) in the case of any limited liability company, the certificate of formation and limited liability company agreement (or similar documents) of such Person, (c) in the case of any limited partnership, the certificate of formation and limited partnership agreement (or similar documents) of such Person, (d) in the case of any general partnership, the partnership agreement (or similar document) of such Person and (e) in any other case, the functional equivalent of the foregoing.

 

 

19

Index

 

“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 other than Excluded Taxes.

 

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

 

“Permitted Additional Senior Notes” means any unsecured senior, senior subordinated or convertible notes issued after the Effective Date by the Borrower under Section 9.02(f).

 

“Permitted Refinancing Debt” means Debt (for purposes of this definition, “new Debt”) incurred in exchange for (other than pursuant to an Exchange Offer), or proceeds of which are used to extend, refinance, renew, replace, defease, discharge, refund or otherwise retire for value, in whole or in part, any other Debt (the “Refinanced Debt”); provided that (a) such new Debt is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the Refinanced Debt (or, if the Refinanced Debt 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 all accrued (including, for the purposes of defeasance, future accrued) and unpaid interest on the Refinanced Debt and any fees and expenses, including premiums, related to such exchange or refinancing; (b) such new Debt has a stated maturity no earlier than the sooner to occur of (i) the date that is 91 days after the Maturity Date (as in effect on the date of incurrence of such new Debt) and (ii) the stated maturity date of the Refinanced Debt; (c) such new Debt has an average life at the time such new Debt is incurred that is no shorter than the shorter of (i) the period beginning on the date of incurrence of such new Debt and ending on the date that is 91 days after the Maturity Date (as in effect on the date of incurrence of such new Debt) and (ii) the average life of the Refinanced Debt at the time such new Debt is incurred; (d) the covenants of such new Debt, when taken as a whole, are not materially more onerous to the Borrower and the Credit Parties than those imposed by the Refinanced Debt, as determined in good faith by a Financial Officer; (e) such new Debt is not incurred or guaranteed by a non-Guarantor Restricted Subsidiary if the Borrower or a Guarantor is the issuer or is otherwise an obligor on the Refinanced Debt; and (f) if the Refinanced Debt was subordinated in right of payment to the Obligations or the guarantees under the Guaranty Agreement, such new Debt (and any guarantees thereof) is subordinated in right of payment to the Obligations (or, if applicable, the guarantees under the Guaranty Agreement) to at least the same extent as the Refinanced Debt.

 

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

 

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

 

 

20

Index

 

change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.  Such rate is set by the Administrative Agent as a general reference rate of interest, taking into account such factors as the Administrative Agent may deem appropriate; it being understood that many of the Administrative Agent’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Administrative Agent may make various commercial or other loans at rates of interest having no relationship to such rate.

 

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

 

“Proposed Borrowing Base” has the meaning assigned to such term in Section 2.07(c)(i).

 

“Proposed Borrowing Base Notice” has the meaning assigned to such term in Section 2.07(c)(ii).

 

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

 

“Redetermination Date” means, with respect to any Scheduled Redetermination or any Interim Redetermination, the date that the redetermined Borrowing Base related thereto becomes effective pursuant to Section 2.07(d).

 

“Refinanced Debt” has the meaning assigned such term in the definition of “Permitted Refinancing Debt”.

 

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

 

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

 

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

 

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

 

“Remedial Work” has the meaning assigned such term in Section 8.09(a).

 

“Required Lenders” means, at any time while no Loans or LC Exposure are outstanding, Lenders having at least sixty six and two-thirds percent (66-2/3%) of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC Exposure are outstanding, Lenders holding at least sixty six and two-thirds percent (66-2/3%) of the outstanding aggregate principal 

 

 

21

Index

 

amount of the Loans or participation interests in such Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided that the Maximum Credit Amount and the outstanding principal amount of the Loans of, and the participation interests in Letters of Credit held by, each Defaulting Lender (if any) shall be excluded from the determination of Required Lenders to the extent set forth in Section 4.03(c)(ii).

 

“Reserve Report” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of each January 1st or July 1st (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 Credit Parties, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the economic assumptions consistent with the Administrative Agent’s lending requirements at the time.

 

“Reserve Report Certificate” means a certificate of a Responsible Officer in substantially the form of Exhibit H attached hereto certifying as to the matters set forth in Section 8.11(c).

 

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the President, any Financial Officer or any Vice President of such Person.  Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower.

 

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

 

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

 

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

 

“Sale” has the meaning set forth in Section 9.11.

 

“Scheduled Redetermination” has the meaning assigned such term in Section 2.07(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 2.07(d).

 

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

 

 

22

Index

 

“Security Instruments” means the Guaranty Agreement, the mortgages, deeds of trust and other agreements, instruments or certificates described or identified in Exhibit F-1, and any and all other agreements or instruments, now or hereafter executed and delivered by the Borrower or any Guarantor (other than Hedge Agreements and Treasury Management Agreements) as security for the payment or performance of the Obligations.

 

“Senior Debt” means, at any date, all Total Debt other than the Senior Notes.

 

“Senior Notes” means the Existing Senior Notes, any Permitted Additional Senior Notes and any Permitted Refinancing Debt in respect thereof.

 

“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.

 

“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” of a Person means (a) a corporation, partnership, joint venture, limited liability company or other business entity of which Equity Interests representing more than 50% of the ordinary voting power to elect a majority of the board of directors, managers or other governing body (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) are at the time owned or controlled by such Person or one or more of its subsidiaries or by such Person and one or more of its subsidiaries, and (b) any partnership of which such Person or any of its subsidiaries is a general partner.

 

“Subsidiary” means any subsidiary of the Borrower.

 

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

 

 

23

Index

 

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

 

“Termination Date” means the earlier of the Maturity Date and the date of termination of the Commitments.

 

“Title Policies and Procedures” means the “Carrizo Title Examination in Barnett Shale Urban Areas Policies and Procedures; Work Product and Expected Results”, amended and revised as of November 18, 2009, a copy of which was delivered to the Administrative Agent prior to the Effective Date, as amended, supplemented, restated or otherwise modified from time to time (but only to the extent any such amendment, supplement, restatement or other modification would not reasonably be expected to be disadvantageous to the Lenders in any material respect).

 

“Total Debt” means, at any date, an amount equal to (a) all Debt of the Borrower and the Consolidated Subsidiaries, excluding (i) non-cash obligations under or as a result of the application of FAS 133 or otherwise and (ii) the Borrower’s obligations under the UK Cost Overrun Guarantee, less (b) all cash and cash equivalents of the Borrower and the Consolidated Subsidiaries as of such date which is unrestricted and subject to no Liens other than in favor of the Administrative Agent.  For purposes of this definition and for determining the Borrower’s compliance with Section 9.01(a), Debt of the Borrower and the Consolidated Subsidiaries shall not include, for each date of determination during the period from January 1, 2011 through December 31, 2011, an amount equal to (i) $6,404,669 (which represents the equity component of the aggregate principal amount of Existing Convertible Notes outstanding on the Effective Date (determined pursuant to FASB Staff Position (“FSB”) Accounting Principles Board (“APB”) 14-1)), multiplied by (ii) a fraction, (x) the numerator of which is equal to the aggregate outstanding principal amount of the Existing Convertible Notes on such date of determination and (y) the denominator of which is equal to $73,750,000.

 

“Transactions” means, with respect to (a) the Borrower, the execution, delivery and performance by the Borrower of this Agreement and each other Loan Document to which it is a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, and the grant of Liens by the Borrower on Mortgaged Properties and other Properties pursuant to the Security Instruments and (b) each Guarantor, the execution, delivery and performance by such Guarantor of each Loan Document to which it is a party, the guaranteeing of the Obligations under the Guaranty Agreement by such Guarantor and the grant of Liens by such Guarantor on Mortgaged Properties and other Properties pursuant to the Security Instruments.

 

“Treasury Management Agreements” means any agreements regarding bank services provided to the Borrower or any Restricted Subsidiary for commercial credit cards and treasury management services, including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network 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.

 

 

24

Index

 

“UK Cost Overrun Guarantee” means the Borrower’s obligations under the Carrizo UK Facility.

 

“Unrestricted Subsidiary” means Carrizo UK Huntington and any other Subsidiary 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 9.16.

 

“Wholly-Owned Subsidiary” means any 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 other Wholly-Owned Subsidiaries or are owned by the Borrower and one or more other Wholly-Owned Subsidiaries.

 

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

 

Section 1.04 Terms Generally; Rules of Construction.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” as used in this Credit Agreement shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), (b) any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including” and (f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement.  No provision of this Agreement or any other Loan Document shall be interpreted or construed against any Person solely because such Person or its legal representative drafted such provision.

 

Section 1.05 Accounting Terms and Determinations; GAAP.  Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the Financial Statements except for changes in which Borrower’s independent certified public accountants concur and which are disclosed therein (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 

 

 

25

Index

 

computed, such that all such computations shall be conducted utilizing financial information presented consistently with prior periods); and provided further that, if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article IX or any financial ratio or requirement set forth in any Loan Document or any definition used therein to eliminate the effect of any change in GAAP on the operation of such covenant, financial ratio or requirement or definition (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article IX or any other Loan Document for such purpose), then the Borrower’s compliance with such covenant, financial ratio or requirement shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant, financial ratio or requirement or definition is amended in a manner satisfactory to the Borrower and the Majority Lenders.  Notwithstanding anything to the contrary in this Agreement or any other Loan Document, for purposes of calculations made pursuant to the terms of this Agreement or any other Loan Document, GAAP will be deemed to treat leases that would have been classified as operating leases in accordance with generally accepted accounting principles in the United States of America as in effect on December 31, 2009 in a manner consistent with the treatment of such leases under generally accepted accounting principles in the United States of America as in effect on December 31, 2009, notwithstanding any modifications or interpretive changes thereto that may occur thereafter.

 

ARTICLE II

The Credits

 

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

 

Section 2.02 Loans and Borrowings.

 

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

 

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

 

 

26

Index

 

(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 $5,000,000.  At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided that an ABR Borrowing may be in a lesser aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.08(e).  Borrowings of more than one Type may be outstanding at the same time, provided that there shall not at any time be more than a total of eight (8) 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.  If requested in writing by a Lender, the Loans made 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 or (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, payable to the 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 the Maximum Credit Amount of any Lender whose Loans are evidenced by a Note increases or decreases for any reason (whether pursuant to Section 2.06, Section 12.04(b) or otherwise), upon the prior written request of such Lender, the Borrower shall deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to the 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 whose Loans are evidenced by a Note, 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, Houston time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., Houston time, on the date of the proposed Borrowing; provided that no such notice shall be required for any deemed request of an ABR Borrowing to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e).  Each such Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower.  Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

 

 

27

Index

 

(i) the aggregate amount of the requested Borrowing;

 

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

 

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

 

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

 

(v) the amount of the then effective Borrowing Base, the current total Revolving Credit Exposures (without regard to the requested Borrowing) and the pro forma total Revolving Credit Exposures (giving effect to the requested Borrowing); and

 

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

 

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

 

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

 

Section 2.04 Interest Elections.

 

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

 

(b) Interest Election Requests.  To make an election pursuant to this Section 2.04, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election.  Each such Interest Election Request shall be irrevocable and shall be 

 

 

28

Index

 

confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in substantially the form of Exhibit C and signed by the Borrower.

 

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

 

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

 

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

 

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

 

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

 

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

 

(d) Notice to Lenders by the Administrative Agent.  Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

 

(e) Effect of Failure to Deliver Timely Interest Election Request and Events of Default and Borrowing Base Deficiencies 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 and the Administrative Agent, at the request of the Majority Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing:  (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing (and any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

 

Section 2.05 Funding of Borrowings.

 

(a) Funding by Lenders.  Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 

 

 

29

Index

 

p.m., Houston time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders.  The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing Bank.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

 

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

 

Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts.

 

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

 

(b) Optional Termination and Reduction of Aggregate Credit Amounts.

 

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

 

 

30

Index

 

(ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof.  Each notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided that a notice of reduction or termination of the Aggregate Maximum Credit Amounts delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or other securities offerings, in which case such notice may be revoked by the Borrower (by at least one Business Day’s prior notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.  Any termination or reduction of the Aggregate Maximum Credit Amounts shall be permanent and may not be reinstated.  Except for termination of a Defaulting Lender under Section 5.04(b), each reduction of the Aggregate Maximum Credit Amounts shall be made ratably among the Lenders in accordance with each Lender’s Applicable Percentage.

 

Section 2.07 Borrowing Base.

 

(a) Initial Borrowing Base.  For the period from and including the Effective Date to but excluding the first Redetermination Date, the amount of the Borrowing Base shall be Three Hundred Fifty Million Dollars ($350,000,000).  Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from time to time pursuant to Section 2.07(e), Section 2.07(f), Section 8.12(c) or Section 9.11.

 

(b) Scheduled and Interim Redeterminations.  Except as set forth in the following sentence, the Borrowing Base shall be redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing Base shall become effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders on May 1st and November 1st of each year, commencing May 1, 2011.  In addition, the Borrower may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at the direction of the Required Lenders, by notifying the Borrower thereof, each elect to cause the Borrowing Base to be redetermined once between each Scheduled Redetermination (an “Interim Redetermination”) in accordance with this Section 2.07.

 

(c) Scheduled and Interim Redetermination Procedure.

 

(i) Each Scheduled Redetermination and each Interim Redetermination shall be effectuated as follows:  Upon receipt by the Administrative Agent of (A) the Reserve Report and the Reserve Report Certificate, and (B) such other reports, data and supplemental information, including, without limitation, the information provided pursuant to Section 8.11(c), as may, from time to time, be reasonably requested by the Majority Lenders (the Reserve Report, such certificate and such other reports, data and supplemental information being the “Engineering Reports”), the Administrative Agent shall evaluate the information contained in the Engineering Reports and shall in good faith propose a new Borrowing Base (the “Proposed Borrowing Base”) based upon such information and such other information (including, without limitation, the status of title information with respect to the Oil and Gas Properties as described 

 

 

31

Index

 

in the Engineering Reports and the existence of any other Debt) as the Administrative Agent deems appropriate in its sole discretion consistent with its normal and customary oil and gas lending criteria as it exists at the particular time.

 

(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 8.11(a) and (c) in a timely manner, then on or before the April 15th and October 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 8.11(a) and (c) in a timely 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 2.07(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 as provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect must be approved or be deemed to have been approved by the Required Lenders as provided in this Section 2.07(c)(iii).  Upon receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days to agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by proposing an alternate Borrowing Base, and each Lender shall make its determination of the appropriate amount of the Borrowing Base consistent with each such Lender’s normal and customary oil and gas lending criteria as it exists at the particular time.  If at the end of such 15-day period, 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) the Proposed Borrowing Base, then the Proposed Borrowing Base shall become the new Borrowing Base, effective on the date specified in Section 2.07(d).  If, however, at the end of such 15-day period, all of the Lenders or the Required Lenders, as applicable, have not approved or deemed to have approved (as aforesaid) the Proposed Borrowing Base, then the Administrative Agent shall poll the Lenders to ascertain the highest Borrowing Base then acceptable to all of the Lenders or a 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 2.07(d).

 

(d) Effectiveness of a Redetermined Borrowing Base.  After a redetermined Borrowing Base is approved or is deemed to have been approved by all of the Lenders or the 

 

 

32

Index

 

Required Lenders, as applicable, pursuant to Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing Base Notice”), and such amount shall become the new Borrowing Base, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders:

 

(i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.11(a) and (c) in a timely and complete manner, then on the May 1st or November 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 8.11(a) and (c) in a timely and complete manner, then on the Business Day next succeeding delivery of such notice; and

 

(ii) in the case of an Interim Redetermination, on the Business Day next succeeding delivery of such notice.

 

Such amount shall then become the Borrowing Base until the next Scheduled Redetermination Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section 2.07(e), Section 2.07(f), Section 8.12(c) or Section 9.11, 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 Issuance of Permitted Additional Senior Notes.  Upon the issuance of any Permitted Additional Senior Notes in accordance with Section 9.02(f) (other than Senior Notes issued pursuant to an Exchange Offer or constituting Permitted Refinancing Debt up to the original principal amount of the refinanced Senior Notes), the Borrowing Base then in effect shall be reduced by an amount equal to the product of 0.25 multiplied by the stated principal amount of such Permitted Additional Senior Notes (without regard to any initial issue discount), and the Borrowing Base as so reduced shall become the new Borrowing Base immediately upon the date of such issuance, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders on such date until the next redetermination or modification thereof hereunder.

 

(f) Reduction of Borrowing Base Upon Hedge Position Cancellation Event.  Upon the occurrence of a Hedge Position Cancellation Event, the Required Lenders shall have the right to reduce the Borrowing Base by an amount determined by the Required Lenders to be the value attributed to the positions that were cancelled pursuant to such Hedge Position Cancellation Event for purposes of determining the then-effective Borrowing Base.

 

Section 2.08 Letters of Credit.

 

(a) General.  Subject to the terms and conditions set forth herein, the Borrower may request the issuance of dollar denominated Letters of Credit for its own account or for the account of any of its Restricted Subsidiaries, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the 

 

 

33

Index

 

Availability Period; provided that the Borrower may not request the issuance, amendment (to extend the term or increase the amount), renewal or extension of Letters of Credit hereunder, and the Issuing Bank shall not issue, amend (to extend the term or increase the amount), renew or extend a Letter of Credit, if a Borrowing Base Deficiency exists at such time or would exist as a result thereof or if the LC Exposure would exceed the LC Commitment after giving effect thereto.  Subject to the terms and conditions set forth herein, the Issuing Bank shall then arrange for the Letter of Credit to be issued on the Borrower’s behalf.  In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

 

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  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 telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (not less than 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 2.08(c));

 

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

 

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

 

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

 

Each such notice shall constitute a representation that, after giving effect to the requested issuance, amendment, renewal or extension, as applicable, (i) the LC Exposure shall not exceed the LC Commitment and (ii) the total Revolving Credit Exposures shall not exceed the total Commitments (i.e. the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base).

 

 

34

Index

 

If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application in a form acceptable to the Issuing Bank 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 year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) unless satisfactorily collateralized in the Issuing Bank’s reasonable opinion, the date that is five Business Days prior to the Maturity Date; provided that any Letter of Credit with a one-year term may provide for the automatic renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (ii)).

 

(d) Participations.  By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit.  In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.08(e), or of any reimbursement payment required to be refunded to the Borrower for any reason.  Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.08(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

 

(e) Reimbursement.  If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit prior to 11:00 a.m., Houston time, then the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 4:00 p.m., Houston time, on the same Business Day, if the Borrower shall have received notice of such LC Disbursement prior to 12:00 noon, Houston 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, Houston time, on the Business Day immediately following the day that the Borrower receives such notice; provided that if such LC Disbursement is not less than $1,000,000, the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing.  If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then 

 

 

35

Index

 

due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof.  Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders.  Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear.  Any payment made by a Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

 

(f) Obligations Absolute.  The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.08(e) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or of any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that appears on its face to comply, but does not comply, with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder.  Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.  In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.  The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of 

 

 

36

Index

 

competent jurisdiction), the Issuing Bank shall be deemed to have exercised all requisite care in each such determination.

 

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

 

(h) Interim Interest.  If the Issuing Bank shall make any LC Disbursement, then, until the Borrower shall have reimbursed the Issuing Bank for such LC Disbursement (either with its own funds or a Borrowing under Section 2.08(e)), the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans.  Interest accrued pursuant to this Section 2.08(h) shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to Section 2.08(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

 

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

 

(j) Cash Collateralization.  If (i) any Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(b), 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 Issuing Bank and 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(b), the amount of such excess as provided in Section 3.04(b), as of such date; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become promptly due and payable, without demand or other notice of 

 

 

37

Index

 

any kind, upon the occurrence of any Event of Default with respect to the Borrower or any other Credit Party described in Section 10.01(h) or Section 10.01(i). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor.  The Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower or any other Credit Party may now or hereafter have against any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever.  Such deposit shall be held as collateral securing the payment and performance of the 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 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 Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors under this Agreement or the other Loan Documents.  If on any date of determination after the Borrower has posted cash collateral, the amount of such cash collateral exceeds the LC Exposure, then the Administrative Agent shall release such excess to the Borrower within three (3) Business Days of its receipt of a request for such release.  

 

ARTICLE III

Payments of Principal and Interest; Prepayments; Fees

 

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

 

Section 3.02 Interest.

 

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

 

 

38

Index

 

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

 

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

 

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

 

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

 

Section 3.03 Alternate Rate of Interest.  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;

 

 

39

Index

 

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

 

Section 3.04 Prepayments.

 

(a) Optional Prepayments. Subject to any break funding costs payable pursuant to Section 5.02 and prior notice in accordance with Section 3.04(b), the Borrower shall have the right at any time and from time to time to (i) prepay ABR Loans in whole or in part, in a minimum aggregate amount of $1,000,000 or any integral multiple of $500,000 in excess thereof or, if less than $500,000, the remaining balance of the ABR Loans, and (ii) prepay any Eurodollar Borrowing in whole in or in part, in a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof or, if less than $1,000,000, the remaining balance of such Eurodollar Borrowing.  

 

(b) Notice and Terms of Optional Prepayment.  The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, Houston time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of ABR Loans, not later than 12:00 noon, Houston time, on the Business Day of such prepayment.  Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid.  Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof.  Each optional prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02.

 

(c) Mandatory Prepayments.

 

(i) If, after giving effect to any termination or reduction of the Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit Exposures exceeds the total Commitments, then the Borrower shall immediately (and in any event on the Business Day of such termination or reduction) (A) prepay the Borrowings on the date of such termination or reduction in an aggregate principal amount equal to such excess, and (B) if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as cash collateral as provided in Section 2.08(j).

 

(ii) Upon any redetermination of or adjustment to the amount of the Borrowing Base in accordance with Section 2.07 (other than in accordance with Section 2.07(e), Section 2.07(f) or Section 9.11) or Section 8.12(c), if the total Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then the Borrower shall take one or more 

 

 

40

Index

 

of the following actions to cure the Borrowing Base Deficiency: (A) deliver to the Administrative Agent reserve engineering and mortgages covering such oil and gas properties not previously evaluated by the Borrower in the immediately preceding Reserve Report with a value and quality satisfactory to the Lenders in their sole discretion sufficient to eliminate such Borrowing Base Deficiency or (B) prepay the Borrowings in an aggregate principal amount equal to such excess, and  if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as cash collateral as provided in Section 2.08(j).  The Borrower shall be obligated to make such prepayments either within 30 days or in six substantially equal monthly installments, with accrued interest thereon, the first of which shall be due on the thirtieth day following receipt of the New Borrowing Base Notice in accordance with Section 2.07(d); provided that all payments required to be made pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination Date.

 

(iii) Upon any adjustment to the Borrowing Base pursuant to Section 2.07(e), Section 2.07(f) or Section 9.11, if the total Revolving Credit Exposures exceeds the Borrowing Base as adjusted, then the Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal to such excess, and (B) if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as cash collateral as provided in Section 2.08(j).  The Borrower shall be obligated to make such prepayment and/or deposit of cash collateral (x) in the case of an adjustment to the Borrowing Base pursuant to Section 2.07(e), within one Business Day after the applicable Permitted Additional Senior Notes are issued, (y) in the case of an adjustment to the Borrowing Base pursuant to Section 2.07(f), within one Business Day after the date on which the Borrower receives written notice from the Administrative Agent of the reduced amount of the Borrowing Base and (z) in the case of an adjustment to the Borrowing Base pursuant to Section 9.11, within one Business Day of the date it or any of the Restricted Subsidiaries receives cash proceeds as a result of the applicable disposition; provided that all payments required to be made pursuant to this Section 3.04(c)(iii) must be made on or prior to the Termination Date.

 

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

 

(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.

 

 

41

Index

 

Section 3.05 Fees.

 

(a) Commitment Fees.  Subject to Section 4.03(c)(i), the Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the rate per annum of 0.50% on the average daily amount of the unused amount of such Lender’s Commitment during the period from and including the date of this Agreement to but excluding the Termination Date.  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 such commitment fees 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 a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate equal to the Applicable Margin used to determine the interest rate applicable from time to time 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; provided that notwithstanding the foregoing if an Event of Default has occurred and is continuing, or if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not paid when due, whether at stated maturity, upon acceleration or otherwise, then at the direction of the Required Lenders, the participation fee shall accrue at a rate equal to two percent (2%) plus the Applicable Margin for ABR Loans, but in no event to exceed the Highest Lawful Rate, (ii) to the Issuing Bank a fronting fee, which shall accrue at a rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, provided that in no event shall such fee be less than $500.00 during any quarter, and (iii) to the Issuing Bank, for its own account, its standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder.  Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be payable on receipt of written demand setting forth such amounts with reasonable particularity.  Any other fees payable to the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days after receipt of written demand setting forth such amounts with reasonable particularity.  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 such fees 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).

 

 

42

Index

 

(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, except as otherwise provided in Section 2.08(a), 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, Houston 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 the Issuing Bank as expressly provided herein and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the Persons entitled thereto.  The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  All payments hereunder shall be made in dollars.

 

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

 

(c) Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and 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; provided that (i) if any such 

 

 

43

Index

 

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 returned 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 to a Lender pursuant to Section 5.04(b) or pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any other Credit Party 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 subject to Section 12.08, any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

 

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

 

Section 4.03 Payments and Deductions to a Defaulting Lender.

 

(a) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(a), Section 2.08(d), Section 2.08(e) or Section 4.02 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 in cash.

 

(b) If a Defaulting Lender (or a Lender who would be a Defaulting Lender but for the expiration of the relevant grace period) as a result of the exercise of a set-off shall have received a payment in respect of its Revolving Credit Exposure which results in its Revolving Credit Exposure being less than its Applicable Percentage of the aggregate Revolving Credit Exposures, then no payments will be made to such Defaulting Lender until such time as such Defaulting Lender shall have complied with Section 4.03(c) and all amounts due and owing to the Lenders has been equalized in accordance with each Lender’s respective pro rata share of the Obligations.  Further, if at any time prior to the acceleration or maturity of the Loans, the Administrative Agent shall receive any payment in respect of principal of a Loan or a reimbursement of an LC Disbursement while one or more Defaulting Lenders shall be party to 

 

 

44

Index

 

this Agreement, the Administrative Agent shall apply such payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its pro rata share until such time as such Borrowing(s) are paid in full or each Lender (including each Defaulting Lender) is owed its Applicable Percentage of all Loans then outstanding.  After acceleration or maturity of the Loans, subject to the first sentence of this Section 4.03(b), all principal will be paid ratably as provided in Section 10.02(c).

 

(c) Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

 

(i) Fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 3.05.

 

(ii) The Commitment, the Maximum Credit Amount and the outstanding principal balance of the Loans of, and the participation interests in Letters of Credit held by, such Defaulting Lender shall not be included in determining whether all Lenders, the Required Lenders or the Majority Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 12.02); provided that any waiver, amendment or modification requiring the consent of each affected Lender shall require the consent of such Defaulting Lender if it is an affected Lender; and provided further that no Defaulting Lender shall participate in any redetermination or affirmation of the Borrowing Base, but the Commitment of any Defaulting Lender (i.e. such Defaulting Lender’s Applicable Percentage of the Borrowing Base) may not be increased without the consent of such Defaulting Lender.

 

(iii) If any LC Exposure exists at the time a Lender becomes a Defaulting Lender, then:

 

(A) all or any part of such LC Exposure shall be automatically reallocated (effective as of the date such Lender becomes a Defaulting Lender) among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent (x) the sum of all Non-Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not exceed the total of all non-Defaulting Lenders’ Commitments and (y) no Default or Event of Default has occurred and is continuing at such time;

 

(B) if the reallocation described in clause (A) above cannot, or can only partially, be effected, then the Borrower shall, within three (3) Business Days following the Borrower’s receipt of written notice by the Administrative Agent, cash collateralize such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (A) above) in accordance with the procedures set forth in Section 2.08(j) for so long as such LC Exposure is outstanding;

 

(C) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to this Section 4.03, then the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 3.05(b) with respect to 

 

 

45

Index

 

such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;

 

(D) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (A) above, then the fees payable to the Lenders pursuant to Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages after giving effect to such reallocation; or

 

(E) if any Defaulting Lender’s LC Exposure is neither cash collateralized nor reallocated pursuant to Section 4.03(c), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all letter of credit fees payable under Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until such LC Exposure is cash collateralized and/or reallocated.

 

(d) So long as any Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the Defaulting Lender’s LC Exposure will be 100% covered by the Commitments of the Non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 4.03(c)(iii)(B), and participating interests in any such newly issued or increased Letter of Credit shall be allocated among Non-Defaulting Lenders in a manner consistent with Section 4.03(c)(iii)(A) (and Defaulting Lenders shall not participate therein).

 

(e) In the event that the Administrative Agent, the Borrower and the Issuing Bank each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the LC Exposures of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date, if necessary as a result of a Loan funding pursuant to Section 2.08(e), such Lender shall purchase at par such of the Loans of the other Lenders  as the Administrative shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.

 

Section 4.04 Disposition of Proceeds.  The Security Instruments contain an assignment by the Borrower and/or the Guarantors unto and in favor of the Administrative Agent for the benefit of the Lenders of all of the Borrower’s or each Guarantor’s interest in and to production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property. The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Obligations and other obligations described therein and secured thereby.  Notwithstanding the assignment contained in such Security Instruments, (a) the Administrative Agent and the Lenders agree that, so long as no Event of Default has occurred and is continuing, 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 relevant Credit Party 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 relevant Credit Party so long as no Event of Default has occurred and is continuing.

 

 

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Index

 

ARTICLE V

Increased Costs; Break Funding Payments; Taxes; Illegality

 

Section 5.01 Increased Costs.

 

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

 

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or

 

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

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

 

(b) Capital Requirements.  If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

 

(c) Certificates.  A certificate of a Lender or the Issuing Bank setting forth in reasonable detail the computation of the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in Section 5.01(a) or (b) shall be delivered to the Borrower contemporaneously with any request for payment under Section 5.01(a) or (b).  Such certificate shall be conclusive absent manifest error and state that such Lender or the Issuing Bank (as the case may be) is charging similar costs to similarly situated borrowers at such time.  The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 30 days after receipt thereof.

 

(d) Effect of Failure or Delay in Requesting Compensation.  Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section 5.01 for any increased costs or reductions incurred more 

 

 

47

Index

 

than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

Section 5.02 Break Funding Payments.  In the event of (a) the payment of any principal of any Eurodollar Loan or an assignment of any Eurodollar Loan pursuant to Section 5.04(b) in each case 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, or (c) the failure to borrow (for a reason other than the failure of a Lender to make a Loan when obligated to do so), convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, 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 in reasonable detail the computation of any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.02 shall be delivered to the Borrower contemporaneously with any request for payment under this Section 5.02.  Such certificate shall be conclusive absent manifest error and state that such Lender or the Issuing Bank (as the case may be) is charging similar costs to similarly situated borrowers at such time.  The Borrower shall pay such Lender the amount shown as due on any such certificate within 30 days after receipt thereof.

 

Section 5.03 Taxes.

 

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

 

 

48

Index

 

the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

 

(b) Payment of Other Taxes by the Borrower.  The Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c) Indemnification by the Borrower.  The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 30 days after written demand therefor, which demand shall contain an invoice setting forth in reasonable detail the amounts subject to indemnification under this Section 5.03(c), for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 5.03) and any penalties that are not the fault of such indemnified Person, 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.  For the avoidance of doubt, no indemnification shall be required under this Section 5.03(c) for any and all present or future stamp or documentary taxes or any other excise or Property taxes, charges or similar levies arising from any transfer of an interest hereunder between parties unrelated to the Borrower.  A certificate of the Administrative Agent, a Lender or the Issuing Bank setting forth in reasonable detail the calculations of the amount of such payment or liability under this Section 5.03 shall be delivered to the Borrower contemporaneously with any request for payment under this Section 5.03 and shall be conclusive absent manifest error.

 

(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) Tax Documentation.  Each Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Code and is not an exempt recipient described under Section 1.6049-4(c)(1)(ii)(m) of the Treasury Regulations shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, properly completed and executed originals of Internal Revenue Service Form W-9 or such other documentation prescribed by applicable law or reasonably requested by the Borrower as will enable the Borrower to determine that such Lender is not subject to backup withholding or information reporting requirements.  Each Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate.

 

 

49

Index

 

If a payment made to a Lender or other recipient by or on account of any obligation of the Borrower hereunder or under any other Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Lender or other recipient 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 or other recipient 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 or other recipient has or has not complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this Section 5.03(e), “FATCA” shall include amendments made to FATCA after the date of this Agreement.

 

(f) Tax Refunds.  If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes  as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 5.03, it shall promptly pay over an amount equal to 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 reasonable out-of-pocket expenses in connection therewith 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 that are not the fault of such Person, interest, or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.  This 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.

 

Section 5.04 Mitigation Obligations; Replacement of Lenders.

 

(a) Designation of Different Lending Office.  If any Lender requests compensation under Section 5.01, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable 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 in any material respect.  The Borrower hereby agrees to pay all 

 

 

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Index

 

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 asserts an illegality under Section 5.05, (iv) any Lender is a Defaulting Lender, (v) any Lender does not consent to any proposed increase in or reaffirmation of the Borrowing Base, (vi) in connection with any consent to or approval of any proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender or the consent of each Lender affected thereby, the consent of the Required Lenders shall have been obtained but any Lender has not so consented to or approved such proposed amendment, waiver, consent or release, or (vii) in connection with any consent to or approval of any proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of the Required Lenders, the consent of the Majority Lenders shall have been obtained but any Lender has not so consented to or approved such proposed amendment, waiver, consent or release, then in any such case, 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), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if such 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, (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) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 5.01, for payments required to be made pursuant to Section 5.03 or an illegality under Section 5.05, such assignment will result in a reduction in such compensation or payments or avoid the illegality.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.  Each Lender hereby agrees to make such assignment and delegations required under this Section 5.04(b).

 

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 last day of the then current Interest Period for such Affected Loan) and, to the extent that Affected Loans are so made as (or 

 

 

51

Index

 

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 the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date 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 fees and amounts due and payable on or prior to the Effective Date, including, to the extent invoiced prior to the Effective Date, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder (including, without limitation, to the extent invoiced prior to the Effective Date, the fees and expenses of Vinson & Elkins L.L.P., counsel to the Administrative Agent).

 

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

 

(c) The Administrative Agent shall have received certificates of the appropriate State agencies of each of the States in which the Borrower or applicable Guarantor, as the case may be, is organized with respect to the existence, qualification and good standing of the Borrower and each Guarantor.

 

(d) The Administrative Agent shall have received a compliance certificate which shall be substantially in the form of Exhibit D, duly and properly executed by a Responsible Officer and dated as of the date of 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 from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Guaranty Agreement and the other Security Instruments described on Exhibit F-1.  In 

 

 

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Index

 

connection with the execution and delivery of such Security Instruments, the Administrative Agent shall:

 

(i) be reasonably satisfied that such Security Instruments create first priority, perfected Liens (provided that Liens which are permitted by the terms of Section 9.03 to attach to the Mortgaged Properties may exist and have whatever priority such Liens have at such time under applicable law) on at least 80% of the total value of the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries evaluated in the Initial Reserve Report; and

 

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

 

(g) The Administrative Agent shall have received an opinion of Baker Botts L.L.P., special counsel to the Borrower, substantially in the form of Exhibit E hereto.

 

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

 

(i) The Administrative Agent shall have received title information in form and substance reasonably acceptable to the Administrative Agent (it being understood that title information with respect to Oil and Gas Properties of the Borrower and the Restricted Subsidiaries located in the Barnett Shale prepared in accordance with the Title Policies and Procedures shall be acceptable to the Administrative Agent) setting forth the status of title to at least 75% of the total value of the Oil and Gas Properties evaluated in the Initial Reserve Report.  It is understood and agreed that title information with respect to Oil and Gas Properties of the Borrower and the Restricted Subsidiaries located in the Barnett Shale shall be deemed satisfactory if such title information meets the qualifications described in the Title Policies and Procedures for establishment of satisfactory title such that no additional curative actions need be taken pursuant to the requirements set forth in the Title Policies and Procedures.

 

(j) The Administrative Agent shall have received a certificate of a Responsible Officer certifying that the Credit Parties have received all consents and approvals required by Section 7.03.

 

(k) The Administrative Agent shall have received (i) the financial statements referred to in Section 7.04(a) and (ii) the Initial Reserve Report accompanied by a Reserve Report Certificate.

 

(l) The Administrative Agent shall have received appropriate UCC search reports from the jurisdiction of organization of each of the Credit Parties reflecting no prior Liens (other than those being assigned or released on or prior to the Effective Date or Liens permitted by Section 9.03) encumbering the Properties of such Credit Party.

 

(m) The Administrative Agent shall have received evidence that, on the date of the initial funding of Loans hereunder, (i) the loans and other Debt of the Borrower outstanding under the Existing Credit Agreement shall be paid in full with the proceeds of such initial 

 

 

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Index

 

funding, (ii) the commitments of the lenders thereunder shall be terminated and (iii) all Liens securing the Existing Credit Agreement shall be released.

 

(n) The Administrative Agent shall be reasonably satisfied that, after giving effect to the making of the Loans to be made on the Effective Date, the application of the proceeds thereof and the issuance of any Letters of Credit to be issued on the Effective Date, Availability will be greater than or equal to the greater of (i) 10% of the Borrowing Base and (ii) $25,000,000.

 

(o) The Administrative Agent shall have received a certificate of a Responsible Officer certifying it has not assigned, terminated, sold or unwound any hedge position under any Hedge Agreement disclosed to the Lenders on January 14, 2011 in a report prepared by Asset Risk Management and has not created any off-setting position (whether evidenced by a floor, put or Hedge Agreement) with respect to any such hedge position if the effect of such action, after taking into account the net hedging position under all Hedge Agreements of the Borrower and the Restricted Subsidiaries outstanding on the Effective Date taken as a whole (including any other Hedge Agreements executed contemporaneously with the taking of such action), was to cancel any of the Borrower’s or any of the Restricted Subsidiaries’ positions under such Hedging Agreements.

 

(p) The Administrative Agent shall have received such other documents as the Administrative Agent or special counsel to the Administrative Agent may reasonably request.

 

The Administrative Agent shall notify the Borrower and the Lenders promptly of the occurrence of the Effective Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 12.02) at or prior to 2:00 p.m., Houston time, on February 19, 2011 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

 

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 the Issuing Bank to issue, amend (to increase the amount or extend the term), renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:

 

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

 

(b) With respect to Loans made and/or Letters of Credit issued on the Effective Date, 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 on and as of the 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 Effective Date, such representations and warranties shall continue to be true and correct as of such specified earlier date, and (ii) with respect to any Borrowing or issuance, amendment, renewal or extension of any Letter of 

 

 

54

Index

 

Credit after the Effective Date, 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 or a request for a Letter of Credit in accordance with Section 2.08(b), as applicable.

 

Each request for a Borrowing and each request for the issuance, amendment (to increase the amount or extend the term), 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 Sections 6.02(a) and 6.02(b).

 

ARTICLE VII

Representations and Warranties

 

The Borrower represents and warrants to the Lenders that:

 

Section 7.01 Organization; Powers.  Each of the Borrower and its Restricted Subsidiaries (a) is validly existing and in good standing under the laws of the jurisdiction of its organization and (b) 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 conducted at the time in question, 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 Credit Party’s corporate or limited liability company powers and have been duly authorized by all necessary corporate or limited liability company and, if required, stockholder or member action.  Each Loan Document to which any Credit Party is a party has been duly executed and delivered by such Credit Party and constitutes a legal, valid and binding obligation of such Credit 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 (i) such as have 

 

 

55

Index

 

been obtained or made and are in full force and effect, (ii) the recordings and filings necessary to perfect the Liens created pursuant to the Security Instruments, (iii) those third party approvals or consents which, if not made or obtained, would not cause a Default hereunder or could not reasonably be expected to have a Material Adverse Effect and (iv) the filing of any required documents with the SEC, (b) will not violate any applicable law or regulation or the Organizational Documents of the Borrower or any Restricted Subsidiary or any order of any Governmental Authority binding upon the Borrower or any Restricted Subsidiary (except for such violations that would not reasonably be expected to have a Material Adverse Effect), (c) will not violate or result in a default under any indenture, agreement or other instrument evidencing Material Indebtedness binding upon the Borrower or any Restricted Subsidiary or its Properties, or give rise to a right thereunder to require any payment to be made by the Borrower or such Restricted Subsidiary and (d) will not result in the creation or imposition of any Lien on any Property of the Borrower or any Restricted Subsidiary (other than the Liens created by the Loan Documents).

 

Section 7.04 Financial Condition; No Material Adverse Change.

 

(a) The Borrower has heretofore furnished to the Lenders (i) its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of and for the fiscal year ended December 31, 2009 and reported on by KPMG, LLP, independent public accountants and (ii) its unaudited consolidated balance sheet and related statements of operations and cash flows as of and for the fiscal quarter ended September 30, 2010.  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 date and for such period in accordance with GAAP.

 

(b) Since December 31, 2009, there has been no event, development or circumstance that has had a Material Adverse Effect.

 

(c) As of the date of this Agreement, other than the Borrower’s $400,000,000 8.625% Senior Notes due 2018, neither the Borrower nor any Restricted Subsidiary has any material Debt (including Disqualified Capital Stock) or any material contingent liabilities, material off-balance sheet liabilities or partnerships, material liabilities for taxes, material unusual forward or long-term commitments or material unrealized or anticipated losses from any unfavorable commitments, that are required to be disclosed in the Financial Statements by GAAP and are not so referred to or reflected or provided for in the Financial Statements or otherwise disclosed prior to the date hereof in writing to the Administrative Agent and the Lenders.

 

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, in writing, against or affecting the Borrower or any of the Restricted Subsidiaries (i) not fully covered by insurance (except for normal deductibles) as to which there is a reasonable possibility of an adverse determination 

 

 

56

Index

 

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 could reasonably be expected to result in, a Material Adverse Effect.

 

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

 

(a) the Borrower and the Restricted Subsidiaries and each of their respective Properties and operations thereon are, and to the knowledge of the Borrower, 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 (it being understood that the term “Properties” as used in this Section 7.06 shall not include surface interests owned by Persons other than the Borrower or any Restricted Subsidiary lying over any mineral interests of the Borrower or any Restricted Subsidiary), with all such Environmental Permits being currently in full force and effect, and no Responsible Officer of the Borrower has received any written notice or otherwise has knowledge that any such existing Environmental Permit will be revoked or that any application for any new Environmental Permit or renewal of any existing Environmental Permit will be protested or denied.

 

(c) there are no claims, demands, suits, orders, inquiries, or proceedings concerning any violation of, or any liability (including as a potentially responsible party) under, any applicable Environmental Laws that is pending or, to the knowledge of a Responsible Officer of the Borrower, threatened, in writing, against the Borrower or any of the Restricted Subsidiaries 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 of the Restricted Subsidiaries contains or, to the knowledge of a Responsible Officer of the Borrower, has 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 threatened Release of Hazardous Materials at, on, under or from any Credit Party’s Properties, there are no investigations, remediations, abatements, removals or monitorings of Hazardous Materials required under applicable Environmental Laws at such Properties, and none of such Properties are adversely affected by any Release or threatened Release of a Hazardous Material originating or emanating from any 

 

 

57

Index

 

other real property, where any of the foregoing could result in the imposition of any liability on or any restrictions on the operations of any Credit Party with respect to Oil and Gas Properties constituting a material portion of the Borrowing Base pursuant to Environmental Laws.

 

(f) neither the Borrower nor any of the Restricted Subsidiaries 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 of the Restricted Subsidiaries’ Properties and, to the Borrower’s knowledge, there are no conditions or circumstances that could reasonably be expected to result in the receipt of such written notice.

 

(g) to the Borrower’s knowledge, 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 the Borrower’s or any of the Restricted Subsidiaries’ Properties that could reasonably be expected to form the basis for a claim for damages or compensation.

 

(h) the Borrower and the Restricted Subsidiaries have made available to the Lenders complete and correct copies of all current 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 Credit Party’s possession or control and relating to their respective Properties or operations thereon.

 

Section 7.07 Compliance with Laws; No Default.

 

(a) Each of the Borrower and the Restricted Subsidiaries is in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, except where the failure to be in compliance, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

(b) No Default has occurred and is continuing.

 

Section 7.08 Investment Company Act.  No Credit Party is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, and subject to regulation and registration as such under, the Investment Company Act of 1940, as amended.

 

Section 7.09 Taxes.  Each of the Borrower and the Subsidiaries has timely filed or caused to be filed all Tax returns 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 or the filing of returns that are being contested in good faith by appropriate proceedings and for which the Borrower, such Restricted Subsidiary or such Unrestricted 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; provided that, in the case of Taxes or Tax returns of any Unrestricted Subsidiary, this representation and warranty shall only apply to those Taxes (and returns with respect to such Taxes) for which the Borrower or any of the Restricted Subsidiaries could be held liable by the Governmental Authority that assessed such 

 

 

58

Index

 

Taxes.  The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of Taxes are, in the reasonable opinion of the Borrower, adequate in all material respects.  No Tax Lien has been filed against any Property of the Borrower or any Subsidiary that would reasonably be expected to have a Material Adverse Effect and, to the knowledge of the Borrower, no claim is being asserted with respect to any Tax that, if unpaid, would reasonably be expected to have a Material Adverse Effect.

 

Section 7.10 ERISA.  Except to the extent noncompliance could not reasonably be expected to have a Material Adverse Effect:

 

(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, established and maintained in substantial compliance with its terms, ERISA and, where applicable, the Code.

 

(c) No act, omission or transaction with respect to any Plan has occurred which could result in imposition on any Credit Party or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA.

 

(d) Full payment when due has been made of all amounts which the Borrower, any Restricted Subsidiary 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.

 

(e) Except as set forth on Schedule 7.10(e), neither the Borrower nor any Restricted Subsidiary nor any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the Borrower, any Restricted Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material liability.

 

(f) Neither the Borrower nor any Restricted Subsidiary 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 employee pension benefit plan, as defined in section 3(2) of ERISA, that is subject to Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

 

Section 7.11 Disclosure; No Material Misstatements.  None of the financial statements, certificates, reports or other written information (other than Reserve Reports and any information delivered in connection therewith) furnished by or on behalf of the Borrower or any Restricted Subsidiary to the Arranger, the Administrative Agent or any Lender pursuant to this Agreement or any other Loan Document or delivered by the Borrower or any Restricted Subsidiary to the Administrative Agent or any Lender hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the

 

 

59

Index

 

circumstances under which they were made, not materially misleading on the date when furnished; provided that with respect to financial estimates, projected or forecasted financial information and other forward-looking information, the Borrower represents and warrants only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation; it being understood that (1) such projections and forecasts, as to future events, are not to be viewed as facts, that actual results during the period(s) covered by any such projections or forecasts may differ significantly from the projected or forecasted results and that such differences may be material and that such projections and forecasts are not a guarantee of financial performance, and (2) no representation is made with respect to information of a general economic or general industry nature.  There are no statements or conclusions in any Reserve Report or in any information delivered in connection therewith which are based upon or include materially misleading information of a material fact or fail to take into account material information regarding the material matters reported therein, it being understood that projections concerning volumes attributable to the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries and production and cost estimates contained in each Reserve Report and in other information delivered in connection therewith are necessarily based upon professional opinions, estimates and projections and that no warranty is made with respect to such opinions, estimates and projections.

 

Section 7.12 Insurance.  Each of the Borrower and the Restricted Subsidiaries has (a) all insurance policies sufficient for the compliance in all material aspects by each of them with all material Governmental Requirements and all material agreements to which the Borrower or such Restricted Subsidiary is a party and (b) insurance coverage in at least the 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 the 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.  Except as permitted under Section 9.14, neither the Borrower nor any Restricted Subsidiary is a party to any material agreement or arrangement or is subject to any order, judgment, writ or decree, which either prohibits or purports to prohibit it from granting Liens to the Administrative Agent and the Lenders on or in respect of its Properties to secure the Obligations.

 

Section 7.14 Subsidiaries.  All of the Subsidiaries are set forth on Schedule 7.14 or have been disclosed in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders) as a supplement to Schedule 7.14.  Schedule 7.14, as supplemented from time to time, identifies each Subsidiary as either Restricted or Unrestricted, and each Restricted Subsidiary on such schedule is a Wholly-Owned Subsidiary.

 

Section 7.15 Location of Business and Offices.  The Borrower’s jurisdiction of organization is Texas; the name of the Borrower as listed in the public records of its jurisdiction of organization is Carrizo Oil & Gas, Inc.; and the organizational identification number of the Borrower in its jurisdiction of organization is 0128552700.  The Borrower’s principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as 

 

 

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set forth in a notice delivered in accordance with Section 12.01(c)).  Each Restricted Subsidiary’s jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office is stated on Schedule 7.15 (or as set forth in a notice delivered pursuant to Section 8.01(k) in accordance with Section 12.01).

 

Section 7.16 Properties; Titles, Etc.

 

(a) Each of the Borrower and the Restricted Subsidiaries has good and defensible title to the Oil and Gas Properties evaluated in the most recently delivered Reserve Report (other than those disposed of in compliance with Section 9.11 since delivery of such Reserve Report and those title defects disclosed in writing to the Administrative Agent), and good title to all its personal Properties, in each case, free and clear of all Liens other than (i) in the case of Properties other than Oil and Gas Properties, Liens permitted by Section 9.03 and (ii) in the case of Oil and Gas Properties, Liens permitted by the terms of Section 9.03 to exist on Oil and Gas Properties.  After giving full effect to the Liens permitted by Section 9.03, the Borrower or the Restricted Subsidiary specified as the owner owns the net interests in production attributable to the Hydrocarbon Interests as reflected in the most recently delivered Reserve Report and Exhibit A to any mortgage or deed of trust (including those delivered on the Effective Date), in each case as of the date delivered, and, except as described in such Reserve Report or such Exhibit A, in each case as of the date delivered, the ownership of such 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 Property set forth in such Reserve Report or such Exhibit A that is not offset by a corresponding proportionate increase in the Borrower’s or such Restricted Subsidiary’s net revenue interest in such Property.

 

(b) All material leases and agreements necessary for the conduct of the business of the Borrower and the Restricted Subsidiaries are valid and subsisting and in full force and effect, except to the extent any failure to be valid and subsisting and in full force and effect could not reasonably be expected to have a Material Adverse 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 agreement which could reasonably be expected to have a Material Adverse Effect.

 

(c) The rights and Properties presently owned, leased or licensed by the Borrower and the Restricted Subsidiaries including all easements and rights of way, include all rights and Properties reasonably necessary to permit the Borrower and the Credit Parties to conduct their business, except to the extent any failure to satisfy the foregoing could not reasonably be expected to have a Material Adverse Effect.

 

(d) All of the Properties of the Borrower and the Restricted Subsidiaries (other than the Oil and Gas Properties, which are addressed in Section 7.17) 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 to the extent any failure to satisfy the foregoing could not reasonably be expected to have a Material Adverse Effect.

 

 

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(e) Each of the Borrower and the Restricted Subsidiaries owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual Property material to its business, and the use thereof by each such Person 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 the 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 and material to their businesses, 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 Oil and Gas Properties (and Properties unitized therewith) of the Borrower and the Restricted Subsidiaries have been maintained, operated and developed in a good and workmanlike manner and in conformity with all Governmental Requirements and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries.  Specifically in connection with the foregoing, except for those as could not be reasonably expected to have a Material Adverse Effect, (i) no Oil and Gas Property of the Borrower or any Restricted Subsidiary is subject to having allowable production reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) and (ii) none of the wells comprising a part of the Oil and Gas Properties (or Properties unitized therewith) of the Borrower and the Restricted Subsidiaries is deviated from the vertical more than the maximum permitted by Governmental Requirements, and such wells are, in fact, bottomed under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or in the case of wells located on Properties unitized therewith, such unitized Properties) of the Borrower and the Restricted Subsidiaries.  All pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Borrower or any Restricted Subsidiary that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing which are operated by the Borrower or any Restricted Subsidiary, in a manner consistent with the past practices of the Borrower and the Restricted Subsidiaries (other than those the failure of which to maintain in accordance with this Section 7.17 could not reasonably be expected to have a Material Adverse Effect).

 

Section 7.18 Gas Imbalances, Prepayments.  Except as set forth on Schedule 7.18 or included in the most recently delivered Reserve Report Certificate delivered pursuant to Section 8.11(c) or as disclosed in writing to the Administrative Agent, on a net basis there are no gas imbalances, take or pay or other prepayments which would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons produced from the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries at some future time without then or thereafter receiving full payment therefor exceeding a volume equal to one-half Bcf of gas (on an Mcf equivalent basis) in the aggregate.

 

 

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Index

 

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

 

Section 7.20 Hedge Agreements.  Schedule 7.20, as of the date hereof, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(d), sets forth a true and complete list of all Hedge Agreements of the Borrower and each Restricted Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof (as of the last Business Day of the most recent month preceding such date of delivery for which a mark to market value is reasonably available), all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement.

 

Section 7.21 Use of Loans and Letters of Credit.  The proceeds of the Loans and the Letters of Credit shall be used to refinance amounts outstanding under the Existing Credit Agreement, pay fees, expenses, and transaction costs in connection with this Agreement, for working capital, and for general corporate purposes.  Neither the Borrower nor any Restricted Subsidiary is engaged principally, or as one of its 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.

 

Section 7.22 Solvency.  Immediately after giving effect to the transactions contemplated hereby, (a) the aggregate assets (after giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement), at a fair valuation, of the Credit Parties, taken as a whole, will exceed the aggregate Debt of the Credit Parties on a consolidated basis, as such Debt becomes absolute and matures, (b) no Credit Party will have incurred, has intended to incur or believes that it will incur, Debt beyond its ability to pay such Debt (after taking into account the timing and amounts of cash to be received by it and the amounts to be payable on or in respect of its liabilities, and giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute and matures and (c) no Credit Party will have (and will have no reason to believe that it will have thereafter) unreasonably small capital for the conduct of its business.

 

 

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ARTICLE VIII

Affirmative Covenants

 

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made as of the time of determination) and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

 

Section 8.01 Financial Statements; Other Information.  The Borrower will furnish to the Administrative Agent:

 

(a) Annual Financial Statements.  As soon as available, but in any event in accordance with then applicable law and not later than 90 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied.

 

(b) Quarterly Financial Statements.  As soon as available, but in any event in accordance with then applicable law and not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations 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 (or, in the case of the balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.

 

(c) Certificate of Financial Officer – Compliance.  Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer in substantially the form of Exhibit D hereto (i) certifying as to whether a Default has occurred and is continuing as of the date of such certificate and, if a Default has occurred and is continuing, 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) with the delivery of the financial statements under Section 8.01(a) only, stating whether any change in GAAP or in the application thereof has occurred since December 31, 2009 which materially changes the calculation of any covenant or affects compliance with the terms of this Agreement and, if applicable, specifying the effect of such change on the financial statements accompanying such certificate.

 

 

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(d) Certificate of Financial Officer – Hedge Agreements.  Concurrently with any delivery of financial statements under Section 8.01(a) and Section 8.01(b), a certificate of a Financial Officer, in form and substance reasonably satisfactory to the Administrative Agent, setting forth as of the last day of such fiscal quarter or fiscal year, a true and complete list of all Hedge Agreements of the Borrower and the Restricted Subsidiaries, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark-to-market value thereof (as of the last day of such fiscal quarter or fiscal year), any new credit support agreements relating thereto not listed on Schedule 7.20, any margin required or supplied under any credit support agreement, and the counterparty to each such Hedge Agreement.

 

(e) Certificate of Insurer – Insurance Coverage.  Concurrently with any delivery of financial statements under Section 8.01(a), if requested by the Administrative Agent, a certificate of insurance coverage from each insurer with respect to the insurance required by Section 8.06, in form and substance satisfactory to the Administrative Agent, and, if requested by the Administrative Agent or any Lender, copies of the applicable policies.

 

(f) SEC and Other Filings; Reports to Shareholders.  Promptly after the same become publicly available, copies of all annual, regular, periodic and special reports and registration and proxy statements filed by the Borrower or any Restricted Subsidiary with the SEC or with any national securities exchange.

 

(g) Notices Under Material Instruments. Promptly after receipt, (i) a copy of any notice of default received from any holder or holders of any Senior Notes or any trustee or agent on its or their behalf, to the extent such notice has not otherwise been delivered to the Administrative Agent hereunder and (ii) a copy of any notice or report given to or received from the lenders or any agent or representative on their behalf under the Carrizo UK Facility specifically related to the Borrower’s guaranty obligations thereunder, including any reports or notices relating to cost overruns.

 

(h) Lists of Purchasers.  In connection with the delivery of any Reserve Report to the Administrative Agent pursuant to Section 8.11, a list of (i) the purchasers that accounted for at least 75% of the aggregate volume of Hydrocarbons purchased from the Borrower and the Restricted Subsidiaries in the six-month period prior to the “as of” date of such Reserve Report (in descending order based on volumes purchased) and (ii) to the extent not included in the group of purchasers described in clause (i), each purchaser that accounted for at least 10% of the aggregate volume of Hydrocarbons purchased from the Borrower and the Restricted Subsidiaries in such six-month period.

 

(i) Notice of Sales of Oil and Gas Properties.  In the event the Borrower or any Restricted Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil or Gas Properties or any Equity Interests in any Restricted Subsidiary owning Oil and Gas Properties in accordance with Section 9.11 (other than pursuant to Section 9.11(a)) in a transaction involving consideration in excess of two percent (2%) of the then effective Borrowing Base, prior written notice of such disposition, the consideration to be received in connection therewith, the anticipated date of closing and any other details thereof reasonably requested by the Administrative Agent or any Lender.

 

 

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(j) Issuance of Permitted Additional Senior Notes; Permitted Refinancing Debt.  Promptly upon the closing and consummation of the issuance of any Permitted Additional Senior Notes or the refinancing of any Debt with the proceeds of Permitted Refinancing Debt, a true and correct copy of the material documents relating to such Permitted Additional Senior Notes or such Permitted Refinancing Debt.

 

(k) Information Regarding Borrower and Guarantors.  Prompt written notice (and in any event within ten (10) days prior thereto or such later date as may be reasonably acceptable to the Administrative Agent) of any change (i) in the Borrower’s or any Guarantor’s corporate or limited liability company name, (ii) in the location of the Borrower’s or any Guarantor’s chief executive office or principal place of business, (iii) in the Borrower’s or any Guarantor’s identity or corporate structure, (iv) in the Borrower’s or any Guarantor’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in the Borrower’s or any Guarantor’s federal taxpayer identification number.

 

(l) Production Report and Lease Operating Statements.  Within five Business Days of the delivery of each Reserve Report, a report in form and substance reasonably satisfactory to the Administrative Agent, setting forth, for each calendar month during the period of 12 consecutive calendar months most recently ended prior to the date of such Reserve Report, the volume of production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) for each such calendar month from the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries, and setting forth the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month.

 

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

 

(n) Termination of Hedge Positions.  In the event that the Borrower or any Restricted Subsidiary intends to assign, terminate, sell or unwind any hedge position under any Hedge Agreement upon which the Lenders relied in determining the then-effective Borrowing Base, or create any off-setting position (whether evidenced by a floor, put or Hedge Agreement) with respect to any hedge position under any Hedge Agreement upon which the Lenders relied in determining the then-effective Borrowing Base, and the effect of such action, after taking into account the net hedging position under all then outstanding Hedge Agreements of the Borrower and the Restricted Subsidiaries taken as a whole (including any other Hedge Agreements executed contemporaneously with the taking of such action), would be to cancel any of the Borrower’s or any of the Restricted Subsidiaries’ positions under all such Hedging Agreements, prior written notice of such intent not less than two (2) Business Days prior to the proposed date of such action; provided that such notice need only be provided to the extent that, if the value attributed to such cancelled positions for purposes of determining the then-

 

 

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effective Borrowing Base were excluded from the Borrowing Base at such time, the Borrowing Base would reasonably be expected to be reduced by an amount in excess of 1% thereof.

 

(o) 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 and any reports or other information required to be filed with respect thereto under the Code or under ERISA), or compliance with the terms of this Agreement or any other Loan Document, as the Administrative Agent or any Lender (acting through the Administrative Agent) may reasonably request.

 

Documents required to be delivered pursuant to this Section 8.01 or Section 8.11 may be delivered electronically and shall be deemed to have been so delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto, on its website (located on the date hereof at www.crzo.net) or (ii) on which such documents are posted on the Borrower’s behalf on the website of the SEC or on IntraLinks or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial third-party website or whether sponsored by the Administrative Agent); provided that, the Borrower shall notify the Administrative Agent of the posting of any such documents and the Administrative Agent shall in turn give the Lenders notice of such posting; and provided further that, if requested by the Administrative Agent, the Compliance Certificate to be delivered under Section 8.01(c) shall also be delivered in a tangible, physical version or in .pdf format.

 

Section 8.02 Notices of Material Events.  The Borrower will furnish to the Administrative Agent, promptly after a Responsible Officer obtains knowledge thereof, written notice of the following:

 

(a) the occurrence of any Default;

 

(b) (i) 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 the Borrower or any Subsidiary not previously disclosed in writing to the Administrative Agent as to which there is a reasonable possibility of an adverse determination that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect and (ii) any material adverse development in any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against the Borrower or any Subsidiary (whether or not previously disclosed to the Administrative Agent) that could reasonably be expected to result in a Material Adverse Effect; and

 

(c) any other development that has had a Material Adverse Effect.

 

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

 

Section 8.03 Existence; Conduct of Business.  The Borrower will, and will cause each of the Restricted Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges 

 

 

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and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which its Oil and Gas Properties is located or the ownership of its Properties requires such qualification, except where the failure to so satisfy the foregoing requirements 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 9.10 or any transaction under Section 9.11.

 

Section 8.04 Payment of Taxes.  The Borrower will, and will cause each Subsidiary to, pay or discharge all Tax liabilities of the Borrower or such Subsidiary, as the case may be, before the same shall become delinquent, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, and the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP or (b) the failure to pay or discharge the same could not reasonably be expected to result in a Material Adverse Effect; provided that, in the case of Tax liabilities of any Unrestricted Subsidiary, this covenant shall only apply to those Tax liabilities for which the Borrower or any of the Restricted Subsidiaries could be held liable by the Governmental Authority that assessed the Taxes giving rise to such Tax liabilities.

 

Section 8.05 Operation and Maintenance of Properties.  The Borrower, at its own expense, will, and will cause each of the Restricted Subsidiaries to:

 

(a) operate its Oil and Gas Properties and other material Properties, or cause such Oil and Gas Properties and other material Properties to be operated, in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance with all applicable Governmental Requirements, including, without limitation, applicable proration requirements and Environmental Laws, except, in each case, where the failure to so operate or comply could not reasonably be expected to have a Material Adverse Effect.

 

(b) except to the extent disposed of pursuant to a transaction permitted by this Agreement, keep and maintain all Property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

 

(c) promptly pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements pertaining to its Oil and Gas Properties and will do all other things necessary to keep unimpaired its rights with respect thereto and prevent any forfeiture thereof or default thereunder except, in each case, where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

(d) promptly perform, or make reasonable and customary efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties except, in each case, where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

 

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(e) to the extent neither the Borrower nor a Restricted Subsidiary is the operator of any of its Oil and Gas Properties, the Borrower shall use commercially reasonable efforts to cause the operator to comply with this Section 8.05 except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

Section 8.06 Insurance.  The Borrower will, and will cause each of the Restricted Subsidiaries 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 (provided that this Section 8.06 shall not be breached if an insurance company with which the Borrower or any Restricted Subsidiary maintains insurance becomes financially troubled and the Borrower or such Restricted Subsidiary reasonably promptly obtains coverage from a different, financially sound insurer).  The loss payable clauses or provisions in the 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 or otherwise include the Administrative Agent and the Lenders as “additional insureds” and provide that the insurer will endeavor to give at least 30 days prior notice of any cancellation thereof to the Administrative Agent.

 

Section 8.07 Books and Records; Inspection Rights.  The Borrower will, and will cause each of the Restricted Subsidiaries to, keep proper books of record and account in accordance with GAAP.  The Borrower will, and will cause each of the Restricted Subsidiaries to, permit any representatives designated by the Administrative Agent (or any Lender, provided that such Lender coordinates its visitation with the Administrative Agent), upon reasonable prior notice and no more often than once in the aggregate for the Administrative Agent or the Lenders, as the case may be, in any period of 12 calendar months (unless an Event of Default has occurred and is continuing, in which case there shall be no limit to the number or frequency of such visitations or inspections while such Event of Default is continuing), 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 at the expense of the Administrative Agent or the applicable Lender, as applicable; provided, however, that the Borrower will bear the expenses of any such visitation or inspection made while an Event of Default has occurred and is continuing.

 

Section 8.08 Compliance with Laws.  The Borrower will, and will cause each of the Restricted Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

Section 8.09 Environmental Matters.

 

(a) The Borrower shall at its sole expense: (i) comply, and shall cause its Properties (it being understood that the term “Properties” as used in this Section 8.09 shall not include surface interests owned by Persons other than the Borrower or any Restricted Subsidiary lying over any mineral interests of the Borrower or any Restricted Subsidiary) and 

 

 

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Index

 

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 Release or threaten to Release, and shall cause each Restricted Subsidiary not to Release or threaten to Release, any Hazardous Material on, under, about or from the Borrower’s or any Restricted Subsidiary’s Properties or any other property offsite the Property to the extent caused by the Borrower’s or any Restricted Subsidiary’s operations except in compliance with applicable Environmental Laws, the Release or threatened 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 Environmental Permits, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or the 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 Release or threatened Release of any Hazardous Material on, under, about or from the Borrower’s or any Restricted Subsidiary’s Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material Adverse Effect; (v) conduct, and cause its Restricted Subsidiaries to conduct, their respective operations and businesses in a manner that will not expose any Property or Person to Hazardous Materials that could reasonably be expected to form the basis for a claim for damages or compensation that could reasonably be expected to have a Material Adverse Effect; and (vi) establish and implement, and shall cause each Restricted Subsidiary to establish and implement, such procedures as may be necessary to continuously determine and assure that the Borrower’s and such Restricted Subsidiary’s obligations under this Section 8.09(a) are timely and fully satisfied, except to the extent that the failure to so establish and implement could not reasonably be expected to have a Material Adverse Effect.

 

(b) In the event that a Responsible Officer of the Borrower obtains knowledge of any threatened (in writing) action, investigation or inquiry by any Governmental Authority or any threatened (in writing) demand or lawsuit by any Person against the Borrower or any Restricted Subsidiary or its Properties in connection with any Environmental Laws which (individually or in the aggregate with all other such actions then in existence) could reasonably be expected to have a Material Adverse Effect, the Borrower will notify the Administrative Agent in writing of such action promptly, but in no event later than ten Business Days, after the later of (i) a Responsible Officer obtaining knowledge thereof and (ii) a Responsible Officer determining that such action (individually or in the aggregate with all other such actions then in existence) could reasonably be expected to have a Material Adverse Effect).

 

(c) Upon request by the Administrative Agent and no more than once per year in the absence of any Event of Default (or as otherwise required to be obtained by the Administrative Agent by any Governmental Authority), the Borrower will, and will cause each Restricted Subsidiary to, provide environmental assessments, audits and tests in accordance 

 

 

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with the most current version of the American Society of Testing Materials standards in connection with any future acquisitions of Oil and Gas Properties or other Properties.

 

Section 8.10 Further Assurances.

 

(a) The Borrower at its sole expense will, and will cause each other Credit Party 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 (in regards to errors and mistakes) in, or accomplish the conditions precedent, covenants and agreements of the Borrower or any other Credit Party, 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 Obligations, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate in connection therewith.

 

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

 

Section 8.11 Reserve Reports.

 

(a) On or before April 1st and October 1st of each year, commencing April 1, 2011, the Borrower shall furnish to the Administrative Agent a Reserve Report evaluating the proved Oil and Gas Properties of the Borrower and its Domestic Subsidiaries as of the immediately preceding January 1st and July 1st located within the geographic boundaries of the United States of America (or the Outer Continental Shelf adjacent to the United States of America).  The Reserve Report as of January 1 of each year shall be prepared by one or more Approved Petroleum Engineers, and the July 1 Reserve Report of each year shall be prepared by the Borrower, which shall certify such Reserve Report to be true and accurate and to have been prepared, except as otherwise specified therein, in accordance with the procedures used in the immediately preceding January 1 Reserve Report.

 

(b) In the event of an Interim Redetermination, the Borrower shall furnish to the Administrative Agent a Reserve Report prepared by the Borrower, which shall certify such Reserve Report to be true and accurate and to have been prepared, except as otherwise specified therein, in accordance with the procedures used in the immediately preceding January 1 Reserve Report.  For any Interim Redetermination requested by the Administrative Agent or the Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve Report with an “as of” date as required by the Administrative Agent as soon as possible, but in any event no later than thirty (30) days following the receipt of such request.

 

(c) With the delivery of each Reserve Report, the Borrower shall provide to the Administrative Agent a Reserve Report Certificate from a Responsible Officer certifying 

 

 

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that: (i) there are no statements or conclusions in any Reserve Report or in any information delivered in connection therewith which are based upon or include materially misleading information of a material fact or fail to take into account material information regarding the material matters reported therein (it being understood that projections concerning volumes attributable to the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries and production and cost estimates contained in such Reserve Report and in other information delivered in connection therewith are necessarily based upon professional opinions, estimates and projections and that no warranty is made with respect to such opinions, estimates and projections), (ii) except as set forth in an exhibit to such certificate, the Borrower or any of the Restricted Subsidiaries owns good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to such 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 the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries evaluated in such Reserve Report which would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons either generally or produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries evaluated in the immediately preceding Reserve Report 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 such Oil and Gas Properties that have been so sold and in such detail as reasonably required by the Administrative Agent, (v) attached to such 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 Certificate 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 (vi) attached thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of the total value of the Oil and Gas Properties that the value of such Mortgaged Properties represent.

 

Section 8.12 Title Information.

 

(a) Within 30 days after the delivery to the Administrative Agent of each Reserve Report required by Section 8.11(a) (or such later date as may be acceptable to the Administrative Agent), the Borrower will deliver title information in form and substance reasonably acceptable to the Administrative Agent (it being understood that title information with respect to Oil and Gas Properties of the Borrower and the Restricted Subsidiaries located in the Barnett Shale prepared in accordance with the Title Policies and Procedures shall be acceptable to the Administrative Agent) covering enough of the Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, satisfactory title information on at least 75% of the total value of the Oil and Gas Properties evaluated by such Reserve Report.

 

(b) If title information for additional Properties has been provided under Section 8.12(a), the Borrower shall, within 60 days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Properties that are not permitted by Section 9.03, either (i) cure any such title defects or exceptions (including defects 

 

 

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or exceptions as to priority), (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions (other than Liens which are permitted by Section 9.03) having an equivalent value or (iii) deliver title information in form and substance reasonably acceptable to the Administrative Agent (it being understood that title information with respect to Oil and Gas Properties of the Borrower and the Restricted Subsidiaries located in the Barnett Shale prepared in accordance with the Borrower’s title policies and procedures shall be 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 75% of the value of the Oil and Gas Properties evaluated by such Reserve Report.

 

(c) If any title defect or exception identified by the Administrative Agent pursuant to a notice to the Borrower as described in Section 8.12(b) cannot be cured or the Borrower does not substitute acceptable Mortgaged Properties or the Borrower does not comply with the requirement to provide acceptable title information covering 75% of the value of the Oil and Gas Properties evaluated in the most recent Reserve Report, in each case within the 60-day period described in Section 8.12(b), such default shall not be a Default, but instead the Administrative Agent and/or the Required Lenders shall have the right to exercise the remedy described in the immediately succeeding sentence in their sole discretion from time to time, and any failure to so exercise such remedy at any time shall not be a waiver as to any future exercise of such remedy by the Administrative Agent or the Lenders.  To the extent that the Administrative Agent or the Required Lenders are not satisfied with title to any Mortgaged Property after the 60-day period described in Section 8.12(b) has elapsed, such Mortgaged Property shall not count towards the 75% title requirement and shall be deemed not to have been included in the most recently delivered Reserve Report, 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 Required Lenders to cause the Borrower to be in compliance with the requirement to provide satisfactory title information on 75% of the value of the Oil and Gas Properties evaluated by the most recently delivered Reserve Report.  This new Borrowing Base shall become effective immediately after receipt of such notice.

 

For purposes of this Section 8.12, it is understood and agreed that title information with respect to Oil and Gas Properties of the Borrower and the Restricted Subsidiaries located in the Barnett Shale shall be deemed satisfactory if such title information meets the qualifications described in the Title Policies and Procedures for establishment of satisfactory title such that no additional curative actions need be taken pursuant to the requirements set forth in the Title Policies and Procedures.

 

Section 8.13 Additional Collateral; Additional Guarantors.

 

(a) In connection with each redetermination of the Borrowing Base, the Borrower shall review the Reserve Report delivered in connection therewith and the list of current Mortgaged Properties (as described in Section 8.11(c)(vi)) to ascertain whether the Mortgaged Properties represent at least 80% of the total value of the Oil and Gas Properties evaluated in such Reserve Report.  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 8.11(c), to the Administrative Agent as security for the Obligations a first-priority Lien 

 

 

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interest (provided that Liens which are permitted by the terms of Section 9.03 to attach to the Mortgaged Properties may exist and have whatever priority such Liens have at such time under applicable law) on additional Oil and Gas Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 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 Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.13(b).

 

(b) If (i) the Borrower shall form or acquire a Material Domestic Subsidiary or otherwise determines that any Restricted Subsidiary is a Material Domestic Subsidiary, (ii) the Borrower elects to have a Domestic Subsidiary guarantee the Obligations or (iii) a Domestic Subsidiary incurs or guarantees any Debt for borrowed money in excess of $500,000, then the Borrower shall promptly cause such Subsidiary to guarantee the Obligations pursuant to the Guaranty Agreement.  In connection with any such guaranty, the Borrower shall, or shall cause the relevant Subsidiary, if applicable, to, (A) execute and deliver a supplement to the Guaranty Agreement executed by such Subsidiary, (B) pledge all of the Equity Interests of such new Domestic Subsidiary (including, without limitation, delivery of original stock certificates, if any, evidencing the Equity Interests of such Subsidiary, together with an appropriate undated stock power 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 in connection therewith.

 

(c) In the event that the Borrower or any Domestic Subsidiary becomes the direct owner of a Foreign Subsidiary which would qualify as a Material Domestic Subsidiary if it were a Domestic Subsidiary, then (i) in the case of a Domestic Subsidiary becoming the direct owner, the Borrower shall cause such Domestic Subsidiary to promptly guarantee the Obligations pursuant to the Guaranty Agreement by executing and delivering a supplement to the Guaranty Agreement, (ii) the Borrower shall, or shall cause such Domestic Subsidiary to, pledge sixty six and two-thirds percent (66-2/3%) of all the Equity Interests of such Foreign Subsidiary (including, without limitation, delivery of original stock certificates evidencing such Equity Interests of such Foreign Subsidiary, if any, together with appropriate stock powers for each certificate duly executed in blank by the registered owner thereof) and (iii) the Borrower shall, or shall cause such Domestic Subsidiary to, execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent in connection therewith.

 

Section 8.14 ERISA Compliance.  The Borrower will promptly furnish, and will cause the Restricted Subsidiaries and any ERISA Affiliate to promptly furnish, to the Administrative Agent upon its request (i) promptly after the filing thereof with the United States Secretary of Labor or the Internal Revenue Service, copies of each annual and other material report with respect to each Plan or any trust created thereunder, and (ii) within five (5) Business Days after becoming aware of the occurrence of any material “prohibited transaction,” as described in 

 

 

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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 a Responsible Officer of the Borrower, the applicable Restricted Subsidiary or the applicable ERISA Affiliate, as the case may be, specifying the nature thereof, what action such Person is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service or the Department of Labor with respect thereto.

 

Section 8.15 Marketing Activities.  The Borrower will not, and will not permit any Credit Party to, engage in marketing activities for any Hydrocarbons or enter into any contracts related thereto other than (i) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from their proved Oil and Gas Properties during the period of such contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from proved Oil and Gas Properties of third parties during the period of such contract associated with the Oil and Gas Properties of the Borrower and the Credit Parties that the Borrower or one of its Subsidiaries has the right to market pursuant to joint operating agreements, unitization agreements or other similar contracts that are usual and customary in the oil and gas business and (iii) other contracts for the purchase and/or sale of Hydrocarbons of third parties (A) to the extent the aggregate amount owed by the Borrower and its Restricted Subsidiaries under all such contracts described in this clause (iii) does not exceed an amount equal to 1% of the then-effective Borrowing Base or (B) which have generally offsetting provisions (i.e. corresponding pricing mechanics, delivery dates and points and volumes) such that no “position” is taken and (B) for which appropriate credit support has been taken to alleviate the material credit risks of the counterparty thereto.

 

Section 8.16 Unrestricted Subsidiaries.

 

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

 

(b) Other than pursuant to the UK Cost Overrun Guarantee and any other Guarantee permitted under Section 9.05(g)(iii) or Section 9.05(q), the Borrower will not, and will not permit any of the Restricted Subsidiaries to, incur, assume, guarantee or be or become liable for any Debt of any of the Unrestricted Subsidiaries.

 

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

 

 

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Index

 

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 (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made as of the time of determination) and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

 

Section 9.01 Financial Covenants.

 

(a) Ratio of Total Debt to EBITDAX.  The Borrower will not, as of the last day of any fiscal quarter, permit its ratio of Total Debt as of such date to EBITDAX for the period of four consecutive fiscal quarters ending on such date to be greater than the following:

 

	
Fiscal Quarter Ending

	
Ratio

	
March 31, 2011 through December 31, 2011

	
4.75 to 1.00

	
March 31, 2012 through June 30, 2012

	
4.25 to 1.00

	
September 30, 2012 and thereafter

	
4.00 to 1.00

(b) Current Ratio.  The Borrower will not permit, as of the last day of any fiscal quarter, its ratio of (i) consolidated current assets of the Borrower and the Restricted Subsidiaries (including the unused amount of the total Commitments, but excluding non-cash assets under FAS 133) to (ii) consolidated current liabilities of the Borrower and the Restricted Subsidiaries (excluding (x) non-cash obligations under FAS 133, (y) current maturities under this Agreement and (z) the non-cash effects, if any, of any non-cash stock option re-pricing accrual), in each case determined in accordance with GAAP, to be less than 1.00 to 1.00.  For purposes of determining the Borrower’s compliance with this Section 9.01(b), the Borrower’s options to acquire mineral interests and leases under agency agreements (x) with independent third parties that are not Affiliates or subsidiaries of any Credit Party or (y) with Affiliates of any Credit Party in connection with joint ventures or other transactions approved by an independent committee of the Borrower’s board of directors will be excluded from the calculation of consolidated current liabilities.

 

(c) Maximum Senior Debt to EBITDAX.  The Borrower will not permit, as of the last day of any fiscal quarter, its ratio of Senior Debt as of such date to EBITDAX for the period of four consecutive fiscal quarters ending on such date to be more than 2.50 to 1.00.

 

(d) Minimum EBITDAX to Interest Expense.  The Borrower will not permit, as of the last day of any fiscal quarter, its ratio of EBITDAX for the period of four consecutive fiscal quarters ending on such date to Interest Expense for the period of four consecutive fiscal quarters ending on such date to be less than 2.50 to 1.00.

 

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

 

 

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(a) the Loans and any other Obligations and any guaranty of or suretyship arrangement in respect thereof.

 

(b) Debt of the Borrower and the Credit Parties existing on the date hereof that is reflected in the Financial Statements or in Schedule 9.02, including the Existing Senior Notes, and any Permitted Refinancing Debt in respect thereof.

 

(c) Debt associated with bonds or surety obligations (i) required in connection with self-insurance or the performance of contracts, (ii) required by Governmental Requirements in connection with the operation of the Oil and Gas Properties or (iii) required in connection with the enforcement of rights or claims of the Borrower or any of the Restricted Subsidiaries or in connection with the appeal of judgments that do not result in a Default or an Event of Default.

 

(d) intercompany Debt between the Borrower and any Restricted Subsidiary or between Restricted Subsidiaries to the extent permitted by Section 9.05(g); provided that such Debt is not held, assigned, transferred, negotiated or pledged to any Person other than the Borrower or any of the Restricted Subsidiaries, and, provided further, that any such Debt for borrowed money owed by a Credit Party to a non-Credit Party shall be subordinated to the Obligations on terms set forth in the Guaranty Agreement.

 

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

 

(f) Permitted Additional Senior Notes issued by the Borrower and any guarantees of such Debt by the Borrower or any other Guarantor, provided that (i) at the time of incurring such Debt (A) no Default has occurred and is then continuing and (B) no Default would result from the incurrence of such Debt after giving effect to the incurrence of such Debt (and any concurrent repayment of Debt with the proceeds of such incurrence), (ii) such Debt does not have any scheduled amortization prior to 91 days after the Maturity Date, (iii) such Debt does not mature sooner than 91 days after the Maturity Date, (iv) the covenants applicable to such Debt are not materially more onerous, taken as a whole, than the covenants applicable to the Existing 2018 Notes, (v) the Borrowing Base is reduced pursuant to Section 2.07(e) and prepayment is made to the extent required by Section 3.04(c)(iii), and (vii) the aggregate principal amount of such Permitted Additional Senior Notes does not exceed $400,000,000 at any time; and any Permitted Refinancing Debt in respect thereof.

 

(g) Debt under Capital Leases and Debt secured by Liens permitted under Section 9.03(d) in an aggregate principal amount at any time not to exceed $20,000,000.

 

(h) Debt in the form of guaranties by the Borrower or any of the Restricted Subsidiaries of Debt of (A) the Borrower or any of the Restricted Subsidiaries permitted under this Section 9.02 and (B) other Subsidiaries to the extent an Investment would be permitted under Section 9.05(g)(iii) or Section 9.05(q).

 

(i) Debt owed to insurance companies for premiums on policies required by Section 8.06.

 

 

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Index

 

(j) other Debt not to exceed $5,000,000 (measured as of the date of incurrence) in the aggregate at any one time outstanding.

 

Section 9.03 Liens.  The Borrower will not, and will not permit any of the Restricted Subsidiaries 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 Obligations.

 

(b) Liens described on Schedule 9.03.

 

(c) Excepted Liens.

 

(d) Liens encumbering assets securing Debt incurred to finance the purchase, construction or improvement of such assets (and any refinancings thereof which do not increase the principal amount thereof); provided that (i) the principal amount of the Debt secured by a purchased asset shall not exceed one hundred percent (100%) of the purchase price of such asset, (ii) such Liens shall not extend to or encumber any other asset of any Credit Party other than the agreement and proceeds and individual financings may be cross–collateralized with other asset specific acquisition/construction financings provided by such Person or its Affiliates, and (iii) such Liens shall attach to such purchased, constructed or improved asset within 180 days after such acquisition or the completion of such construction or improvement (or substantially contemporaneously with refinancings of such Debt which do not increase the amount thereof).

 

(e) Liens on the proceeds of insurance policies and unearned or refunded premiums securing Debt owed to an insurance company permitted by Section 9.02(i).

 

(f) Liens on Equity Interests in Unrestricted Subsidiaries and joint ventures that are not Restricted Subsidiaries, and rights directly related to such Equity Interests.

 

(g) Liens on intercompany receivables owing from Carrizo UK Huntington granted in connection with the Carrizo UK Facility to the extent such receivables arise from one or more Investments made in Carrizo UK Huntington in accordance with Section 9.05; provided, that recourse to the Person granting such Lien is limited solely to the Property so pledged.

 

(h) Liens securing obligations or Debt not in excess of $10,000,000 in the aggregate at any time.

 

Section 9.04 Dividends, Distributions and Redemptions; Repayment of Senior Notes.

 

(a) Restricted Payments.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital to its stockholders on account of its Equity Interests or make any distribution of its Property to its Equity Interest holders on account of its Equity Interests, except

 

 

78

Index

 

(i) 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),

 

(ii) Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests,

 

(iii) the Borrower may make Restricted Payments pursuant to and in accordance with equity incentive plans, stock option plans or arrangements or other benefit plans or arrangements for management, employees or directors of the Borrower and the Restricted Subsidiaries in an amount not to exceed $3,000,000 during any fiscal year (with any portion of such $3,000,000 amount that is unused in any fiscal year to be carried forward to successive fiscal years and added to such amount) and $15,000,000 during the term of this Agreement,

 

(iv) the Borrower may make cash payments in lieu of issuing fractional shares in an aggregate amount not exceeding $200,000 during the term of this Agreement,

 

(v) the Borrower may declare and pay distributions of rights to acquire Equity Interests in the Borrower effecting “poison pill” rights plans, provided that any securities or rights so distributed have a nominal fair market value at the time of declaration,

 

(vi) the Borrower may make repurchases, redemptions, defeasances or other acquisitions or retirements for value of (A) any of its Equity Interests in connection with the exercise of stock options or other rights to acquire Equity Interests of the Borrower if such Equity Interests represent a portion of the exercise or exchange price thereof and (B) any of its Equity Interests held by any current or former officers, directors or employees of the Borrower or any of the Restricted Subsidiaries in connection with the exercise or vesting of any equity compensation (including, without limitation, stock options, restricted stock and phantom stock) in order to satisfy any tax withholding obligation with respect to such exercise or vesting; provided that the aggregate amount of Restricted Payments made pursuant to this clause (vi) shall not exceed $500,000 during any fiscal year (with any portion of such $500,000 amount that is unused in any fiscal year to be carried forward to successive fiscal years and added to such amount) and $2,500,000 during the term of this Agreement,

 

(vii) to the extent otherwise constituting a Restricted Payment, the Borrower may make repurchases, redemptions, defeasances or other acquisitions or retirements for value of any rights under any cash and/or equity-settled equity stock appreciation agreement or plan of the Borrower or any Restricted Subsidiary, and

 

(viii) if no Default, Event of Default or Borrowing Base Deficiency exists at the time of declaration, other Restricted Payments in an aggregate amount not to exceed $5,000,000 during any fiscal year (with any portion of such $5,000,000 amount that is unused in any fiscal year to be carried forward to successive fiscal years and added to such amount) and $25,000,000 during the term of this Agreement.

 

(b) Redemption of Senior Notes; Amendment of Indentures. The Borrower will not, and will not permit any of the Restricted Subsidiaries to:

 

 

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Index

 

(i) Redeem the Senior Notes (other than (A) as the result of the conversion of Senior Notes into Equity Interests of the Borrower (other than Disqualified Capital Stock), (B) with the net cash proceeds of a substantially concurrent (for this purpose meaning 150 days) offering of common Equity Interests or Permitted Refinancing Debt, (C) cash payments made in settlement of the Borrower’s obligations under (1) the Existing Convertible Notes Indenture upon the conversion or required repurchase of any Existing Convertible Notes thereunder or (2) any other indenture pursuant to which any convertible notes of the Borrower are issued upon the conversion or required repurchase of any such convertible notes thereunder, and (D) voluntary Redemptions of the Existing Convertible Notes so long as (1) immediately after giving effect to any such Redemption, Availability is greater than or equal to 25% of the Borrowing Base and (2) the aggregate amount paid by the Borrower and the Restricted Subsidiaries to effect all such Redemptions does not exceed $30,000,000); or

 

(ii) amend, modify, waive or otherwise change, consent or agree to any amendment, modification, waiver or other change to, any of the terms of any of the Senior Notes or any of the Indentures pursuant to which the Senior Notes are issued if the effect thereof would be to shorten the maturity of any of the Senior Notes to a date that is earlier than 91 days after the Maturity Date or to shorten the average life of any of the Senior Notes to a period that is shorter than the period from the date of effectiveness of any such amendment, modification, waiver or other change to the date that is 91 days after the then-effective Maturity Date, provided that the foregoing shall not prohibit the execution of supplemental indentures associated with (A) the incurrence of additional Senior Notes to the extent permitted by Section 9.02(f), (B) the issuance of Permitted Refinancing Debt, (C) the addition of guarantors if required by the terms of any Indenture provided such Person complies with Section 8.13(b) or (D) the correction of defects, ambiguities or deficiencies which can be adopted without consent of all or any portion of the holders of the Senior Notes.

 

For the avoidance of doubt, the issuance of Senior Notes pursuant to an Exchange Offer in exchange for previously issued Senior Notes shall not constitute a Redemption of Senior Notes.

 

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

 

(a) Investments reflected in the Financial Statements or which are disclosed in Schedule 9.05 and any refinancings or replacements thereof, provided that the amount of such Investment is not increased.

 

(b) accounts receivable arising in the ordinary course of business and endorsements of negotiable instruments for deposit and collection in the ordinary course of business.

 

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

 

 

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Index

 

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

 

(e) deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the date of such bank or trust company’s most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by S&P or Moody’s, respectively, or, in the case of any Foreign Subsidiary, a bank organized in a jurisdiction in which the Foreign Subsidiary conducts operations having assets in excess of $500,000,000 (or its equivalent in another currency).

 

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

 

(g) Investments (measured on a cost basis) (i) made by the Borrower or any Guarantor in or to the Borrower or any other Guarantor, (ii) made by any Subsidiary in or to the Borrower or any Guarantor and (iii) made by the Borrower or any Guarantor in or to all other Subsidiaries which are not Guarantors which, together with the guaranties permitted by Section 9.02(h)(B), do not at the time of making any such Investment, exceed 2.5% of the consolidated quarterly revenues of the Borrower and the Restricted Subsidiaries for the most recent fiscal quarter for which financial statements have been delivered pursuant to Section 8.01(a) or 8.01(b); provided that Investments made pursuant to the UK Cost Overrun Guarantee shall not be permitted to be made under this clause (iii).

 

(h) Investments (including, without limitation, capital contributions) in general or limited partnerships or other types of entities (each a “venture”) entered into by the Borrower or any of the Restricted Subsidiaries with others; provided that (i) any such venture is engaged exclusively in oil and gas exploration, development, production, processing and related activities, including transportation, (ii) the interest in such venture is acquired on fair and reasonable terms and (iii) such venture interests acquired and capital contributions made (valued as of the date such interest was acquired or the contribution made) do not exceed, in the aggregate at any time outstanding, an amount equal to $15,000,000.

 

(i) Investments in direct ownership interests in additional Oil and Gas Properties and gas gathering systems related thereto or related to or made pursuant to the requirements of 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.

 

(j) the contribution to Carrizo UK Huntington of the North Sea Properties.

 

(k) 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 

 

 

81

Index

 

in respect of such debts or upon the enforcement of any Lien in favor of the Borrower or any of its Restricted Subsidiaries.

 

(l) prepayments on drilling contracts, deposits made for Property acquisitions and advance payments made on undeveloped leases and for configuration of gathering systems or otherwise, in each case in the ordinary course of business of the Borrower and the Restricted Subsidiaries.

 

(m) Investments made as a result of the receipt of non-cash consideration in connection with any disposition of Property permitted hereunder.

 

(n) Investments (i) the consideration for which consists solely of common Equity Interests of the Borrower or warrants, options or other rights to purchase or acquire common Equity Interests of the Borrower or (ii) with up to 100% of the net cash proceeds of an offering of common Equity Interests by the Borrower (to the extent made within 150 days of the closing of such offering), in each case in (A) joint ventures engaging in businesses conducted by companies in the oil and gas industry, (B) any Unrestricted Subsidiary or non-Guarantor Restricted Subsidiary or (C) any other Person, so long as, immediately after giving effect to any such Investment made pursuant to this clause (C), Availability is equal to or greater than 30% of the Borrowing Base.

 

(o) Investments made in connection with the purchase, lease or other acquisition of tangible assets of any Person, and investments made in connection with the purchase, lease or other acquisition of the Equity Interests of any Person (including by the merger or consolidation of such Person into the Borrower or any of the Restricted Subsidiaries); provided that (i) any newly acquired Material Domestic Subsidiary shall promptly comply with the requirements of Section 8.13(b), (ii) no Default exists immediately before and immediately after giving effect to such Investment and (iii) after giving effect to such Investment, the Borrower shall be in pro forma compliance with the covenants set forth in Section 9.01 as of the last day of the fiscal quarter most recently ended for which financial statements have been delivered pursuant to Section 8.01(a) or 8.01(b), as the case may be, with such covenants being calculated as if such acquisition had occurred on the first day of the period of four consecutive fiscal quarters ending on such day.

 

(p) Investments by the Borrower or any of the Restricted Subsidiaries consisting of profit interests in Avista JV Partner and Investments received by the Borrower or any of the Restricted Subsidiaries in exchange for such profit interests in connection with a merger, conversion, consolidation or other combination of Avista JV Partner with another Person.

 

(q) other Investments made after the Effective Date (including Investments in Unrestricted Subsidiaries and Foreign Restricted Subsidiaries made after the Effective Date) not to exceed $80,000,000 (measured on a cost basis) in the aggregate at any time; provided that no Event of Default exists or would result from such Investment.

 

Section 9.06 Nature of Business.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, allow any material change to be made in the character of its business 

 

 

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as an independent oil and gas exploration and production company and activities reasonably incidental or related thereto.

 

Section 9.07 Proceeds of Notes.  The Borrower will not permit the proceeds of the Notes to be used for any purpose other than those permitted by Section 7.21.  Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which would 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 a statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

 

Section 9.08 ERISA Compliance.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, at any time to the extent that any of the following could reasonably be expected to have a Material Adverse Effect:

 

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

 

(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, any Restricted Subsidiary or any ERISA Affiliate is required to pay as contributions thereto.

 

(c) contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to (i) any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any material liability, except as set forth on Schedule 9.08(c), or (ii) any employee pension benefit plan, as defined in section 3(2) of ERISA, that is subject to Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

 

Section 9.09 Sale or Discount of Receivables.  Except for receivables obtained by the Borrower or any of the Restricted Subsidiaries 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 of the Restricted Subsidiaries to, discount or sell (with or without recourse) any of its notes receivable or accounts receivable.

 

 

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Section 9.10 Mergers, Etc.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, merge into or with or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (whether in one transaction or in a series of related transactions) all or substantially all of its Property to any other Person (whether now owned or hereafter acquired) (any such transaction, a “consolidation”); provided that (a) any Restricted Subsidiary may participate in a consolidation with (i) the Borrower so long as the Borrower shall be the continuing or surviving entity or transferee, as applicable, or (ii) any other Subsidiary (provided that if one of such Subsidiaries is a Wholly-Owned Subsidiary, then the continuing or surviving Person or transferee, as applicable, shall be a Wholly-Owned Subsidiary), (b) the Borrower and the Restricted Subsidiaries may engage in Sales permitted by clauses (a) through (e) of Section 9.11 and Sales of Property of any type not restricted under Section 9.11, and (c) the Borrower and the Restricted Subsidiaries may make Investments permitted by Section 9.05.

 

Section 9.11 Sale of Oil and Gas Properties.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, sell, assign (other than assignments intended to convey a Lien), farm-out, convey or otherwise transfer (collectively, a “Sale”) any Oil and Gas Property or Equity Interests of any Restricted Subsidiary owning Oil and Gas Properties to any Person other than the Borrower or any Restricted Subsidiary, except for:

 

(a) the Sale of Hydrocarbons and geological and seismic data in the ordinary course of business;

 

(b) farmouts of undeveloped acreage to which no proved reserves are attributable and assignments in connection with such farmouts;

 

(c) the Sale of equipment that is no longer necessary or useful for the business of the Borrower or such Restricted Subsidiary or is replaced by equipment of at least comparable value and use, or the Sale of surplus equipment;

 

(d) unless an Event of Default has occurred and is continuing, the Sale of any Oil and Gas Property or any interest therein or the Sale of any Equity Interests of any Restricted Subsidiary owning Oil and Gas Properties; provided (with respect to this clause (d) only) that (i) the consideration received in respect of such Sale shall be any of the following (or a combination thereof): (1) cash, (2) the assumption of liabilities not constituting debt for borrowed money associated with the assets subject of such Sale (provided the assumption of liabilities shall not exceed 10% of the aggregate consideration for such Sale), (3) other Oil and Gas Properties (provided that such exchange qualifies for nonrecognition of gain or loss under the provisions of Section 1031 of the Code), or (4) in the case of farm-outs, carried or royalty or net profits interests in the Property subject of such farm-out (provided that, notwithstanding the foregoing, if a Borrowing Base Deficiency results from such Sale, the cash portion of the consideration shall be an amount at least sufficient to pay such Borrowing Base Deficiency under Section 3.04(c)(iii)), (ii) the consideration received in respect of such Sale shall be equal to or greater than the fair market value of the Property subject of such Sale (as determined in good faith by a Financial Officer, provided that if a Financial Officer determines in good faith that such Sale involves Oil and Gas Property or Equity Interests in a Restricted Subsidiary owning any Oil and Gas Property having a fair market value in excess of $25,000,000, the 

 

 

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board of directors of the Borrower shall reasonably determine whether the consideration received in respect of such Sale is equal to or greater than the fair market value of the Property subject of such Sale and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer certifying to that effect), (iii) in the case of any Sale of Oil and Gas Properties included in the most recently delivered Reserve Report or Equity Interests of a Restricted Subsidiary owning Oil and Gas Properties included in the most recently delivered Reserve Report, if the aggregate consideration received in respect of such Sale, together with the aggregate consideration received in respect of all other Sales of Oil and Gas Properties included in the most recently delivered Reserve Report and Sales of Restricted Subsidiaries owning Oil and Gas Properties included in the most recently delivered Reserve Report effected since the most recent Scheduled Redetermination Date, would exceed an amount equal to five percent (5%) of the then effective Borrowing Base, the Borrowing Base shall be reduced, effective immediately upon the consummation of such Sale, by an amount equal to the value, if any, attributable to the Property that is being disposed of pursuant to such Sale in the then-current Borrowing Base, as determined by Administrative Agent and confirmed by the Required Lenders after the receipt of the notice contemplated by Section 8.01(i) by the Administrative Agent;

 

(e) the Sale of such Property to which the exceptions pursuant to Section 9.11(a) to (d) or (f) do not apply or are not relied upon having a fair market value not to exceed $1,000,000 during any 6-month period; and

 

(f) the Sale of such Property to the extent permitted by Section 9.05 or Section 9.10.

 

Section 9.12 Environmental Matters.  The Borrower will not, and will not permit any Credit Party 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 a Release or threatened Release of Hazardous Materials, exposure to any Hazardous Materials, or 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, Release or threatened Release, exposure, or Remedial Work could reasonably be expected to have a Material Adverse Effect.

 

Section 9.13 Transactions with Affiliates.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than the Guarantors and Wholly-Owned Subsidiaries of the Borrower) unless such transactions are otherwise not prohibited under this Agreement and are upon terms substantially as favorable to it as it would obtain in a comparable transaction with a Person not an Affiliate (or, if in the good faith judgment of the Borrower’s Board of Directors, no comparable transaction is available with which to compare any such transaction, such transaction is otherwise fair to the Borrower or the relevant Restricted Subsidiary from a financial point of view); provided that the foregoing shall not apply to:

 

(a) transactions described on Schedule 9.13;

 

 

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(b) any Restricted Payment permitted by Section 9.04, Debt permitted by Section 9.02, or Investments permitted by Section 9.05;

 

(c) the payment of reasonable and customary directors’ fees and other benefits to Persons who are not otherwise Affiliates of the Borrower or any Restricted Subsidiary;

 

(d) any employment or severance or other employee compensation, arrangement or plan or any amendment thereto, entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business or which is customary in the oil and gas business, and payments, awards, grants or issuances of Equity Interests pursuant thereto;

 

(e) provision of officers’ and directors’ indemnification and insurance in the ordinary course of business to the extent permitted by law; and

 

(f) transactions with Avista or any of its Subsidiaries or any other Affiliate entered into in connection with the Avista Marcellus Joint Venture.

 

Section 9.14 Negative Pledge Agreements; Dividend Restrictions.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, create, incur, assume or suffer to exist any contract, agreement or understanding (other than this Agreement, the Security Instruments) which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Administrative Agent and the Lenders or restricts any Restricted Subsidiary from paying dividends or making distributions to the Borrower or any Guarantor, or which requires the consent of or notice to other Persons in connection therewith; provided that the foregoing shall not prevent (a) prohibitions or restrictions in joint venture agreements or agreements entered into in connection with joint ventures with respect to the transfer of, or the making of dividends or distributions with respect to, Equity Interests in any joint venture, or with respect to the transfer of or other encumbrance with respect to Property that is the subject of any joint venture or agreements entered into in connection therewith, (b) customary non-assignment provisions in leases, licenses, permits and other agreements entered into in the ordinary course of business, (c) in connection with any Sale of Property permitted hereunder, any restriction with respect to such Property imposed under the agreement or agreements governing such Sale, (d) restrictions imposed by any Governmental Authority or under any Governmental Requirement or (e) any restriction imposed on the granting, conveying, creation or imposition of any Lien on any Property of the Borrower or any of the Restricted Subsidiaries imposed by any contract, agreement or understanding related to the Liens permitted under clause (b), (d), (e), (f), (g) or (h) of Section 9.03 so long as such restriction only applies to the Property permitted under such clauses to be encumbered by such Liens.

 

Section 9.15 Hedge Agreements.

 

(a) The Borrower will not, and will not permit any of the Restricted Subsidiaries to, enter into or maintain any Hedge Agreements with any Person other than:

 

(i) Hedge Agreements in respect of commodities (A) with an Approved Counterparty and (B) the notional volumes for which (when aggregated with other commodity Hedge Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Hedge Agreements) do not exceed, as of the date such Hedge 

 

 

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Agreement is executed or at any time during the term of this Agreement, the percentage set forth below of the Credit Parties’ Current Production for each month during the period during which such Hedge Agreement is in effect, for each of crude oil, natural gas liquids and natural gas, calculated separately:

 

	
Calendar Year Hedged (relative to measurement date)

	
Percentage Limitation

       Oil                         NGL’s/ Gas

	
Months 1-24

	
100%

	
100%

	
Months 25-36

	
75%

	
75%

	
Months 37-48

	
50%

	
50%

No Hedge Agreement in respect of commodities shall have a tenor of longer than 4 years.  For purposes of the foregoing volume limitations, floors and puts shall be disregarded.

 

(ii) Hedge Agreements in respect of interest rates with an Approved Counterparty, as follows: (A) Hedge Agreements effectively converting interest rates from fixed to floating, the notional amounts of which (when aggregated with all other Hedge Agreements of the Borrower and the Credit Parties then in effect effectively converting interest rates from fixed to floating) do not exceed 50% of the then outstanding principal amount of any Credit Party’s Debt for borrowed money which bears interest at a fixed rate and (B) Hedge Agreements effectively converting interest rates from floating to fixed, the notional amounts of which (when aggregated with all other Hedge Agreements of the Borrower and the Credit Parties then in effect effectively converting interest rates from floating to fixed) do not exceed 75% of the then outstanding principal amount of any Credit Party’s Debt for borrowed money which bears interest at a floating rate.

 

(b) In no event shall any Hedge Agreement contain any requirement, agreement or covenant for the Borrower or any Restricted Subsidiary to post collateral or margin to secure its obligations under such Hedge Agreement or to cover market exposures, other than collateral or margin not in excess of $2,000,000 for all Hedge Agreements of the Borrower and the Restricted Subsidiaries at any time to the extent permitted under Section 9.03(h); provided that this sentence shall not prevent a Hedge Bank from requiring the obligations under any Hedge Agreement with the Borrower or any Restricted Subsidiary to be secured by the Liens granted to the Administrative Agent under the Security Instruments pursuant to such Security Instruments.

 

(c) In no event shall any Hedge Position Cancellation Event occur if (i) an Event of Default has occurred and is continuing at the time of such Hedge Position Cancellation Event and (ii) immediately after giving effect to such Hedge Position Cancellation Event and any concurrent prepayments of the Loans, Availability would be less than $5,000,000.

 

 

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Section 9.16 Unrestricted Subsidiaries.

 

(a) Unless designated as an Unrestricted Subsidiary on Schedule 7.14 as of the date hereof or thereafter, subject to Section 9.16(b), any Person that becomes a Wholly Owned 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 ownership interest in such Subsidiary and such Investment would be permitted to be made at the time of such designation under Section 9.05(o).  Except as provided in this Section 9.16(b), no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.

 

(c) The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving effect to such designation: (i) the representations and warranties of the Credit Parties contained in each of the Loan Documents are true and correct in all material respects 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 in all material respects as of such date), (ii) no Default exists and (iii) the Borrower complies with the requirements of Section 8.13 and Section 8.16.  Any such designation shall be treated as a cash dividend in an amount equal to the lesser of (A) the fair market value of the Borrower’s and the Restricted Subsidiaries’ direct and indirect ownership interest in such Subsidiary and (B) the amount of the Borrower’s and the Restricted Subsidiaries’ cost basis of their investment previously made for purposes of the limitation on Investments under Section 9.05(g)(iii) and/or Section 9.05(o).

 

(d) No Unrestricted Subsidiary shall have any Debt other than Non-Recourse Debt.  The aggregate principal amount of all Non-Recourse Debt outstanding at any one time shall not exceed $120,000,000.

 

Section 9.17 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 Oil and Gas 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 a volume equal to one-half Bcf of gas (on an Mcf equivalent basis) in the aggregate.

 

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”:

 

 

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(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 three Business Days.

 

(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any other Credit Party 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 certificate furnished pursuant to or in connection with any Loan Document, shall prove to have been materially incorrect when made or deemed made.

 

(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 8.01(l), Section 8.02, Section 8.03 (with respect to the legal existence of the Borrower or any other Credit Party) or in Article IX.

 

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

 

(f) the Borrower or any other Credit Party shall fail to make any payment (of principal or interest) in respect of any Material Indebtedness, when and as the same shall become due and payable, after the expiration of any applicable period of grace and/or notice and cure.

 

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the Redemption thereof or any offer to Redeem to be made in respect thereof, prior to its scheduled maturity or require the Borrower or any other Credit Party to make an offer in respect thereof; provided that this clause (g) shall not apply to secured Debt permitted under Section 9.02(g) that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness.

 

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any other Credit Party 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 other Credit Party or for a substantial part of its assets, and, in any such 

 

 

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case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered.

 

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

 

(j) the Borrower or any other Credit Party shall become unable, admit in writing its inability or fail generally to pay its debts generally as they become due.

 

(k) (i) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 (to the extent not covered by independent third party insurance 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 any Credit Party and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any other Credit Party to enforce any such judgment.

 

(l) the Loan Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with their terms against the Borrower or a Guarantor party thereto or shall be repudiated by any of them, or cease to create a valid and perfected Lien of the priority required thereby on any material portion of the collateral purported to be covered thereby, except to the extent permitted by the terms of this Agreement, or the Borrower or any other Credit Party shall so state in writing.

 

(m) 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(h) or Section 10.01(i) at any time thereafter during the continuance of such Event of Default, the Majority Lenders may, by notice to the Borrower, take either or both of the following actions, at the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents then outstanding to be due and payable in whole (or in 

 

 

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part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.08(j)), shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(h) or Section 10.01(i), the Commitments shall automatically terminate and the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.08(j)), shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.

 

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

 

(c) Except as otherwise provided in Section 4.03, all proceeds realized from the liquidation or other disposition of collateral or otherwise received after maturity of the Notes, whether by acceleration or otherwise, shall be applied:

 

(i) first, to payment or reimbursement of that portion of the 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 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 principal outstanding on the Loans, Obligations referred to in clauses (b) and (c) of the definition of Obligations and to serve as cash collateral to be held by the Administrative Agent to secure the LC Exposure;

 

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

 

(vi) sixth, any excess, after all of the Obligations shall have been indefeasibly paid in full in cash (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made as of the time of determination), shall be paid to the Borrower or as otherwise required by any Governmental Requirement.

 

 

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ARTICLE XI

The Agents

 

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

 

Section 11.02 Duties and Obligations of Administrative Agent.  The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents.  Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing (the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties), (b) the Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any other Credit Party 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 the Credit Parties or any other obligor or guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or observance of any covenants, agreements or other terms or conditions set forth herein or therein.  For purposes of determining compliance with the conditions specified in Article VI, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed closing date specifying its objection thereto.

 

 

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Section 11.03 Action by Administrative Agent.  The Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Majority Lenders, the Required 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, the Required Lenders or the Lenders, as applicable (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action.  The instructions as aforesaid and any action taken or failure to act pursuant thereto by the Administrative Agent shall be binding on all of the Lenders.  If a Default has occurred and is continuing, then the Administrative Agent shall take such action with respect to such Default as shall be directed by the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders.  In no event, however, shall the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement, the other Loan Documents or applicable law.  If a Default has occurred and is continuing, neither the Co-Syndication Agents nor the Co-Documentation Agents 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, the Required 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 Bank 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 good faith 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 

 

 

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assignment or transfer thereof permitted hereunder shall have been filed with the Administrative Agent.

 

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

 

Section 11.06 Resignation 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 giving the Lenders, the Issuing Bank and the Borrower at least 30 days prior written notice, and the Administrative Agent may be removed at any time with or without cause by the Required Lenders.  Upon any such resignation or removal, the Majority Lenders shall have the right, in consultation and with the consent of 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 30 days after the retiring Administrative Agent gives notice of its resignation or the removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent.  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 other Credit Party or other Affiliate thereof as if it were not an Agent hereunder.

 

Section 11.08 No Reliance.  Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is a party.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any 

 

 

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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 other Credit Party of this Agreement, the Loan Documents or any other document referred to or provided for herein or to inspect the Properties or books of any Credit Party.  Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent or the Arranger shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Credit Party (or any of their Affiliates) which may come into the possession of such Agent or any of its Affiliates.  In this regard, each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this transaction as special counsel to the Administrative Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document.  Each other party hereto will consult with its own legal counsel at its own cost.

 

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 other Credit Party, 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 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 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.

 

 

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Section 11.10 Authority of Administrative Agent to Release Collateral and Liens.  Each Lender, the Issuing Bank and each other Secured Party (by its acceptance of the benefits of any Lien encumbering the Mortgaged Property) 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, the Issuing Bank and each other Secured Party (by its acceptance of the benefits of any Lien encumbering the Mortgaged Property) hereby authorizes the Administrative Agent to execute and deliver to the Borrower, at the Borrower’s sole cost and expense, any and all releases of Liens, termination statements, assignments or other documents reasonably requested by the Borrower in connection with any sale or other disposition of Property to the extent such sale or other disposition is permitted by the terms of Section 9.11 or is otherwise authorized by the terms of the Loan Documents.  Upon the request of the Administrative Agent at any time, the Secured Parties will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant to this Section 11.10.

 

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

 

ARTICLE XII

Miscellaneous

 

Section 12.01 Notices.

 

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

 

(i)  if to the Borrower or any Credit Party, to it at 1000 Louisiana Street, Suite 1500, Houston, Texas 77002; Attention: Chief Financial Officer; Fax:  (713) 328-1049; E-mail: paul.boling@crzo.net; with a copy to the Law Department of the Borrower; Attention: General Counsel; Fax: (713) 328-1035; E-mail: gerry.morton@crzo.net;

 

(ii) if to the Administrative Agent or to BNP, as the Issuing Bank, to it at 525 Washington Blvd., Loan Servicing – 8th Floor, Jersey City, New Jersey 07310, Attention: Dina Wilson (Fax: (201) 850—4020, email: agency.ls.support@americas.bnpparibas.com), with a copy to 1200 Smith Street, Suite 3100, Houston, TX 77002; Attention: John Clark (email: john.clark@americas.bnpparibas.com); and

 

(iii) if to any other Lender, to it at its address (or telecopy 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 

 

 

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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 telecopy number for notices and other communications hereunder by notice to the other parties hereto.  All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

 

Section 12.02 Waivers; Amendments.

 

(a) No failure on the part of the Administrative Agent, the Issuing Bank or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege, or any abandonment or discontinuance of steps to enforce such right, power or privilege, under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies of the Administrative Agent, the Issuing Bank 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 any Credit Party 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 the Issuing Bank may have had notice or knowledge of such Default at the time.

 

(b) Neither this Agreement nor any provision hereof nor any Security Instrument nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (1) increase the Commitment or the Maximum Credit Amount of any Lender without the written consent of such Lender, (2) increase the Borrowing Base without the written consent of each Lender, decrease or affirm at the existing amount the Borrowing Base without the consent of the Required Lenders, or modify Section 2.07 or 3.04(c) in any manner adverse to the Lenders without the consent of each Lender; provided that a Scheduled Redetermination may be postponed by the Required Lenders, (3) 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 Obligations hereunder or under any other Loan Document, without the written consent of each Lender affected thereby, (4) 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 Obligations hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Maturity Date without the written consent of each Lender affected thereby, (5) change Section 4.01(b), 4.01(c) or 10.02(c) in any manner 

 

 

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that would alter the pro rata sharing of payments required thereby in a manner adverse to any Lender without the written consent of such Lender, (6) waive or amend Section 6.01 without the written consent of each Lender, (7) modify clause (b) of the definition of Obligations, Section 10.02(c), Sections 12.02(b)(7), Section 12.02(b)(9) or Section 12.13 without the consent of each Lender adversely affected thereby and the consent of each Person that is adversely affected thereby and a party to a Hedge Agreement secured by the Security Instruments which is not a Lender (or an Affiliate of a Lender) at the time of such agreement, (8) 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, (9) amend or otherwise modify any Security Instrument in a manner that results in the Obligations owed to any Person under any Hedge Agreement secured by such Security Instrument no longer being secured thereby, without the written consent of such Person, or (10) release any Guarantor (except as set forth in the Guaranty Agreement) or release all or a substantial portion of the Mortgaged Properties (other than as provided in Section 11.10) without the written consent of all Lenders; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any other Agent, or the Issuing Bank hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, such other Agent or the Issuing Bank, as the case may be.  Notwithstanding the foregoing, so long as each designation of an Unrestricted Subsidiary set forth therein complies with this Agreement, 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.

 

Section 12.03 Expenses, Indemnity; Damage Waiver.

 

                      (a)           The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Arranger and their Affiliates, including, without limitation, the reasonable fees, charges and disbursements of counsel and other outside consultants for the Administrative Agent, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental invasive and non-invasive assessments and audits and surveys and appraisals, in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Administrative Agent as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and other charges incurred by any Agent or any Lender in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein, (iii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iv) all out-of-pocket expenses incurred by the Administrative Agent (and its Affiliates) and the Lenders (including (A) the fees, charges and disbursements of counsel to the Administrative 

 

 

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Agent and (B) the fees, charges and disbursements of one primary counsel to the Lenders as a group (plus no more than one additional counsel in each jurisdiction that is relevant to such enforcement or protection of rights)) in connection with this Agreement or any other Loan Document 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.

(b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE AND CUSTOMARY FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY ANY INDEMNITEE (INCLUDING ANY CLAIM, LITIGATION OR PROCEEDING INITIATED BY THE BORROWER, OR ANY OF ITS AFFILIATES) 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 OTHER CREDIT PARTY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, (v) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND THE CREDIT PARTIES BY THE BORROWER AND THE CREDIT PARTIES, (vi) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (vii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OTHER CREDIT PARTY OR ANY OF THEIR PROPERTIES OR OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (viii) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY OTHER CREDIT PARTY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OTHER CREDIT PARTY, (ix) THE PAST OWNERSHIP BY THE BORROWER OR ANY OTHER CREDIT PARTY 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, (x) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT,

 

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ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY OTHER CREDIT PARTY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OTHER CREDIT PARTY, (xi) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OTHER CREDIT PARTY, OR (xii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiii) 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 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 THE INDEMNITY SET FORTH HEREIN SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO SUCH INDEMNITEE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR THE BAD FAITH BREACH OF SUCH INDEMNITEE’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT; AND PROVIDED FURTHER THAT THE INDEMNITY SET FORTH HEREIN SHALL NOT APPLY TO DISPUTES BETWEEN LENDERS UNLESS SUCH DISPUTE RESULTS FROM THE EXISTENCE OF A BREACH OF ANY LOAN DOCUMENT BY A CREDIT PARTY.  WITH RESPECT TO THE OBLIGATION TO REIMBURSE AN INDEMNITEE FOR FEES, CHARGES AND DISBURSEMENTS OF COUNSEL, EACH INDEMNITEE AGREES THAT ALL INDEMNITEES WILL AS A GROUP UTILIZE ONE PRIMARY COUNSEL (PLUS NO MORE THAN ONE ADDITIONAL COUNSEL IN EACH JURISDICTION WHERE A PROCEEDING THAT IS THE SUBJECT MATTER OF THE INDEMNITY IS LOCATED) UNLESS (1) THERE IS A CONFLICT OF INTEREST AMONG INDEMNITEES, (2) DEFENSES OR CLAIMS EXIST WITH RESPECT TO ONE OR MORE INDEMNITEES THAT ARE NOT AVAILABLE TO ONE OR MORE OTHER INDEMNITEES OR (3) SPECIAL COUNSEL IS REQUIRED TO BE RETAINED AND THE BORROWER CONSENTS TO SUCH RETENTION.

 

(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Arranger or the Issuing Bank under Section 12.03(a) or (b), each Lender severally agrees to pay to the Administrative Agent, the Arranger or the Issuing Bank, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability 

 

 

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or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Arranger or the Issuing Bank in its capacity as such.

 

(d) To the extent permitted by applicable law, neither any party hereto nor any of their respective directors, officers, employees and agents shall assert, and each hereby waives, any claim against any other such Person, 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 promptly after written demand therefor attaching the relevant invoices and/or a certificate, in each case setting forth the basis for such demand in reasonable detail.

 

Section 12.04 Successors and Assigns.

 

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer without such consent shall be null and void), (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 12.04 or as required under Section 5.04 and (iii) no Lender may assign to the Borrower or to an Affiliate of the Borrower all or any portion of such Lender’s rights and obligations under the Agreement or all or any portion of its Commitments or the Loans owing to it hereunder. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in Section 12.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

(D) if the assignee is not a Lender prior to such assignment, it 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, Section 5.02, Section 5.03 and Section 12.03 as to events occurring within the stated timeframes and prior to such assignment).  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 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 (absent manifest error), and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.  In connection with any changes to the Register, if 

 

 

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Index

 

necessary, the Administrative Agent will reflect the revisions on Annex I and forward a copy of such revised Annex I to the Borrower, the Issuing Bank and each Lender.

 

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

 

(c) 

 

(i) Any Lender may, without the consent of the Borrower, the Administrative Agent or the Issuing Bank, sell participations to one or more banks or other 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 Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 12.02(b) that affects such Participant.  In addition, each agreement or instrument creating any participation must include an agreement by the Participant to be bound by the provisions of Section 12.11.  Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the benefits of Section 5.01 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(a).

 

(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.  The Borrower shall be notified of each participation sold to a Participant, and each Participant shall comply with Sections 5.03(e) and 5.03(f) as though it were a Lender.  A Participant that fails to comply with the preceding sentence shall not be entitled to any of the benefits of Section 5.03.

 

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender 

 

 

103

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

 

(b) To the extent that any payments on the 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 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 each Credit Party 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 

 

 

104

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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 permitted assigns.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

 

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 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 Hedge Agreements) at any time owing by such Lender to or for the credit or the account of the Borrower or any other Credit Party against any of and all the obligations of the Borrower or any other Credit Party 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.  Each Lender agrees to promptly notify the Borrower and the Administrative Agent after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.  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 may have.

 

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

 

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS 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 

 

 

105

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LOCATED.  CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.

 

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, 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 BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

 

(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), 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.

 

 

106

Index

 

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

 

Section 12.11 Confidentiality.  Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority (and in connection therewith, to the extent permitted by applicable law or such regulatory authority, the disclosing Person agrees to inform the Borrower of such disclosure or pending disclosure), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process (and in connection therewith, to the extent permitted by applicable law or such legal process, the disclosing Person agrees to inform the Borrower of such disclosure or pending disclosure), (d) to any other party to this Agreement or any other Loan Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 12.11, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective counterparty (or its advisors) to any Hedge Agreement relating to any Credit Party and its obligations or (iii) any credit insurance provider relating to the Borrower and its obligations under the Loan Documents, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower or any Credit Party.  For the purposes of this Section 12.11, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or the business of the Borrower or any Subsidiary, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary.  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 and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows:  (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the 

 

 

107

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Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made as of the time of determination), refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made as of the time of determination), refunded by such Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law.  If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.12.  To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender, such Lender elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect.  Chapter 346 of the Texas Finance Code does not apply to the Borrower’s obligations hereunder.

 

Section 12.13  Collateral Matters; Hedge Agreements.  The benefit of the Security Instruments and of the provisions of this Agreement relating to any collateral securing the Obligations shall also extend to and be available on a pro rata basis to Hedge Banks in respect of any Obligations of the type described in clause (b) of the definition thereof (after giving effect to all netting arrangements relating to the Hedge Agreements giving rise to such Obligations) and to the Lenders and their respective Affiliates in respect of any Obligations of the type described in clause (c) of the definition thereof.  Except as set forth in Section 12.02(b)(7), no Person shall have any voting rights under any Loan Document as a result of the existence of obligations owed to it under any Hedge Agreements or any Treasury Management Agreements.

 

 

108

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Section 12.14 No Third Party Beneficiaries.  This Agreement and the other Loan Documents, and the agreement of the Lenders to make Loans and the Issuing Bank 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 contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent, the Issuing Bank or any Lender for any reason whatsoever.  There are no third party beneficiaries.

 

Section 12.15 USA Patriot Act Notice.  Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

 

Section 12.16 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.”

 

 

[SIGNATURES BEGIN NEXT PAGE]

 

 

109

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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:

	
CARRIZO OIL & GAS, INC.

	
  

	
By:

	/s/ Paul F. Boling 	 

	
  

	
Paul F. Boling

	
  

	 	
 
Chief Financial Officer, Vice President, 

Secretary and Treasurer

[Signature Page- Credit Agreement]

 

1

Index

	
ADMINISTRATIVE AGENT:

	
BNP PARIBAS

	
  

	
By:

	
/s/ Greg Smothers

	 

	
  

	
Name:  Greg Smothers

	
  

	
Title:

	
Director

	
  

	
By:

	
/s/ Betsy Jocher

	 

	
  

	
Name:  Betsy Jocher

	
  

	
Title:

	
Director

[Signature Page- Credit Agreement]

 

2

Index

 

 

	
 
CO-SYNDICATION AGENTS:

	
CREDIT AGRICOLE CORPORATE AND 

INVESTMENT BANK, as Co-Syndication Agent

 

	
  

	
By:

	/s/ Tom Byargeon 	 

	
  

	
Name:  Tom Byargeon

	
  

	
Title:

	
Managing Director

	
  

	
By:

	/s/ Sharada Manne 	 

	
  

	
Name:  Sharada Manne

	
  

	
Title:

	
Director

 

 

 

[Signature Page- Credit Agreement]

 

3

Index

 

 

 

	

ROYAL BANK OF CANADA, as Co-Syndication Agent

	
 

 

	
  

	
By:

	 /s/ Jason York

	
  

	
Name:  Jason York

	
  

	
Title:

	
Authorized Signatory

[Signature Page- Credit Agreement]

 

4

Index

 

 

	
 
CO-DOCUMENTATION AGENTS:

	
CAPITAL ONE, N.A., as Co-Documentation Agent

 

	
  

	
By:

	 /s/ Eric Broussard 

	
  

	
Name:  Eric Broussard

	
  

	
Title:

	
Senior Vice President

[Signature Page- Credit Agreement]

 

5

Index

	
 

	
COMPASS BANK, as Co-Documentation Agent

 

	
  

	
By:

	 /s/ Kathleen J. Bowen 

	
  

	
Name:  Kathleen J. Bowen

	
  

	
Title:

	
Senior Vice President

[Signature Page- Credit Agreement]

 

6

Index

 

	
 
LENDERS:   

	
BNP PARIBAS, as a Lender

 

	
  

	
By:

	/s/ Greg Smothers	 

	
  

	
Name:  Greg Smothers

	
  

	
Title:

	
Director

	
  

	
By:

	/s/ Betsy Jocher	 

	
  

	
Name:  Betsy Jocher

	
  

	
Title:

	
Director

 

                                                             

[Signature Page- Credit Agreement]

 

7

Index

 

	
 
CO-SYNDICATION AGENTS:

	
CREDIT AGRICOLE CORPORATE AND 

INVESTMENT BANK, as a Lender

 

	
  

	
By:

	/s/ Tom Byargeon 	 

	
  

	
Name:  Tom Byargeon

	
  

	
Title:

	
Managing Director

	
  

	
By:

	/s/ Sharada Manne 	 

	
  

	
Name:  Sharada Manne

	
  

	
Title:

	
Director

 

 

 

 

[Signature Page- Credit Agreement]

 

8

Index

	
 

	
 
ROYAL BANK OF CANADA, as a Lender

 

	
  

	
By:

	 /s/ Jason York

	
  

	
Name:  Jason York

	
  

	
Title:

	
Authorized Signatory

 

[Signature Page- Credit Agreement]

 

9

Index

	
 
 

	
CAPITAL ONE, N.A., as a Lender

 

	
  

	
By:

	 /s/ Eric Broussard 

	
  

	
Name:  Eric Broussard

	
  

	
Title:

	
Senior Vice President

[Signature Page- Credit Agreement]

 

10

Index

	
 

	
COMPASS BANK, as a Lender

 

	
  

	
By:

	 /s/ Kathleen J. Bowen 

	
  

	
Name:  Kathleen J. Bowen

	
  

	
Title:

	
Senior Vice President

[Signature Page- Credit Agreement]

 

11

Index

	
 

	
REGIONS BANK, as a Lender

 

	
  

	
By:       /s/ Kelly L. Elmore III

	
  

	
Name:  Kelly L. Elmore III

	
  

	
Title:

	
Senior Vice President

 

[Signature Page- Credit Agreement]

 

12

Index

	
 

	
UNION BANK, N.A. , as a Lender

 

	
  

	
By:       /s/ Damien Meiburger 

	
  

	
Name:  Damien Meiburger

	
  

	
Title:

	
Senior Vice President

 

 

 

[Signature Page- Credit Agreement]

 

13

Index

	
 

	
SOCIETE GENERALE, as a Lender

 

	
  

	
By:       /s/ David M. Bornstein 

	
  

	
Name:  David M. Bornstein

	
  

	
Title:

	
Director

 

 

    

[Signature Page- Credit Agreement]

 

14

Index

 

	
 
 

	
 
CREDIT SUISSE AG, CAYMAN ISLANDS 

BRANCH, as a Lender

 

	
  

	
By:

	/s/ Robert Hetu    	 

	
  

	
Name:  Robert Hetu

	
  

	
Title:

	
Managing Director

 

	
  

	
By:

	/s/ Vipul Dhadda 	 

	
  

	
Name:  Vipul Dhadda

	
  

	
Title:

	
Associate

 

 

              

[Signature Page- Credit Agreement]

 

15

Index

ANNEX I

 

LIST OF MAXIMUM CREDIT AMOUNTS

 

	
Name of Lender

	
Applicable Percentage

	
Maximum Credit Amount

	
BNP Paribas

	
13.1%

	
$ 98,571,428.57

	
Credit Agricole Corporate and Investment Bank

	
12.6%

	
$ 94,285,714.29

	
Royal Bank of Canada

	
12.6%

	
$ 94,285,714.29

	
Capital One, N.A.

	
12.6%

	
$ 94,285,714.29

	
Compass Bank

	
12.6%

	
$ 94,285,714.29

	
Regions Bank

	
9.1%

	
$ 68,571,428.57

	
Union Bank, N.A.

	
9.1%

	
$ 68,571,428.57

	
Societe Generale

	
9.1%

	
$ 68,571,428.57

	
Credit Suisse AG, Cayman Islands Branch

	
9.1%

	
$ 68,571,428.57

	  	  	  
	
TOTAL

	
100.00%

	
$750,000,000.00Unassociated Document

EXECUTION VERSION

 

 

 

 

 

 

 

	 	28 January 2011	 
	 	 	 
	 	 	 
	 	 CARRIZO UK HUNTINGTON LTD	 
	 	 	 
	 	 	 
	 	 arranged by	 
	 	 	 
	 	 	 
	 	 BNP PARIBAS	 
	 	 	 
	 	

and

	 
	 	 	 
	 	

SOCIÉTÉ GÉNÉRALE

	 
	 	 	 
	 	 	 
	 	

$84,000,000

	 
	 	 	 
	 	

SENIOR SECURED MULTICURRENCY 

	 
	 	

CREDIT

	 
	 	FACILITY AGREEMENT	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	Herbert Smith LLP 	 

 

  

  

  

TABLE OF CONTENTS

 

                 

 

	 Clause	 Headings 	 Page
	 	 	 
	 1.	 DEFINITIONS AND INTERPRETATION	 1
	 	 	 
	 2.	 THE FACILITY	 38
	 	 	 
	 3.	 PURPOSE	 40
	 	 	 
	 4.	 CONDITIONS OF UTILISATION	 41
	 	 	 
	 5.	 UTILISATION - LOANS	 45
	 	 	 
	 6.	 UTILISATION - LETTERS OF CREDIT	 49
	 	 	 
	 7.	 PROJECTIONS	 59
	 	 	 
	 8.	 REPAYMENT	 67
	 	 	 
	 9.	 PREPAYMENT AND CANCELLATION	 69
	 	 	 
	 10.	 INTEREST	 75
	 	 	 
	 11.	 INTEREST PERIODS	 76
	 	 	 
	 12.	 CHANGES TO THE CALCULATION OF INTEREST	 77
	 	 	 
	 13.	 FEES	 79
	 	 	 
	 14.	 TAX GROSS UP AND INDEMNITIES	 82
	 	 	 
	 15.	 INCREASED 	 89
	 	 	 
	 16.	 OTHER INDEMNITIES	 90
	 	 	 
	 17.	 MITIGAQTION BY THE LENDERS	 92
	 	 	 
	 18.	 COSTS AND EXPENSES	 92
	 	 	 
	 19.	 PROJECT ACCOUNTS	 94
	 	 	 
	 20.	 PARENT SUPPORT UNDERTAKINGS	 101
	 	 	 
	 21.	 REPRESENTATIONS	 104
	 	 	 
	 22.	 INFORMATION UNDERTAKINGS	 114
	 	 	 
	 23.	 GENERAL UNDERTAKINGS	 120
	 	 	 
	 24.	 EVENTS OF DEFAULT	 133
	 	 	 
	 25.	 CHANGES TO THE LENDERS	 139
	 	 	 
	 26.	 RESTRICTION ON DEBT PURCHASE TRANSACTIONS	 144
	 	 	 
	 27.	 ASSIGNMENTS AND TRANSFERS BY OBLIGORS	 144

  

  

  

 

	 28.	 ROLE OF THE ADMINISTRATIVE FINANCE PARTIES	 145
	 	 	 
	 29.	 THE SECURITY TRUSTEE	 152
	 	 	 
	 30.	 CONDUCT OF BUSINESS BY THE FINANCE PARTIES	 162
	 	 	 
	 31.	 SHARING AMONG THE FINANCE PARTIES	 168
	 	 	 
	 32.	 PAYMENT MECHANICS	 170
	 	 	 
	 33.	 SET-OFF	 175
	 	 	 
	 34.	 NOTICES	 175
	 	 	 
	 35.	 CALCULATIONS AND CERTIFICATES	 179
	 	 	 
	 36.	 PARTIAL INVALIDITY	179 
	 	 	 
	 37.	 REMEDIES AND WAIVERS	179 
	 	 	 
	 38.	 AMENDMENTS AND WAIVERS	179 
	 	 	 
	 39.	 CONFIDENTIALITY	183 
	 	 	 
	 40.	 MISCELLANEOUS	187 
	 	 	 
	 41.	 GOVERNING LAW	187 
	 	 	 
	 42	 ENFORCEMENT	187 

 

 

  

Index

THIS AGREEMENT is dated 28 January 2011 and made between:

 

	
(1) 

	
CARRIZO UK HUNTINGTON LTD, a company incorporated in England and Wales with company number 7385624 and with registered office at 20-22 Bedford Row, London WC1R 4JS (the "Borrower");

 

	
(2) 

	
CARRIZO OIL & GAS, INC., a company incorporated in Texas, USA, with its principal place of business at 1000 Louisiana, Suite 1500, Houston, Texas 77002 USA (the "Parent");

 

	
(3)  

	
BNP PARIBAS AND SOCIÉTÉ GÉNÉRALE as mandated lead arrangers and bookrunners (together, the "Mandated Lead Arrangers");

 

	
(4) 

	
BNP PARIBAS AND SOCIÉTÉ GÉNÉRALE (together, the "Original Lenders");

 

	
(5) 

	
SOCIÉTÉ GÉNÉRALE as initial Facility Agent;

 

	
(6)  

	
SOCIÉTÉ GÉNÉRALE as initial Security Trustee;

 

	
(7) 

	
BNP PARIBAS AND SOCIÉTÉ GÉNÉRALE each as initial Technical Bank;

 

	
(8)  

	
BNP PARIBAS as initial Modelling Bank;

 

	
(9)  

	
SOCIÉTÉ GÉNÉRALE as initial Account Bank; and

 

	
(10)  

	
BNP PARIBAS as the Fronting Bank.

 

IT IS AGREED as follows:

 

INTERPRETATION

 

	
1.  

	
DEFINITIONS AND INTERPRETATION

 

	
1.1  

	
Definitions

 

In this Agreement:

 

"Abandonment Date" means, the date on which the operation of the Huntington Petroleum Field ceases, or is expected to cease, for economic reasons as production of Petroleum therefrom is no longer commercially viable.

 

"Acceptable Bank" means:

 

	
  

	
(A)

	
a bank or financial institution which has a rating for its long-term unsecured and non credit-enhanced debt obligations of A- or higher by Standard & Poor's Rating Services or Fitch Ratings Ltd or A3 or higher by Moody's Investor Services Limited or a comparable rating from an internationally recognised credit rating agency; or

 

	
  

	
(B)

	
any other bank or financial institution approved by the Facility Agent.

 

 

1

Index

 

"Accession Letter" means a letter substantially in the form set out in Schedule 8 (Form of Hedging Accession Agreement) or in such other form as the Facility Agent may approve (acting reasonably).

 

"Account Bank" means Société Générale in its capacity as account bank in relation to the Project Accounts or any other person that replaces it in such capacity in accordance with this Agreement.

 

"Additional Cost Rate" has the meaning given to that term in Schedule 5 (Mandatory Cost Formulae).

 

"Administrative Finance Parties" means each of the Mandated Lead Arrangers, the Facility Agent, the Security Trustee, the Technical Banks, the Modelling Bank, the Account Bank and the Fronting Bank.

 

"Affiliate" means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

 

"Agent's Spot Rate of Exchange" means, in relation to any date, the Facility Agent's spot rate of exchange for the purchase of an Optional Currency with dollars in the London foreign exchange market at or about 11.00 a.m. on that date or, if that date in not a Business Day, on the Business Day preceding that date.

 

"Aggregate Commitments" means, in relation to a Tranche, the sum of each Lender's Commitments under that Tranche.

 

"Agreed Insurances" means any insurances that are required to be maintained by or on behalf of the Borrower pursuant to this Agreement.

 

"Arrangement Fee Letter" means the arrangement fee letter dated on or about the date hereof entered into between the Borrower and the Mandated Lead Arrangers.

 

"Assignment Agreement" means an agreement substantially in the form set out in Schedule 7 (Form of Assignment Agreement) or any other form agreed between the relevant assignor and assignee.

 

"Assumptions" means the Economic Assumptions and the Technical Assumptions.

 

"Authorisation" means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

 

"Availability Period" means:

 

	
  

	
(A)

	
in relation to Tranche A and Tranche B, the period from and including the date of this Agreement to and including the earlier of (i) the Project Completion Date and (ii) the Final Completion Date; and

 

	
  

	
(B)

	
in relation to Tranche C, the period from and including the date of this Agreement to and including the date falling 71 months from the Financial Closing Date.

 

"Available Commitment" means in relation to a Tranche, a Lender's Commitment under that Tranche minus:

 

 

2

Index

 

	
  

	
(A)

	
the Dollar Amount of its participation in any outstanding Utilisations under that Tranche; and

 

	
  

	
(B)

	
in relation to any proposed Utilisations under that Tranche, the Dollar Amount of its participation in any Utilisations under that Tranche that are due to be made on or before the proposed Utilisation Date,

 

other than (in relation to any proposed Utilisation under Tranche C only), that Lender's participation in any Utilisations under Tranche C that are due to be repaid or prepaid on or before the proposed Utilisation Date.

 

"Borrower Update" means a report prepared by or on behalf of the Borrower (in a form approved by the Technical Banks) which (i) updates the information and/or evaluation(s) contained in the Reserves Report most recently delivered to the Technical Banks under this Agreement and (ii) includes any additional information and/or evaluation(s) as the Technical Banks may reasonably require.

 

"Break Costs" means the amount (if any) by which:

 

	
  

	
(A)

	
the interest (as calculated pursuant to Clause 10.1 (Calculation of interest)) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

 

exceeds:

 

	
  

	
(B)

	
the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the London interbank market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

 

"Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in London, Paris and Houston and:

 

	
  

	
(A)

	
(in relation to any date for payment or purchase of a currency other than euro) the principal financial centre of the country of that currency; or

 

(B)             (in relation to any date for payment or purchase of euro) any TARGET Day.

 

"Calculation End Date" means, in relation to each Projection, the last day of the last Calculation Period in which any item of Gross Expenditure and/or Gross Income is projected to arise.

 

"Calculation Period" means:

 

	
  

	
(A)

	
subject to (B) and (C) below, each calculation period of six months:

 

(1)           commencing on 1 April and ending on 30 September of each year; and

 

(2)           commencing on 1 October and ending on 31 March of each year,

 

 

3

Index

 

	
  

	
(B)

	
in case of the calculation period starting in the calendar year 2010, the period commencing on 1 October 2010 and ending on 30 April 2011, and

 

	
  

	
(C)

	
in case of the first calculation period starting in the calendar year 2011, the period commencing on 1 May 2011 and ending on 30 September 2011.

 

	
  

	
"Cash Collateral Account" has the meaning given to it in Clause 19.6 (Cash Collateral Accounts).

 

"CATS Parties" means: (1) Amco (U.K.) Exploration Company; (2) BG International Limited; (3) Hess Limited; (4) ENI UK Limited; (5) Fina Exploration Limited; and (6) Conocophillips Petroleum Company U.K. Limited.

 

"CATS Transportation and Processing Agreement" means the agreement to be entered into between, among others, E.ON Ruhrgas UK E&P Limited, the Borrower and the CATS Parties for the transportation and processing of natural gas from the Huntington Petroleum Field.

 

"Commitment" means:

 

(A)             in relation to Tranche A:

 

	
  

	
(1)

	
in relation to each Original Lender for that Tranche, the amount (in dollars) set in the column in which that Original Lender's name appears in the table set out in Part I (Tranche A Commitments) of Schedule 1 (Commitments) and the amount of any other Commitment under Tranche A transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 (Increase) of this Agreement; and

 

	
  

	
(2)

	
in relation to any other Lender for that Tranche, the amount (in dollars) of any Commitment under Tranche A transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 (Increase) of this Agreement;

 

(B)             in relation to Tranche B:

 

	
  

	
(1)

	
in relation to each Original Lender for that Tranche, the amount (in dollars) set in the column in which that Original Lender's name appears in the table set out in Part II (Tranche B Commitments) of Schedule 1 (Commitments) and the amount of any other Commitment under Tranche B transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 (Increase) of this Agreement; and

 

	
  

	
(2)

	
in relation to any other Lender for that Tranche, the amount (in dollars) of any Commitment under Tranche B transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 (Increase) of this Agreement; and

 

	
  

	
(C)

	
in relation to Tranche C:

 

	
  

	
(1)

	
in relation to each Original Lender for that Tranche, the amount (in dollars) set in the column in which that Original Lender's name appears in 

 

 

4

Index

 

	
  

	
 

	

the table set out in Part III (Tranche C Commitments) in Schedule 1 (Commitments) and the amount of any other Commitment under Tranche C transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 (Increase); and

 

	
  

	
(2)

	
in relation to any other Lender for that Tranche, the amount (in dollars) of any Commitment under Tranche C transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 (Increase),

 

in each case, to the extent not cancelled, reduced or transferred by it under this Agreement.

 

"Computer Model" means the computer model used to prepare the Initial Projection, as amended from time to time in accordance with Clause 7.10 (Computer Model).

 

"Confidential Information" means all information relating to any Obligor, the Finance Documents, the Development Asset or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:

 

(A)             any Obligor or any of its advisers; or

 

	
  

	
(B)

	
another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any Obligor or any of its advisers,

 

in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:

 

	
  

	
(1)

	
is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 39 (Confidentiality); or

 

	
  

	
(2)

	
is identified in writing at the time of delivery as non-confidential by any Obligor or any of its advisers; or

 

	
  

	
(3)

	
is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (A) or (B) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with any Obligor and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

 

"Confidentiality Undertaking" means a confidentiality undertaking substantially in a recommended form of the LMA or in any other form agreed between the Borrower and the Facility Agent.

 

"Construction All Risk Back Stop Date means 31 March 2011.

 

"Contingent Indebtedness" means, in relation to any outstanding Letter of Credit, the liabilities of the Fronting Bank that issued such Letter of Credit, the Finance Parties (other than pursuant to Clause 6.11 (Cash collateral by Non-Acceptable L/C Lender)) or the 

 

 

5

Index

 

Borrower (as the case may be) with respect to such Letter of Credit which have not matured and remain contingent by reason of such Letter of Credit being outstanding.

 

"Cost Overrun" means in relation to the Project any amount of capital expenditure in excess of the Total Development Cost the Technical Banks reasonably determine is required to be incurred by the Borrower in the period ending on or before the Project Completion Date for the purposes of achieving Project Completion having regard to information and estimates provided by the Borrower and the Operator.

 

"CTA" means the Corporation Tax Act 2009.

 

"Dangerous Substance" means any natural or artificial substance (including Petroleum and whether in a solid or liquid form or in the form of a gas or vapour and whether alone or in combination with any such other substance) capable of causing harm to the Environment or damaging the Environment or public health or welfare including any noxious, hazardous, toxic, dangerous, special or controlled waste or other polluting substance or matter.

 

"Debt Purchase Transaction" means, in relation to a person, a transaction where such person:

 

(A)             purchases by way of assignment or transfer;

 

(B)             enters into any sub-participation in respect of; or

 

	
  

	
(C)

	
enters into any other agreement or arrangement having an economic effect substantially similar to a sub-participation in respect of,

 

any Commitment or amount outstanding under this Agreement.

 

"DECC" means the UK government's Department of Energy and Climate Change (or any successor thereto) and/or the Secretary of State and/or where the context so requires any relevant predecessor department.

 

"Decommissioning Agreement" means the decommissioning security agreement between E.ON Ruhrgas UK Exploration and Production Limited, Premier Oil ONS Limited, Altinex Oil (UK) Limited and the Parent, as amended, novated, supplemented or otherwise modified from time to time.

 

"Decommissioning Cost" means the Provision Amount as such term is defined in the Decommissioning Agreement.

 

"Default" means an Event of Default or any event or circumstance specified in Clause 24 (Events of Default) (other than Clause 24.20 (Acceleration)) which would (with the expiry of a grace period, the giving of notice, the fulfilment of any condition, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

 

"Defaulting Lender" means any Lender:

 

	
  

	
(A)

	
which has failed to make its participation in a Loan available or has notified the Facility Agent that it will not make its participation in a Loan available by the 

 

 

6

Index

 

Utilisation Date of that Loan in accordance with Clause 5.4 (Lenders' participation) or has failed to provide cash collateral (or has notified the Fronting Bank that it will not provide cash collateral) in accordance with Clause 6.11 (Cash collateral by Non-Acceptable L/C Lender);

 

(B)             which has otherwise rescinded or repudiated a Finance Document; or

 

(C)             with respect to which an Insolvency Event has occurred and is continuing,

 

unless, in the case of paragraph (A) above:

 

(1)           its failure to pay is caused by:

 

(a)           administrative or technical error; or

 

(b)           a Disruption Event; and

 

payment is made within five Business Days of its due date; or

 

	
  

	
(2)

	
the Lender is disputing in good faith whether it is contractually obliged to make the payment in question.

 

"Delegate" means any delegate, agent, attorney or co-trustee appointed by the Security Trustee.

 

"Development Asset" means the Parent's or (on and from the point at which it becomes a licensee under licence number P.1114) the Borrower's 15% working interest in UK licence number P.1114, any infrastructure or facilities relating thereto and/or any Petroleum derived therefrom.

 

"Disruption Event" means either or both of:

 

	
  

	
(A)

	
a material disruption to those payment or communication systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or

 

	
  

	
(B)

	
the occurrence of any other event which results in a disruption (of technical or systems related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

 

	
  

	
(1)

	
from performing its payment obligations under the Finance Documents; or

 

	
  

	
(2)

	
from communicating with other Parties in accordance with the terms of the Finance Documents,

 

and which, in either such case, is not caused by, and is beyond the control of, the Party whose operations are disrupted.

 

"Distribution" means:

 

 

7

Index

 

	
  

	
(A)

	
any payment, dividend or other distribution in relation to any share capital (or issued shares) of the Borrower;

 

	
  

	
(B)

	
any redemption, reduction, repayment or retirement of any share capital (or issued shares) of the Borrower;

 

	
  

	
(C)

	
any payments in respect of, or any repayment, prepayment, redemption, retirement, discharge or purchase of, or sub-participation in, any loans or other financial accommodation made available to the Borrower by any of its Affiliates; and

 

	
  

	
(D)

	
any other payments or distributions (including without limitation any loans) to any of the Borrower's shareholders or its Affiliates,

 

in each case, whether in cash or in kind and whether by way of actual payment, set-off, counterclaim or otherwise.

 

"Dollar Amount" means, at any time:

 

	
  

	
(A)

	
in relation to each Utilisation denominated in dollars, the relevant amount of that Utilisation;

 

	
  

	
(B)

	
in relation to each Loan or, as the case may be proposed Loan, not denominated in dollars, the amount of that Loan converted into dollars at the Agent's Spot Rate of Exchange on the most recent valuation date (where for these purposes, "valuation date" means (a) any date on which the Facility Agent receives a Utilisation Request; (b) any Utilisation Date; (c) the last date of any Interest Period; and (d) any Reduction Date) and any other date nominated by the Facility Agent (acting reasonably); and

 

	
  

	
(C)

	
in relation to each Letter of Credit, or as the case may be, proposed Letter of Credit, not denominated in dollars, the relevant amount of that Letter of Credit converted into dollars at the Agent's Spot Rate of Exchange on the most recent valuation date (where, for these purposes, "valuation date" means (a) any date on which the Facility Agent receives a Utilisation Request; (b) any Utilisation Date; (c) the last day of any Interest Period or Term; and (d) any Reduction Date) and any other date nominated by the Facility Agent (acting reasonably).

 

"Drop-Down Documents" means:

 

	
  

	
(A)

	
the JOA Novation Consent Letter dated 28 October 2010 between E.ON Ruhrgas UK E&P Limited, Premier Oil Ons Limited, Altinex Oil UK Limited and the Parent;

 

	
  

	
(B)

	
the Deed of Guarantee provided or to be provided by the Parent in favour of E.ON Ruhrgas UK E&P Limited, Premier Oil Ons Limited and Altinex Oil UK Limited in relation to the Development Asset;

 

	
  

	
(C)

	
the Deed of Novation between E.ON Ruhrgas UK E&P Limited, Premier Oil Ons Limited, Altinex Oil UK Limited, the Borrower and the Parent in relation to the Development Asset;

 

 

8

Index

 

	
  

	
(D)

	
the Deed of Assignment between E.ON Ruhrgas UK E&P Limited, Premier Oil Ons Limited, Altinex Oil UK Limited, the Borrower, the Parent and The Secretary of State for the Department of Energy and Climate Change in relation to the Development Asset; and

 

	
  

	
(E)

	
the Subscription Agreement between the Parent and the Borrower in relation to transfer of the Parent's interest in the Development Asset to the Borrower.

 

"DSCR" means the debt service cover ratio being, in relation to any Calculation Period, the ratio of N:D (as shown in each Projection) where:

 

	
  

	
"N" is the sum of the Projected Net Revenues arising in that Calculation Period; and

 

"D" is the amount (in dollars) of the sum of all interest, fees, commission, costs and other expenses payable, or as the case may be, projected to be payable, by the Borrower under the Finance Documents in that Calculation Period disregarding any payments due under Clause 9.4 (Cash sweep) in that Calculation Period (but not in any previous Calculation Period).

 

"Economic Assumption" means each of the following economic assumptions, and the values ascribed to such assumptions, upon which each Projection or draft Projection and, in each case, the calculations and information therein are, or are to be, based:

 

(A)             Petroleum prices;

 

(B)             exchange rates;

 

(C)             inflation rates;

 

(D)             discount rates;

 

(E)             interest rates; and

 

	
  

	
(F)

	
any other assumption that the Technical Banks and the Borrower agree shall be treated as "Economic Assumptions".

 

"Enforcement Date" means the date on which a notice is issued under Clause 24.20 (Acceleration).

 

"Environment" means humans, animals, plants and all other living organisms including the ecological systems of which they form part and the following media:

 

	
  

	
(A)

	
air (including air within natural or man-made structures, whether above or below ground);

 

	
  

	
(B)

	
water (including territorial, coastal and inland waters, water under or within land and water in drains and sewers); and

 

	
  

	
(C)

	
land (including land under water).

 

"Environmental Claims" means any claim by any person in connection with (i) a breach, or alleged breach, of Environmental Laws; (ii) any accident, fire, explosion or other event 

 

 

9

Index

 

of any type involving an emission or substance which is capable of causing harm to the Environment; or (iii) any Environmental Contamination.

 

"Environmental Contamination" means each of the following, and their consequences:

 

	
  

	
(A)

	
any release, discharge, emission, leakage or spillage of any Dangerous Substance at or from any relevant site into any part of the Environment;

 

	
  

	
(B)

	
any accident, fire, explosion or sudden event at any relevant site which is directly or indirectly caused by, or attributable to, any Dangerous Substance; or

 

	
  

	
(C)

	
any other pollution of the Environment arising in connection with any relevant site,

 

where, for these purposes, "relevant site" means any site of a Petroleum Asset in which the Borrower has an interest or otherwise owned, occupied or used by the Borrower.

 

"Environmental Laws" means any law or regulation concerning (i) the protection of health and safety; (ii) the Environment; or (iii) any emission or substance which is capable of causing harm to the Environment.

 

"Environmental Licences" means all Authorisations necessary under Environmental Law.

 

"Equity Contribution Account" has the meaning given to it in Clause 19.5 (Equity Contribution Account).

 

"EURIBOR" means, in relation to any Loan in euro:

 

	
(A)  

	
the applicable Screen Rate; or

 

	
(B)  

	
(if no Screen Rate is available for the Interest Period of that Loan) the arithmetic  mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request quoted by the Reference Banks to leading banks in the European interbank market,

 

as of 11.00 a.m. Brussels time on the Quotation Day for the offering of deposits in euro for a period comparable to the Interest Period for that Loan.

 

"Event of Default" means any event or circumstance specified in Clause 24 (Events of Default) (other than Clause 24.20 (Acceleration)).

 

"Excess Revenues" means, on any date, the amount determined by the Technical Banks, acting reasonably, by which (i) the aggregate balance standing to the credit of the Proceeds Accounts on such date exceeds (ii) the Required Retention Amount.

 

"Existing Borrowing Base Facility Agreement" means the senior secured revolving credit facility agreement dated on or about 27 January 2011 between, among others, the Parent and BNP Paribas, as administrative agent, and the lenders thereto, as the same has been or may be amended, modified, supplemented, replaced from time to time and any facility refinancing the same from time to time.

 

 

10

Index

 

"Expiry Date" means, for a Letter of Credit, the last day of its Term.

 

"Facility" means the Loan and Letter of Credit facilities made under this Agreement as described in Clause 2.1 (Facility).

 

"Facility Agent" means Société Générale in its capacity as facility agent for the other Finance Parties or any other person that replaces it in such capacity in accordance with this Agreement.

 

"Facility Office" means the office or offices notified by a Finance Party to the Facility Agent in writing on or before the date it becomes a Finance Party (or, following that date, by not less than five Business Days' written notice) as the office or offices through which it will perform its obligations under this Agreement.

 

"Fee Letter" means each of:

 

	
  

	
(A)

	
any letter between (i) all or any of the Obligors and (ii) all or any of the Administrative Finance Parties relating to the payment of fees by the Obligors (or any of them) to any such Administrative Finance Party(ies) in its or their capacity as such;

 

	
  

	
(B)

	
the fee letter dated on or about the date of this Agreement between, among others, the Borrower and the Facility Agent relating to the payment of upfront fees for the benefit of the Lenders;

 

(C)             any fee letter entered into pursuant to Clause ‎2.2 (Increase); and

 

(D)             any other letter designated as such by the Facility Agent and the Borrower.

 

"Field Development Plan" means, in relation to the Petroleum field comprised in any Petroleum Asset, a field development plan for that Petroleum field as approved by DECC.

 

"Field Life End Date" means, the date (included in each Projection) which is the earlier of:

 

	
  

	
(A)

	
the anticipated Abandonment Date for the Project; and

 

	
  

	
(B)

	
the Licence Termination Date for the Project.

 

"Field Security Agreement" means the Huntington Field Security Agreement between E.ON Ruhrgas Exploration and Production Limited, Premier Oil ONS Limited, Altinex Oil (UK) Limited and Parent, as amended, novated, supplemented or otherwise modified from time to time.

 

"Field Security Costs" means the Required Amount, as such term is defined in the Field Security Agreement.

 

	
  

	
"Final Completion Date" means 31 December 2012.

 

"Final Maturity Date" means:

 

 

11

Index

 

	
  

	
(A)

	
in relation to Tranche A and Tranche B the earliest of (i) the Reserve Tail Date (ii) the date falling four years from the Financial Closing Date and (iii) 31 December 2014;

 

	
  

	
(B)

	
in relation to Tranche C the earlier of (i), the date falling six years from the Financial Closing Date and (ii) 31 December 2016.

 

"Finance Document" means:

 

(A)             this Agreement;

 

(B)             each Security Document;

 

(C)             each Fee Letter;

 

	
  

	
(D)

	
(other than for the purposes of Clauses 14 (Tax Gross up and Indemnities), 15 (Increased Costs), 25.1 (Assignments and transfers by the Lenders), 30.3.9 (Hedging Banks), 32.7 (No set-off by Obligors) and 38 (Amendments and Waivers)) each Secured Hedging Agreement;

 

	
  

	
(E)

	
each Transfer Certificate;

 

(F)             each Assignment Agreement;

 

(G)             each Accession Letter;

 

(H)             each Hedging Accession Agreement;

 

	
  

	
(I)

	
the mandate letter dated September 2010 between the Mandated Lead Arrangers and the Obligors;

 

(J)             the Subordination Deed; and

 

(K)             any other document designated as such by the Borrower and the Facility Agent.

 

"Finance Party" means each of the Lenders, the Hedging Banks and the Administrative Finance Parties.

 

"Financial Closing Date" means the date on which the Facility Agent notifies the Borrower pursuant to Clause 4.1 (Initial conditions precedent) that it has received all of the documents and other evidence listed in Schedule 2 (Initial conditions precedent).

 

"Financial Indebtedness" means any indebtedness for or in respect of:

 

(A)             moneys borrowed;

 

	
  

	
(B)

	
any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

 

	
  

	
(C)

	
any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

 

 

12

Index

 

	
  

	
(D)

	
the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with IFRS/GAAP, be treated as a finance or capital lease;

 

	
  

	
(E)

	
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

 

	
  

	
(F)

	
any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

 

	
  

	
(G)

	
any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

 

	
  

	
(H)

	
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution;

 

	
  

	
(I)

	
the amount paid up or credited as paid up on any redeemable share capital; and

 

	
  

	
(J)

	
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (A) to (I) above.

 

"First Oil Date" means, in relation to the Huntington Petroleum Field, the first date on which oil (other than any oil that has been produced for the purposes of testing the facilities associated with that field) is produced by that field.

 

"Forecast Period" means, in relation to any Working Capital Model, the period commencing on the day after the Quarter End Date to which that Working Capital Model relates and ending on the later of (i) the date falling 12 months thereafter, and (ii) the date determined by the Technical Banks (acting reasonably) on which the Project Completion is then anticipated to occur.

 

"FPSO Agreement" means, as applicable:

 

	
  

	
(A)

	
the Over-Arching Agreement between E.ON Ruhrgas UK E&P Limited, E.ON Ruhrgas E&P GmbH, Sevan Production UK Limited and Sevan 300 Pte Ltd for the Sub-Bareboat Charter Party and Service Agreement in relation to the FPF Sevan Voyageur;

 

	
  

	
(B)

	
the Sub-Bareboat Charter Party between E.ON Ruhrgas UK E&P Limited, E.ON Ruhrgas E&P GmbH and Sevan Production UK Limited in respect of the FPF Sevan Voyageur; and

 

	
  

	
(C)

	
the Service Agreement between E.ON Ruhrgas UK E&P Limited, E.ON Ruhrgas E&P GmbH and Sevan Production UK Limited for the provision of services in relation to the FPF Sevan Voyageur,

 

as each may be amended, novated, supplemented or otherwise modified from time to time.

 

"FPSO Facility" means the floating production storage and offloading unit or vessel that is subject to the FPSO Agreement.

 

 

13

Index

 

"FPSO Termination Fees" means the Termination Fee, as such term is defined in the EPSO Agreement.

 

"Fronting Bank" means BNP Paribas in its capacity as issuer of a Letter of Credit or any other person that replaces it in such capacity provided that:

 

(A)           such successor Fronting Bank has been approved by all the Parties; and

 

	
  

	
(B)

	
the successor Fronting Bank, the retiring Fronting Bank, the other Parties and/or the beneficiaries of any Letter of Credit have completed all such steps (including execution and delivery of documents) as may be required by the Parties in order to facilitate the change in identity of the Fronting Bank.

 

"Fulmar Disposal" means the disposal of all of the Borrower's interest in the Fulmar Petroleum Field in accordance with the terms of Clause 23.6.2(G) (Disposals).

 

"Fulmar Petroleum Field" means all reservoir layers in which there exists Petroleum to the extent (in the case of each reservoir layer) they lie within the areas that are found within the stratigraphic equivalent of the upper Jurassic "Fulmar Reservoir" found between the true vertical depths subsea of 11,500ft and 14,000ft forming part of the Huntington field (and the facilities associated therewith) comprised in the Development Asset and located primarily within licence P.1114.

 

"Fulmar Project" means the exploration, appraisal, development and/or operation of the Fulmar Petroleum Field.

 

"Fulmar Project Costs" any cost and/or expenditure payable by the Borrower in relation to the Fulmar Project.

 

"Fulmar Project Costs Account" has the meaning given to it in Clause 19.4 (Fulmar Project Costs Account).

 

"Global Commitments" means the aggregate of the Commitments under the Tranches (being, at the date of this Agreement, $84,000,000).

 

"Gross Expenditure" means, in relation to any period without double counting:

 

	
  

	
(A)

	
to the extent that the same is payable in that period by the Borrower in respect of the Project or attributable to the Borrower's share of the Project:

 

(1)           all cash calls by the operator of the Huntington Petroleum Field; and

 

(2)           to the extent not covered by paragraph (1) above:

 

	
  

	
(a)

	
all capital costs relating to the Project;

 

	
  

	
(b)

	
all operating and maintenance costs relating to the Project;

 

	
  

	
(c)

	
all costs of producing, lifting, transporting, storing, processing and selling any Petroleum derived from the Project;

 

 

14

Index

 

	
  

	
(d)

	
all costs of reinstating any damaged facilities relating to the Project;

 

	
  

	
(e)

	
all costs of satisfying any liability in respect of seepage, pollution and well control relating to the Project;

 

	
  

	
(f)

	
all costs of abandonment, and any payments to make provision for abandonment costs, relating to the whole or any part of the Project or any physical assets associated with the Project including, but not limited to, the Decommissioning Costs and Field Security Costs; and

 

	
  

	
(g)

	
all royalties payable under any Petroleum production licence relating to the Project;

 

	
  

	
(h)

	
all other costs, expenses and payments not falling within the preceding paragraphs of this definition in respect of the Project;

 

(B)             any Taxes payable by the Borrower in that period;

 

	
  

	
(C)

	
all general and administrative expenditure not falling within paragraph (A) above which is payable by the Borrower in that period;

 

	
  

	
(D)

	
all amounts payable by the Borrower in that period under each Hedging Agreement to which it is a party after taking into account any netting applicable under the terms of the Hedging Agreement; and

 

	
  

	
(E)

	
any other costs, expenses or payments that the Borrower and the Majority Lenders agree to designate as "Gross Expenditure".

 

"Gross Income" means, in relation to any period, without double counting:

 

	
  

	
(A)

	
to the extent that the same is payable in that period to the Borrower in respect of the Project or attributable to the Borrower's share of the Project:

 

	
  

	
(1)

	
the gross proceeds (without deductions whatsoever) of any disposal of any Petroleum derived from the Project in that period; and

 

	
  

	
(2)

	
the proceeds of insurance under insurance policies that have been taken out with respect to the Project or any facilities or activities relating to the Project; and

 

	
  

	
(B)

	
all amounts payable to the Borrower in that period under each Hedging Agreement to which it is a party after taking into account any netting applicable under the terms of the Hedging Agreement);

 

	
  

	
(C)

	
any refunds of Taxes payable to the Borrower in that period;

 

	
  

	
(D)

	
the Borrower's share of any amounts payable to the Huntington Petroleum Field joint venture in respect of any third party processing, storage or transportation fees relating to the Huntington Petroleum Field; and

 

 

15

Index

 

	
  

	
(E)

	
any other payments that the Borrower and the Majority Lenders agree to designate as "Gross Income".

 

"Group" means the Parent and its Subsidiaries from time to time.

 

"Hedging Accession Agreement" means a document substantially in the form set out in  Schedule 8 (Form of Hedging Accession Agreement) or in such other form as the Facility Agent may approve (acting reasonably).

 

"Hedging Agreement" means any ISDA Master Agreement, confirmation, schedule or other agreement evidencing a Hedging Transaction.

 

"Hedging Agreement Account" has the meaning given to it in Clause 19.7 (Hedging Agreement Account). 

 

"Hedging Bank" means:

 

(A)             any Lender; and

 

	
  

	
(B)

	
any Affiliate of any Lender that accedes, and becomes a party, to this Agreement as a "Hedging Bank" in accordance with this Agreement,

 

in each case, to the extent that such person is a party to any Hedging Agreement under which any Hedging Liability is, or is capable of being, outstanding.

 

"Hedging Costs" means any amount falling due from the Borrower under a Hedging Agreement except for any Hedging Termination Payment.

 

"Hedging Liabilities" means any liabilities of the Borrower under or in respect of any Secured Hedging Agreement (including any Hedging Costs and Hedging Termination Payments due, in each case, from the Borrower under such Secured Hedging Agreement).

 

"Hedging Policy" means the hedging policy set out in Schedule 9 (Hedging Policy).

 

"Hedging Termination Payment" means any amount falling due from or, as the case may be, to the Borrower pursuant to the terms of a Hedging Agreement as a result of the designation of an Early Termination Date (as defined in the Hedging Agreement) under that Hedging Agreement (or the occurrence of a date having similar effect in the case of a Hedging Transaction that is not documented pursuant to an ISDA Master Agreement), other than interest accruing on any amount not paid when due.

 

"Hedging Transaction" means (i) (for the purpose of Mandatory Hedging) a derivative instrument entered into in accordance with the provisions of paragraph 2 of Schedule 9 (Hedging Policy); and (ii) (other than for the purpose of Mandatory Hedging) a swap, option, cap, collar, floor, put, call or other hedging instrument approved by the Facility Agent (acting on the instructions of the Majority Lenders).

 

"Highest Lawful Rate" means, as to any Lender or Fronting Bank, at the particular time in question, the maximum nonusurious rate of interest which, under applicable law, such person is then permitted to charge an Obligor on the Loans made to such Obligor or the other obligations of such Obligor hereunder, and as to any other person, at the particular 

 

 

16

Index

 

time in question, the maximum nonusurious rate of interest which, under applicable law, such person is then permitted to charge with respect to the obligation in question.

 

"Holding Company" means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.

 

"Huntington Petroleum Field" means the Petroleum accumulation known as the Forties reservoir (as described in the Field Development Plan for the Huntington Petroleum Field) forming part of the Huntington field (and the facilities associated therewith) comprised in the Development Asset.

 

"IFRS/GAAP" means, in relation to any Obligor, either (i) the generally accepted accounting principles in that Obligor's jurisdiction of incorporation or (ii) (if implemented by the relevant Obligor) international accounting standards within the meaning of the IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements.

 

"Impaired Agent" means the Facility Agent or the Security Trustee (as the case may be) at any time when:

 

	
  

	
(A)

	
it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;

 

	
  

	
(B)

	
the Facility Agent or the Security Trustee (as the case may be) otherwise rescinds or repudiates a Finance Document;

 

	
  

	
(C)

	
(if the Facility Agent or the Security Trustee (as the case may be) is also a Lender) it is a Defaulting Lender under paragraph (A) or (B) of the definition of "Defaulting Lender"; or

 

	
  

	
(D)

	
an Insolvency Event has occurred and is continuing with respect to the Facility Agent or the Security Trustee (as the case may be);

 

unless, in the case of paragraph (A) above:

 

	
  

	
(1)

	
its failure to pay is caused by:

 

(a)           administrative or technical error; or

 

(b)           a Disruption Event; and

 

payment is made within five Business Days of its due date; or

 

	
  

	
(2)

	
the Facility Agent or the Security Trustee (as the case may be) is disputing in good faith whether it is contractually obliged to make the payment in question.

 

"Increase Confirmation" means a confirmation substantially in the form set out in Schedule 10 (Form of Increase Confirmation).

 

"Increase Lender" has the meaning given to that term in Clause 2.2 (Increase).

 

 

17

Index

 

"Independent Engineering Consultant" means Ryder Scott or such other reputable independent petroleum engineering firm as may be selected by the Borrower and approved by the Technical Banks.

 

"Information Package" means all or any information provided, in writing, by or on behalf of any Obligor to the Finance Party(ies) on or before the date of this Agreement in relation to, or in connection with, the Development Asset, any Obligor or any transaction contemplated by this Agreement or any Transaction Document.

 

"Initial Approved Reserves" means the aggregate quantity of Petroleum reserves that is forecast in the Initial Projection to be derived from the Huntington Petroleum Field.

 

"Initial Equity Contribution" means the amount determined by the Technical Banks which is the aggregate of:

 

	
  

	
(A)

	
the amount which is equal to the Total Development Cost less the aggregate of:

 

	
  

	
(1)

	
the lesser of (x) the highest Tranche A Borrowing Base Amount for any Calculation Period shown in the Initial Projection, and (y) the Aggregate Commitments for Tranche A applicable on the Financial Closing Date, and

 

	
  

	
(2)

	
the aggregate of (x) $4,397,620, and (y) the amounts funded from 1 January 2011 to the Financial Closing Date for capital expenditure in respect of the Project as approved by the Technical Banks; and

 

	
  

	
(B)

	
the amount which is equal to the aggregate of (i) all fees payable by the Borrower under the Finance Documents for the period of 12 months commencing on the date of this Agreement other than the arrangement fees payable by the Borrower under the Arrangement Fee Letter, and (ii) all interest projected to be payable by the Borrower under the Finance Documents for the period of 12 months commencing on the date of this Agreement.

 

"Initial Projection" has the meaning given to that term in Clause 7.1 (Adoption).

 

"Initial Working Capital Model" means the Borrower's Working capital Model referred to in paragraph 5.3 of Schedule 2 (Initial conditions precedent).

 

"Insolvency Event" in relation to a Finance Party means that the Finance Party:

 

(A)             is dissolved (other than pursuant to a consolidation, amalgamation or merger);

 

	
  

	
(B)

	
becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;

 

	
  

	
(C)

	
makes a general assignment, arrangement or composition with or for the benefit of its creditors;

 

	
  

	
(D)

	
institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official;

 

 

18

Index

 

affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in paragraph (D) above and:

 

	
  

	
(E)

	
has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law 

 

 

	
  

	
(1)

	
results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or

 

	
  

	
(2)

	
is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof;

 

	
  

	
(F)

	
has exercised in respect of it one or more of the stabilisation powers pursuant to Part 1 of the Banking Act 2009 and/or has instituted against it a bank insolvency proceeding pursuant to Part 2 of the Banking Act 2009 or a bank administration proceeding pursuant to Part 3 of the Banking Act 2009;

 

	
  

	
(G)

	
has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);

 

	
  

	
(H)

	
seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets;

 

	
  

	
(I)

	
has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;

 

	
  

	
(J)

	
causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in paragraphs (A) to (I) above; or

 

	
  

	
(K)

	
takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.

 

"Insolvency Officer" means any liquidator, trustee in bankruptcy, judicial custodian or manager, compulsory manager, receiver, receiver and manager, administrative receiver, administrator or other similar officer, in each case, appointed in any jurisdiction.

 

"Interest Period" means, in relation to a Loan, each period determined in accordance with Clause 11 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 10.3 (Default interest).

 

"Interim Projection" has the meaning given to that term in Clause 7.1 (Adoption).

 

 

19

Index

 

"Interim Recalculation Date" has the meaning given to that term in Clause 7.1 (Adoption).

 

"ISDA Master Agreement" means the 2002 ISDA Master Agreement (Multicurrency –Cross Border) published by the International Swaps and Derivatives Association.

 

"ITA" means the Income Tax Act 2007.

 

"L/C Proportion" means, in relation to any Lender in respect of any Letter of Credit at any time, the proportion (expressed as a percentage) borne by that Lender's Commitment for Tranche C to the Aggregate Commitments for Tranche C at such time or, if at any such time the Aggregate Commitments for Tranche C have been reduced to zero, the proportion, (expressed as a percentage) borne by that Lender's Commitment for Tranche C to the Aggregate Commitments for Tranche C immediately prior to such reduction.

 

"Lender" means:

 

(A)             any Original Lender; and

 

	
  

	
(B)

	
any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 2.2 (Increase) or Clause 25 (Changes to the Lenders),

 

which in each case has not ceased to be a Party in accordance with the terms of this Agreement.

 

"Lenders' Adviser" has the meaning given to that term in Clause 18.4 (Advisers' fees).

 

"Letter of Credit" means a letter of credit issued or to be issued under Tranche C pursuant to Clause 6 (Utilisation – Letters of Credit).

 

"LIBOR" means, in relation to any Loan (in any currency other than in euro):

 

	
  

	
(A)

	
the applicable Screen Rate; or

 

	
  

	
(B)

	
(if no Screen Rate is available for the currency for the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request quoted by the Reference Banks to lending banks in the London interbank market,

 

as of 11.00 a.m. (London time) on the Quotation Day for the currency of that Loan and for a period comparable to the Interest Period of that Loan.

 

"Licence Termination Date" means, in relation to the Development Asset and/or Petroleum field comprised therein, the date of the expiry of:

 

	
  

	
(A)

	
any production licence or any production sharing contract relating to the Development Asset and/or Petroleum field; or

 

	
  

	
(B)

	
any other Authorisation required for (i) Petroleum production from that Petroleum field to be extracted or otherwise exploited or (ii) that Petroleum field to be operated.

 

 

20

Index

 

"LLCR" means the loan life cover ratio, being in relation to any Calculation Period or any day falling in that Calculation Period, the ratio of N:D where:

 

"N" is the NPV (Loan Life) for that Calculation Period; and

 

"D" is the aggregate Dollar Amount of Utilisations outstanding under Tranche A and Tranche B or, as the case may be, projected to be outstanding in that Calculation Period.

 

"LMA" means the Loan Market Association.

 

"Loan" means, in relation to a Tranche, a loan made or to be made under that Tranche or the principal amount outstanding for the time being of that loan.

 

"Majority Lenders" means:

 

	
  

	
(A)

	
until the Global Commitments have been reduced to zero, a Lender or Lenders whose Commitments in relation to the Tranches aggregate more than 662/3% of the Global Commitments (or, if the Global Commitments have been reduced to zero and there are no Utilisations then outstanding, aggregated more than 662/3% of the Global Commitments immediately prior to the reduction); or

 

	
  

	
(B)

	
at any other time, a Lender or Lenders whose participations in the Utilisations then outstanding aggregate more than 662/3% of all the Utilisations then outstanding.

 

"Mandatory Cost" means the percentage rate per annum calculated by the Facility Agent in accordance with Schedule 5 (Mandatory Cost Formulae).

 

"Mandatory Hedging" has the meaning ascribed to it in paragraph 1.1 of Schedule 9 (Hedging Policy).

 

"Mandatory Hedging Volume" has the meaning ascribed to it in paragraph 2.1 of Schedule 9 (Hedging Policy).

 

"Margin" means:

 

(A)             in relation to any Utilisation under Tranche A, on any day:

 

	
  

	
 (1)

	
on and from the date of this Agreement up to and including the Project Completion Date, 3.50 per cent. per annum;

 

(2)           from the Project Completion Date, 3.00 per cent. per annum.

 

	
  

	
(B)

	
in relation to any Utilisation under Tranche B, on any day, 4.75 per cent. per annum; and

 

	
  

	
(C)

	
in relation to any Utilisation under Tranche C, on any day:

 

	
  

	
(1)

	
on and from the date of this Agreement up to and including the Project Completion Date, 3.50 per cent. per annum;

 

	
  

	
(2)

	
from the Project Completion Date, 3.00 per cent. per annum.

 

 

21

Index

 

"Market Hedge" has the meaning ascribed to it in paragraph 2.3 of Schedule 9 (Hedging Policy).

 

"Material Adverse Effect" means any event or circumstance (including any material adverse change or the continuation of any circumstance) which, in the opinion of the Majority Lenders have materially and adversely affected or could materially and adversely affect:

 

	
  

	
(A)

	
the ability of any Obligor to perform any of its obligations in any material respect under any Transaction Document as and when they fall due to be performed; or

 

	
  

	
(B)

	
the business, performance, assets, prospects, operations or condition (financial or otherwise) of the Borrower; or

 

	
  

	
(C)

	
the legality, validity or enforceability of any material provision of any Finance Document; or

 

	
  

	
(E)

	
the effectiveness or priority of any Security created or purported to be created under any Finance Document.

 

"Modelling Bank" means BNP Paribas in its capacity as modelling bank or any other person that replaces it in such capacity in accordance with this Agreement.

 

"Month" means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

 

	
  

	
(A)

	
(subject to paragraph (C) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

 

	
  

	
(B)

	
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

 

	
  

	
(C)

	
if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

 

The above rules will only apply to the last Month of any period.

 

"Monthly Report" means a report in a form satisfactory to the Facility Agent and the Technical Banks (each, acting reasonably) with respect to the Project which includes, to the extent provided to the Borrower by the Operator, or obtained by the Borrower from the Operator or third parties without the incurrence of material additional expense or effort:

 

	
  

	
(A)

	
a progress report with respect to the development and construction of the Project which details, among other things, significant developments in relation to (i) the development schedule, (ii) the initial development budget, (iii) capital utilised and (iv) projected capital requirements to achieve Project Completion;

 

	
  

	
(B)

	
the progress of the construction of the FPSO Facility;

 

 

22

Index

 

	
  

	
(C)

	
budget reconciliation tables and the Project S-curves;

 

	
  

	
(D)

	
any available production data; and

 

	
  

	
(E)

	
any other information, data and analysis relating to the Project that the Technical Banks or Facility Agent may reasonably require.

 

"Non-Acceptable L/C Lender" means a Lender which:

 

	
  

	
(A)

	
is not an Acceptable Bank within the meaning of paragraph (A) of the definition of "Acceptable Bank" (other than a Lender which the Fronting Bank has agreed is acceptable to it notwithstanding that fact); or

 

(B)             is a Defaulting Lender; or

 

	
  

	
(C)

	
has failed to make (or has notified the Facility Agent that it will not make) a payment to be made by it under Clause 6.9 (Indemnities) or Clause 28.10 (Lenders' indemnity) or any other payment to be made by it under the Finance Documents to or for the account of any other Finance Party in its capacity as Lender by the due date for payment unless the failure to pay falls within the description of any of those items set out in paragraphs (1) to (2) of the definition of Defaulting Lender.

 

"Non-Mandatory Hedging" has the meaning ascribed to it in paragraph 1.1 of Schedule 9 (Hedging Policy).

 

"NPV (Loan Life)" means, in relation to any Calculation Period, the amount calculated (in dollars) which is the sum of:

 

	
  

	
(A)

	
the net present value of the Projected Net Revenues for that Calculation Period and for each subsequent Calculation Period ending on or before the Final Maturity Date; and

 

	
  

	
(B)

	
to the extent that the Technical Banks so approve, the net present value of capital expenditure that has been included in the determination of the figure referred to in paragraph (A) above,

 

where (i) net present values are calculated, using the Computer Model, by applying the relevant discount rate agreed or determined pursuant to Clause 7 (Projections) and (ii) in accordance with Clause 7.3 (Key principles), in determining the Projected Net Revenues, no account shall be taken of any Gross Expenditure or Gross Income relating to the Project which is projected to arise after the Field Life End Date for the Project other than any Gross Expenditure relating to the abandonment of the Huntington Petroleum Field (including the FPSO Termination Fees).

 

"NPV (Project Life)" means, in relation to any Calculation Period, the amount calculated (in dollars) which is the sum of:

 

	
  

	
(A)

	
the net present value of the Projected Net Revenues for that Calculation Period and for each subsequent Calculation Period ending on or before the Calculation End Date; and

 

 

23

Index

 

	
  

	
(B)

	
to the extent that the Technical Bank so approve, the net present value of capital expenditure that has been included in the determination of the figure referred to in paragraph (A),

 

where (i) net present values are calculated, using the Computer Model, by applying the relevant discount rate agreed or determined pursuant to Clause 7 (Projections) and (ii) in accordance with Clause 7.3 (Key principles), in determining the Projected Net Revenues, no account shall be taken of any Gross Expenditure or Gross Income relating to the Project which is projected to arise after the Field Life End Date for the Project other than any Gross Expenditure relating to the abandonment of the Huntington Petroleum Field (including the FPSO Termination Fees).

 

"Obligor" means the Borrower or the Parent.

 

"Optional Currency" means a currency (other than dollars) which complies with the conditions set out in Clause 4.4 (Conditions relating to Optional Currencies).

 

"P50 Reserves" means, in relation to the Project, those quantities of Petroleum which are deemed to be recoverable from the Huntington Petroleum Field comprised in the Project as "Proved plus Probable Reserves" in accordance with the guidelines of the Society of Petroleum Engineers (provided that if such guidelines are modified after the date of this Agreement and as a result of such modification, the Technical Banks (acting reasonably in consultation with the Borrower) are of the opinion that such definition of the term "P50 Reserves" will need to be modified to take account of the relevant modification to such guidelines, then such definition shall be modified as required by the Technical Banks (acting reasonably in consultation with the Borrower and the Lenders)).

 

"P90 Reserves" means, in relation to the Project, those quantities of Petroleum which are deemed to be recoverable from the Huntington Petroleum Field comprised in the Project as "Proved Reserves" in accordance with the guidelines of the Society of Petroleum Engineers (provided that if such guidelines are modified after the date of this Agreement and as a result of such modification, the Technical Banks (acting reasonably in consultation with the Borrower) are of the opinion that such definition of the term "P90 Reserves" will need to be modified to take account of the relevant modification to such guidelines, then such definition shall be modified as required by the Technical Banks (acting reasonably in consultation with the Borrower and the Lenders)).

 

"Participating Member State" means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

 

"Party" means a party to this Agreement.

 

"Permitted Expenditure" means:

 

	
  

	
(A)

	
each item of Gross Expenditure falling within paragraphs (A) and (to the extent agreed by the Technical Banks), (B) and (C) of the definition of "Gross Expenditure"; and

 

	
  

	
(B)

	
any other item of expenditure that the Technical Banks and the Borrower agree to treat as "Permitted  Expenditure".

 

 

24

Index

 

"Petroleum" means any mineral, oil or relative hydrocarbon (including condensate and natural gas liquids) and natural gas existing in its natural condition in strata (but not including coal or bituminous shale or other stratified deposits from which oil can be extracted by destructive distillation).

 

"Petroleum Asset" means (i) any Petroleum field, pipeline transmission system or other Petroleum project, (ii) the facilities relating to such field, system or project and/or (iii) the interests in such field, system, project or facilities.

 

"PLCR" means the project life cover ratio being, in relation to any Calculation Period or any day falling in that Calculation Period, the ratio of N:D where:

 

"N" is the NPV (Project Life) for that Calculation Period; and

 

"D" is the aggregate Dollar Amount of Utilisations outstanding under Tranche A and Tranche B or, as the case may be, projected to be outstanding in that Calculation Period.

 

"Proceeds Accounts" has the meaning given to that term in Clause 19.3 (Proceeds Accounts).

 

"Project" means the development and operation of the Huntington Petroleum Field (and the facilities and infrastructure associated therewith including the FPSO Facility) in accordance with its Field Development Plan.

 

"Project Accounts" means the Equity Contribution Account, the Cash Collateral Accounts, the Fulmar Project Costs Account, the Proceeds Accounts and the Hedging Agreement Account.

 

"Project Completion" shall occur when each of the conditions specified in Schedule 11 (Project Completion Tests) have been fulfilled to the satisfaction of the Technical Banks and the Majority Lenders or, to the extent not fulfilled, waived by the Super Majority Lenders.

 

"Project Completion Date" means the date (as confirmed by the Technical Banks to the Borrower and the Lenders) on which Project Completion has occurred.

 

"Project Document" means each of:

 

	
  

	
(A)

	
the documents listed in paragraph 3.1 (Project Documents) of Schedule 2 (Initial conditions precedent);

 

	
  

	
(B)

	
in relation to the Project and to the extent not falling within paragraph (A) above:

 

	
  

	
(1)

	
each joint operating agreement and/ or unitisation and unit operating agreement relating to the Project, each agreement relating to the transportation, processing and/or storage of production from the Project, each agreement for the sale or marketing of production from the Project and each other material agreement relating to the Project and/or Petroleum produced from the Project; and

 

	
  

	
(2)

	
any Authorisation required for the lawful exploitation, development or operation of the Project or the production, transportation or sale of 

 

 

25

Index

 

Petroleum from the Project (and including any Petroleum production licence); and

 

	
  

	
(C)

	
any other document designated as such by the Borrower and the Facility Agent.

 

"Projected Net Revenues" means, in relation to any Calculation Period, an amount (which may be a negative or positive figure) calculated by deducting "B" from "A" where:

 

"A" is the aggregate of the Gross Incomes of the Borrower projected to be received in that Calculation Period; and

 

"B" is the aggregate of the Gross Expenditure of the Borrower projected to be made in that Calculation Period.

 

"Projection" means a consolidated cashflow and debt service projection in respect of the Borrower prepared or to be prepared pursuant to this Agreement.

 

“Proportional Basis” means on any Recalculation Date the relative proportions of (i) the aggregate amount of cash cover that is required to be maintained under Clause 6.14 (Reserving requirements) of this Agreement in respect of all Letters of Credit that have been issued less the cash cover already provided for such Letters of Credit and (ii) the amount required to be paid by the Borrower into a Sinking Fund in the period of 3 months following such Recalculation Date.

 

"Qualifying Lender" has the meaning given to that term in Clause 14 (Tax gross-up and indemnities).

 

"Quarter End Date" means 31 March, 30 June, 30 September or 31 December of each year.

 

"Quotation Day" means, in relation to any period for which an interest rate is to be determined, (i) (if the currency is sterling) the first day of that period, (ii) (if the currency is euro) two TARGET days before the first day of that period, or (iii) (for any other currency) two Business Days before the first day of that period, unless market practice differs (in relation to euro) in the European interbank market, and (in relation to any other currency) in the London interbank market in which case the Quotation Day for that currency will be determined by the Facility Agent in accordance with market practice (in relation to euro) in the European interbank market, and (in relation to any other currency) in the London interbank market (and if quotations would normally be given by leading banks (in relation to euro) in the European interbank market, and (in relation to any other currency) in the London interbank market on more than one day, the Quotation Day will be the last of those days).

 

"Recalculation Date" means any Scheduled Recalculation Date or Interim Recalculation Date.

 

"Reduction Date" means each Recalculation Date and each other date on which a Projection is adopted in accordance with Clause 7 (Projections).

 

"Reference Banks" means BNP Paribas and Société Générale or such other banks as may be appointed by the Facility Agent in consultation with the Borrower.

 

 

26

Index

 

"Related Fund" in relation to a fund (the "first fund"), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.

 

"Relevant Affiliate" means, to the extent that it is not already an Obligor, any wholly-owned Subsidiary of an Obligor or any wholly-owned Subsidiary of a Holding Company of an Obligor.

 

"Relevant Working Capital Model" means each of (i) the Initial Working Capital Model and (ii) the Working Capital Model most recently delivered to the Facility Agent.

 

"Remaining Reserves" means, in relation to the Project and any Calculation Period, the total quantities of Petroleum reserves forecast in the then current Projection to be derived from the Project in that Calculation Period and each subsequent Calculation Period which ends on or before the Field Life End Date for the Huntington Petroleum Field.

 

"Renewal Letter of Credit" means a Letter of Credit issued under Tranche C in accordance with the requirements of Clause 6.4 (Renewal of a Letter of Credit).

 

"Repeating Representations" means each of the representations set out in Clause 21 (Representations) other than in sub-Clauses 21.8.1 (Tax) and 21.9 (No filing or stamp taxes).

 

"Representative" means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

 

"Required Fulmar Balance" means, in relation to any date, the Fulmar Project Costs that are projected in the then current Working Capital Model to be payable by the Borrower over the following 3 month period.

 

"Required Retention Amount" means, in relation to any date, the amount (determined by the Technical Banks after consultation with the Borrower with reference to the current Projection) required to be retained by the Borrower in the Proceeds Accounts in order for the Borrower to meet any costs (other than Decommissioning Costs and Field Security Costs) that are projected in the then current Projection to be payable by the Borrower over the period of 60 days from that date, if prior to Project Completion, and over the period of 30 days from that date on and following Project Completion.

 

"Reserves Report" means a report in form and substance satisfactory to the Technical Banks, which is prepared by an Independent Engineering Consultant and includes:

 

	
  

	
(A)

	
evaluations of, and production profiles for, the P50 Reserves and P90 Reserves recoverable from the Project;

 

	
  

	
(B)

	
all relevant information and data about, and all estimates of the operating and capital expenditure that may be required to be incurred in connection with the recovery of such reserves and/or the achievement of such production profiles;

 

	
  

	
(C)

	
any other information, data or evaluation(s) relating to the Project as the Technical Banks may reasonably require.

 

 

27

Index

 

"Reserve Tail Date" means the last day of the Calculation Period immediately preceding the first Calculation Period in which the aggregate Remaining Reserves are projected in the then current Projection to be less than 25% of the Initial Approved Reserves.

 

"Rollover Loan" means one or more Loans under Tranche C:

 

	
  

	
(A)

	
made or to be made on the same day that a maturing Loan under Tranche C is due to be repaid;

 

	
  

	
(B)

	
the aggregate amount of which is equal to or less than the maturing Loan under Tranche C;

 

	
  

	
(C)

	
in the same currency as the maturing Loan under Tranche C (unless it arose as a result of the operation of Clause 5.8 (Unavailability of a currency)); and

 

	
  

	
(D)

	
made or to be made to the Borrower for the purpose of refinancing a maturing Loan under Tranche C.

 

"Scheduled Projection" means each Projection that is adopted or due to be adopted on a Scheduled Recalculation Date.

 

"Scheduled Recalculation Date" means 30 April 2011 and each 31 March and 30 September occurring on or after 30 April 2011 and before the Final Maturity Date.

 

"Scheduled Tranche A Repayment Date" has the meaning given to it in Clause 8.1.1 (Repayment of Tranche A and Tranche B Loans).

 

"Scheduled Tranche B Repayment Date" has the meaning given to it in Clause 8.1.2 (Repayment of Tranche A and Tranche B Loans).

 

"Screen Rate" means, (i) in relation to LIBOR, the British Bankers' Association Interest Settlement Rate for the relevant currency for the relevant period, (ii) in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period, displayed on the appropriate page of the Reuters screen.  If the agreed page is replaced or service ceases to be available, the Facility Agent may specify another page or service displaying the appropriate rate after consultation with the Borrower and the Lenders.

 

"Secured Hedging Agreement" means any Hedging Agreement entered into between the Borrower and any Hedging Bank in compliance with this Agreement.

 

"Secured Liabilities" means all or any monies, obligations and liabilities now or hereafter due, owing or incurred by the Borrower to any Finance Party under or pursuant to  the Finance Documents, in each case, whether by acceleration or otherwise, and whether such monies, obligations or liabilities are express or implied; present, future or contingent; joint or several; incurrent as principal or surety; originally owing to the Finance Party(ies) or purchased (whether by assignment or otherwise) or acquired in any other way by the Finance Party(ies); denominated in dollars or any other currency; or incurred on any current or other banking account or in any other manner whatsoever.

 

"Security" means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

 

 

28

Index

 

"Security Document" means:

 

	
  

	
(A)

	
each of the documents referred to in paragraph 2.3 of Schedule 2 (Initial conditions precedent);

 

	
  

	
(B)

	
each other document evidencing or creating any Security in favour of the Finance Parties (or, as the case may be, the Security Trustee (in its capacity as such)) for, or in respect of, the Secured Liabilities; and

 

(C)             each other document designated as such by the Facility Agent and the Borrower.

 

"Security Trustee" means Société Générale in its capacity as security trustee for the Finance Parties or any other person that replaces it in such capacity in accordance with this Agreement.

 

"Selection Notice" means a notice substantially in the form set out in Part III (Selection Notice of Schedule 3 (Utilisation Request) given in accordance with Clause 11 (Interest Periods).

 

"Separate Loan" has the meaning given to that term in Clause 8.2 (Repayment of Tranche C Loans).

 

"Sinking Fund" means a cash collateral or trust account which is established by the Borrower with the approval of the Facility Agent (acting reasonably) on terms that amounts may only be withdrawn from such account to meet Decommissioning Costs and/or Field Security Costs.

 

"Spread" has the meaning ascribed to it in paragraph 2.3 of Schedule 9 (Hedging Policy).

 

"Subordination Deed" means the subordination deed dated on or about the date hereof entered into between the Parent, the Security Trustee and the Borrower.

 

"Subsidiary" means, in relation to any person (a "parent entity"), any other person (the "relevant entity") (a) in respect of which that parent entity holds or owns (directly or indirectly) more than 50% of the voting capital or similar ownership rights or (b) over which that parent entity has direct or indirect control (where, for the purposes of this definition, "control" means the power to direct the management and the policies of the relevant entity whether through the ownership of voting capital, by contract or otherwise).

 

"Super Majority Lenders" means:

 

	
  

	
(A)

	
until the Global Commitments have been reduced to zero, a Lender or Lenders whose Commitments in relation to the Tranches aggregate more than 79% of the Global Commitments (or, if the Global Commitments have been reduced to zero and there are no Utilisations then outstanding, aggregated more than 79% of the Global Commitments immediately prior to the reduction); or

 

	
  

	
(B)

	
at any other time, a Lender or Lenders whose participations in the Utilisations then outstanding aggregate more than 79% of all the Utilisations then outstanding.

 

 

29

Index

 

"TARGET2" means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007.

 

"TARGET Day" means any day on which TARGET2 is open for the settlement of payments in euro.

 

"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

 

"Taxes Act" means the Income and Corporation Taxes Act 1988.

 

"Technical Assumption" means any assumptions (other than an Economic Assumption), and the values ascribed to such assumptions, upon which each Projection or draft Projection and, in each case, the calculations and information therein are, or are to be, based.

 

"Technical Banks" means each of BNP Paribas and Société Générale in its capacity as technical bank or any other person that replaces it in such capacity in accordance with this Agreement.

 

"Term" means, in relation to any Letter of Credit, the period during which the Fronting Bank is under a liability under that Letter of Credit.

 

"Third Parties Act" has the meaning give to that term in Clause 1.3 (Third party rights).

 

"Total Available Commitments" means, in relation to a Tranche, the aggregate for the time being of each Lender's Available Commitment under that Tranche.

 

"Total Borrower Sources" means, in relation to any period, the sum (without double counting) of:

 

	
  

	
(A)

	
the total unutilised amount of the Facility and any other committed credit facility that is available to the Borrower in that period for the purposes of meeting any Total Borrower Uses in that period;

 

	
  

	
(B)

	
the actual cash balances of the Borrower on the first day of that period;

 

	
  

	
(C)

	
any committed sources of funds available from the Parent in that period for the purposes of meeting the Parent's payment undertakings under Clause 20.3 (Equity Contribution for Cost Overrun) and Clause 20.7 (Fulmar Project Cost).

 

	
  

	
(D)

	
the aggregate amount of the proceeds of sale from the sale of Petroleum that is projected to be received by the Borrower in that period and the Borrower's Petroleum anticipated to be in storage or in transit on the last day of such period; and

 

	
  

	
(E)

	
any other sources or potential sources of funds approved by the Technical Banks,

 

	
  

	
where, for these purposes:

 

 

30

Index

 

	
  

	
(1)

	
a credit facility (including the Facility) shall only be treated as being "available" on any date to the extent that no circumstances exist or are continuing on such date which would prohibit any lender under that credit facility from making, or would entitle any such lender to refuse to make, any utilisation available to any borrower under that credit facility; and

 

	
  

	
(2)

	
the Petroleum price to be received upon sale, and value of inventory at the end of such period, used for the purposes of determining the amount referred to in paragraph (D) above shall be approved by the Technical Banks (acting reasonably).

 

"Total Borrower Uses" means, in relation to any period, the aggregate amount (without double counting) of all of the costs, expenditure, outgoings and other payments that are projected to be payable by the Borrower in that period (whether with respect to the Project, the Fulmar Project or otherwise).

 

"Total Development Cost" means in relation to the Project the aggregate amount of capital expenditure that is projected to be incurred by the Borrower with respect to the Project in the Initial Projection in the period ending on or before the Project Completion Date for the purposes of achieving the Project Completion Date.

 

"Tranche" means Tranche A, Tranche B or Tranche C.

 

"Tranche A" has the meaning given to it in Clause 2 (The Facility).

 

"Tranche A Borrowing Base Amount" means, in relation to a Calculation Period or any day falling within such period, the amount (in dollars) specified in each Projection which is the lowest of A,B and C where:

 

	
  

	
(A)

	
"A" is the project life cover ratio amount calculated by dividing the NPV (Project Life) relating to that Calculation Period by 1.5;

 

	
  

	
(B)

	
"B" is the loan life cover ratio amount calculated by dividing the NPV (Loan Life) relating to that Calculation Period by 1.35; and

 

	
  

	
(C)

	
"C" is the amount which is the maximum aggregate amount of the Loans that could be outstanding on the first day of that Calculation Period that would generate a DSCR for each Calculation Period commencing before the Final Maturity Date of at least 1.2:1.

 

"Tranche B Borrowing Base Amount" means in relation to a Calculation Period or any day falling within such period, the amount (in dollars) specified in each Projection which is the lesser of A and B where:

 

	
(A)  

	
"A" is the amount calculated by subtracting the Tranche A Borrowing Base Amount relating to that Calculation Period from the project life cover ratio amount calculated by dividing NPV (Project Life) relating to that Calculation Period by 1.35;

 

	
(B)  

	
"B" is the amount calculated by subtracting the Tranche A Borrowing Base Amount relating to that Calculation Period from the loan life cover ratio amount calculated by dividing the NPV (Loan Life) relating to that Calculation Period by 1.2.

 

 

31

Index

 

"Tranche B Maximum Amount" means, in relation to any day the same falls due for determination in accordance with Clause 20.3.1 (Equity Contribution for Cost Overrun), an amount (determined by the Technical Banks with reference to the current Projection) equal to the lesser of (i) the Aggregate Commitments for Tranche B and (ii) the Tranche B Borrowing Base Amount.

 

"Tranche B Required Amount" means, in relation to any day the same falls due for determination in accordance with Clause 20.3.1 (Equity Contribution for Cost Overrun), the amount (determined by the Technical Banks with reference to the current Projection) which is:

 

	
  

	
(A)

	
where the Cost Overrun is less than or equal to the Tranche B Maximum Amount, an amount equal to half of the Cost Overrun;

 

	
  

	
(B)

	
where the Cost Overrun is greater than the Tranche B Maximum Amount but not greater than twice the Tranche B Maximum Amount, an amount equal to half of the Cost Overrun; and

 

	
  

	
(C)

	
where the Cost Overrun is greater than twice the Tranche B Maximum Amount, an amount equal to the greater of (i) the Tranche B Maximum Amount and (ii) the amount in respect of Cost Overruns that are projected in the then current Projection to be payable by the Borrower over the following 2 month period.

 

"Tranche C" has the meaning given to it in Clause 2 (The Facility).

 

"Transaction Documents" means the Project Documents and the Finance Documents.

 

"Transaction Security" means the Security created or expressed to be created in favour of the Security Trustee pursuant to the Security Documents.

 

"Transfer Certificate" means a certificate substantially in one of the forms set out in Schedule 6 (Form of Transfer Certificate) or any other form agreed between the Facility Agent and the Borrower.

 

"Transfer Date" means, in relation to an assignment or a transfer, the later of:

 

	
  

	
(A)

	
the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and

 

	
  

	
(B)

	
the date on which the Facility Agent executes the relevant Assignment Agreement or Transfer Certificate.

 

"Unpaid Sum" means any sum due and payable but unpaid by an Obligor under the Finance Documents.

 

"Utilisation" means a Loan or a Letter of Credit.

 

"Utilisation Date" means the date of a Utilisation, being (a) in the case of any Loan, the date on which the Loan is made or (b) in the case of any Letter of Credit, the date on which that Letter of Credit is issued or, as the case may be, in relation to any Letter of Credit that is being or has been renewed, the date on which that Letter of Credit is renewed and re-issued.

 

 

32

Index

 

"Utilisation Request" means:

 

	
  

	
(A)

	
in relation to any Loan, a notice substantially in the form set out in Part I (Loans) of Schedule 3 (Utilisation Request); and

 

	
  

	
(B)

	
in relation to any Letter of Credit, a notice substantially in the form set out in Part II (Letters of Credit) of Schedule 3 (Utilisation Request).

 

"VAT" means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.

 

"Working Capital Model" means, in relation to any Quarter End Date, a Working Capital Model prepared by the Borrower which:

 

	
  

	
(A)

	
sets out and itemises the Total Borrower Sources and Total Borrower Uses for each month in the Forecast Period in at least the same level of detail as that included in the Initial Working Capital Model;

 

	
  

	
(B)

	
is in the same form as the Initial Working Capital Model or in such other form approved by the Majority Lenders (acting reasonably);

 

	
  

	
(C)

	
sets out and presents the data and calculations for each of the 12 months commencing on the day after that Quarter End Date;

 

	
  

	
(D)

	
is prepared using Petroleum price assumptions that have been approved by the Technical Banks (acting reasonably); and

 

	
  

	
(E)

	
is signed by the chief financial officer or Vice President of Corporate Development and Finance of the Parent and a director of the Borrower, for and on behalf of the Parent and the Borrower (as the case may be) but without personal liability.

 

	
1.2  

	
Construction

 

	
1.2.1  

	
Unless a contrary indication appears, any reference in any Finance Document (other than any Secured Hedging Agreement) to:

 

	
(A)  

	
the singular includes the plural and vice versa;

 

	
(B)  

	
any Finance Party or any Obligor shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

 

	
(C)  

	
"assets" includes (i) present and future properties, revenues and rights of every description and (ii) reference to all or any part of that asset;

 

	
(D)  

	
a "Finance Document" or any other agreement or instrument is a reference to that that Finance Document or other agreement or instrument as modified (however fundamentally and whether or not more onerously) and includes any change in the purpose of, any extension of or increase in any facility or addition of any new facility under that Finance Document or other agreement or instrument;

 

 

33

Index

 

	
(E)  

	
the "equivalent" in any currency (the "first currency") of any amount in another currency (the "second currency") shall be construed as a reference to the amount in the first currency which could be purchased with that amount in the second currency at the spot rate of exchange at which the Facility Agent would have been prepared and able to purchase that amount in the first currency for the second currency in the London foreign exchange market for value as at the relevant time on the relevant date specified in this Agreement (or, where no such time and date is specified, for value at such time and on such date as the Facility Agent may from time to time reasonably determine to be appropriate in the circumstances);

 

	
(F)  

	
a "modification" includes an amendment, supplement, novation, re-enactment, restatement, variation, extension, replacement, modification or waiver or the giving of any waiver, release or consent having the same commercial effect of any of the foregoing but, for the purposes of Clause 38 (Amendment and waivers), excludes any transfer or assignment by any Finance Party of its rights and/or obligations under the relevant Finance Documents which has been effected in accordance the provisions thereof and the provisions of this Agreement (and "modify" shall be construed accordingly);

 

	
(G)  

	
any "obligation" of any person under any Finance Document or any other agreement or document shall be construed as a reference to an obligation expressed to be assumed by or imposed on it under that Finance Document or, as the case may be, that other agreement or document;

 

	
(H)  

	
"indebtedness" includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

 

	
(I)  

	
the "winding-up", "dissolution" or "administration" of a person shall be construed so as to include any equivalent or analogous proceedings under the law of the jurisdiction in which such person is incorporated or established, or any jurisdiction in which such person carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors;

 

	
(J)  

	
a "person" includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium or partnership (whether or not having separate legal personality);

 

	
(K)  

	
a "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, being of a kind that is normally complied with by those to whom it is addressed) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

 

 

34

Index

 

	
(L)  

	
"disposal" means a sale, transfer, grant, lease or other disposal, whether voluntary or involuntary, and "dispose" will be construed accordingly;

 

	
(M)  

	
a provision of law is a reference to that provision as amended or re-enacted;

 

	
(N)  

	
a time of day is a reference to London time;

 

	
(O)  

	
any matter "including" specific instances or examples of such matter shall be construed without limitation to the generality of that matter (and references to "include" shall be construed accordingly);

 

	
(P)  

	
the Interest Period of a Letter of Credit will be construed as a reference to the Term of that Letter of Credit;

 

	
(Q)  

	
an amount borrowed includes any amount utilised by way of Letter of Credit;

 

	
(R)  

	
a Utilisation made or to be made to the Borrower includes a Letter of Credit issued on its behalf;

 

	
(S)  

	
a Lender funding its participation in a Utilisation includes a Lender participating in a Letter of Credit;

 

	
(T)  

	
amounts outstanding under this Agreement include amounts outstanding under any Letter of Credit;

 

	
(U)  

	
an "outstanding" amount of a Letter of Credit at any time is the maximum amount that is or may be payable by the Borrower in respect of that Letter of Credit at that time (without regard to any cash cover provided in relation to such Letter of Credit);

 

	
(V)  

	
the "face value" of any Letter of Credit is a reference to the face amount of the Letter of Credit on the date of its issue (without regard to any cash cover provided or any claims made thereunder);

 

	
(W)  

	
the Borrower "repaying" or "prepaying" a Letter of Credit means:

 

	
(1)  

	
the Borrower providing cash cover for that Letter of Credit;

 

	
(2)  

	
the maximum amount payable under the Letter of Credit being reduced in accordance with its terms; or

 

	
(3)  

	
the Fronting Bank being satisfied that it has no further liability under that Letter of Credit,

 

and the amount by which a Letter of Credit is repaid or prepaid under paragraphs (W)(1) and (W)(2) above is the amount of the relevant cash cover or, as the case may be, relevant reduction;

 

 

35

Index

 

	
(X)  

	
the Borrower providing "cash cover" for a Letter of Credit means the Borrower paying an amount in the currency in which that Letter of Credit is denominated to a Cash Collateral Account;

 

	
(Y)  

	
"$" or "dollars" is to the lawful currency for the time being of the United States of America;

 

	
(Z)  

	
"£" or "sterling" is to the lawful currency for the time being of the United Kingdom of Great Britain and Northern Ireland; and

 

	
(AA)  

	
"€" or "euro" is to the lawful currency for the time being of the Participating Member States.

 

	
1.2.2  

	
Clause and Schedule headings are for ease of reference only.

 

	
1.2.3  

	
The words "other", "or otherwise" and "whatsoever", when used in any Finance Document (other than any Secured Hedging Agreement), shall not be construed ejusdem generis or be construed as any limitation upon the generality of any preceding words or matters specifically referred to.

 

	
1.2.4  

	
Unless a contrary indication appears:

 

	
(A)  

	
a term used in any other Finance Document (other than any Secured Hedging Agreement) or in any notice or certificate given under or in connection with any such Finance Document has the same meaning in that Finance Document, notice or certificate as in this Agreement; and

 

	
(B)  

	
a term defined in any other Finance Document (other than any Secured Hedging Agreement) has the same meaning when used in this Agreement.

 

	
1.2.5  

	
A Default (other than an Event of Default) is "continuing" if it has not been remedied or waived and an Event of Default is "continuing" if it has not been waived.

 

	
1.2.6  

	
If a moratorium occurs in respect of an Obligor, the ending of that moratorium will not remedy any Event of Default caused by the moratorium and, notwithstanding any other term of the Finance Documents, that Event of Default will continue to be outstanding unless and until it is expressly waived by the Agent (acting on the instructions of the Majority Lenders).

 

	
1.2.7  

	
For the purposes of this Agreement:

 

	
(A)  

	
subject to the first sentence in Clause 7.1.1 (Adoption), a reference to the then "current Projection" is a reference to the Projection most recently adopted pursuant to Clause 7.9 (Adoption of Projections); and

 

	
(B)  

	
a reference to the date on which any Projection is "due" to be adopted is a reference to the Recalculation Date as of which that Projection is to be prepared and adopted under Clause 7.1.2 (Adoption) or, as the case may be, Clause 7.1.4 (Adoption).

 

 

36

Index

 

	
1.2.8  

	
Any reference in this Agreement to the Tranche A Borrowing Base Amount or Tranche B Borrowing Base Amount which is "applicable" at any date or period is a reference to the Tranche A Borrowing Base Amount or, as the case may be, the Tranche B Borrowing Base Amount relating to that date or period as shown in the then current Projection.

 

	
1.2.9  

	
Any reference in this Agreement to a "Utilisation Request" for any Loan shall include any Utilisation Request which has been deemed to have been issued pursuant to Clause 6.8 (Loans to cover demands).

 

	
1.2.10  

	
Unless a contrary intention appears, the obligation(s) of each Obligor under this Agreement and/or the other Finance Documents shall remain in force for as long as any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

 

	
1.3  

	
Third party rights

 

	
1.3.1  

	
Unless expressly provided to the contrary in a Finance Document (other than a Secured Hedging Agreement), a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the "Third Parties Act") to enforce or to enjoy the benefit of any term of this Agreement.

 

	
1.3.2  

	
Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

 

 

37

Index

THE FACILITY

 

	
2.  

	
THE FACILITY

 

	
2.1 

	
Facility

 

Subject to the terms of this Agreement, the Lenders make available to the Borrower:

 

	
2.1.1  

	
a multi-currency borrowing base term loan facility which may be utilised by way of loan ("Tranche A") in an aggregate amount equal to the Aggregate Commitments under Tranche A from time to time;

 

	
2.1.2  

	
a multi-currency cost overrun term loan facility which may be utilised by way of loan ("Tranche B") in an aggregate amount equal to the Aggregate Commitments under Tranche B from time to time; and

 

	
2.1.3  

	
a multi-currency revolving credit facility which may be utilised by way of loan or letters of credit ("Tranche C") in an aggregate amount equal to the Aggregate Commitments under Tranche C from time to time.

 

	
2.2  

	
Increase

 

	
2.2.1  

	
The Borrower may by giving prior written notice to the Facility Agent by no later than the date falling ten Business Days after the effective date of a cancellation of:

 

	
(A)  

	
the Commitments of a Defaulting Lender under each Tranche in accordance with Clause 9.8 (Right of cancellation in relation to a Defaulting Lender); or

 

	
(B)  

	
the Commitments of a Lender under each Tranche in accordance with Clause 9.1 (Illegality),

 

request that the Aggregate Commitments under each Tranche be increased (and the Aggregate Commitments under each Tranche shall be so increased) in an aggregate amount in dollars of up to the amount of the Commitments under each Tranche so cancelled or reduced under Clause 9.8 (Right of cancellation in relation to a Defaulting Lender) or ‎9.1 (Illegality) (as the case may be) as follows:

 

	
(1)  

	
subject to Clause 2.2.7, the increased Commitments for each Tranche will be assumed by one or more Lenders or other banks, financial institutions, trusts, funds or other entities (each an "Increase Lender") selected by the Borrower (each of which shall not be a member of the Group or an Affiliate of any member of the Group and which is further acceptable to the Facility Agent (acting reasonably)) and each of which confirms its willingness to assume and does assume all the obligations of a Lender corresponding to that part of the increased Commitments for each Tranche which it is to assume, as if it had been an Original Lender;

 

 

38

Index

 

	
(2)  

	
each of the Obligors and any Increase Lender shall assume obligations towards one another and/or acquire rights against one another as the Obligors and the Increase Lender would have assumed and/or acquired had the Increase Lender been an Original Lender;

 

	
(3)  

	
each Increase Lender shall become a Party as a "Lender" and any Increase Lender and each of the other Finance Parties shall assume obligations towards one another and acquire rights against one another as that Increase Lender and those Finance Parties would have assumed and/or acquired had the Increase Lender been an Original Lender;

 

	
(4)  

	
the Commitments under each Tranche of the other Lenders shall continue in full force and effect; and

 

	
(5)  

	
any increase in the Aggregate Commitments under each Tranche shall take effect on the date specified by the Borrower in the notice referred to above or any later date on which the conditions set out in Clause 2.2.2 are satisfied.

 

	
2.2.2  

	
An increase in the Aggregate Commitments will only be effective on:

 

	
(A)  

	
the execution by the Facility Agent of an Increase Confirmation from the relevant Increase Lender;

 

	
(B)  

	
in relation to an Increase Lender which is not a Lender immediately prior to the relevant increase, the performance by the Facility Agent of all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the assumption of the increased Commitments under each Tranche by that Increase Lender, the completion of which the Facility Agent shall promptly notify to the Borrower, the Increase Lender and the Fronting Bank; and

 

	
(C)  

	
in relation to an increase to the Commitments under Tranche C only, the Fronting Bank consenting to that increase.

 

	
2.2.3  

	
Each Increase Lender, by executing the Increase Confirmation, confirms (for the avoidance of doubt) that the Facility Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the increase becomes effective.

 

	
2.2.4  

	
Unless the Facility Agent otherwise agrees or the increased Commitment under each Tranche is assumed by an existing Lender, the Borrower shall, on the date upon which the increase takes effect, pay to the Facility Agent (for its own account) a fee of $2,500 and the Borrower shall promptly on demand pay each Administrative Finance Party the amount of all costs and expenses (including legal fees) reasonably incurred by that Administrative Finance Party and, in the case of the Security Trustee, by any Insolvency Officer or Delegate in connection with any increase in Commitments under each Tranche, under this Clause 2.2 (Increase).

 

 

39

Index

 

	
2.2.5  

	
Subject to the terms of this Agreement, the Borrower may pay to the Increase Lender a fee in the amount and at the times agreed between the Borrower and the Increase Lender in a fee letter.

 

	
2.2.6  

	
Clause 25.4 (Limitation of responsibility of Existing Lenders) shall apply mutatis mutandis in this Clause 2.2 (Increase) in relation to an Increase Lender as if references in that Clause to:

 

	
(A)  

	
an "Existing Lender" were references to all the Lenders immediately prior to the relevant increase;

 

	
(B)  

	
the "New Lender" were references to that "Increase Lender"; and

 

	
(C)  

	
a "re-transfer" and "re-assignment" were references to respectively a "transfer" and "assignment".

 

	
2.2.7  

	
No Increase Lender may assume any increased Commitments under a Tranche (the "relevant Tranche") pursuant to the preceding provisions of this Clause 2.2 (Increase) without also assuming increased Commitments under the other Tranches in the same proportion borne by the increased Commitments so assumed under the relevant Tranche to the Aggregate Commitments under that Tranche (before taking into account such increased Commitments).

 

	
2.3  

	
Finance Parties' rights and obligations

 

	
2.3.1  

	
The obligations of each Finance Party under the Finance Documents are several.  Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents.  No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

 

	
2.3.2  

	
The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from the Borrower shall be a separate and independent debt.

 

	
2.3.3  

	
A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.

 

	
3.  

	
PURPOSE

 

	
3.1  

	
Purpose

 

The Borrower shall apply or utilise:

 

	
3.1.1  

	
all Loans made to it under Tranche A in or towards:

 

	
(A)  

	
to the extent that such items of Permitted Expenditure are included in the then current Projection payment of any items of Permitted Expenditure; and

 

 

40

Index

 

	
(B)  

	
such other purposes as may be approved by the Facility Agent (acting on instructions of the Lenders);

 

	
3.1.2  

	
all Loans made to it under Tranche B in or towards the payment of any Cost Overruns with respect to the Project; and

 

	
3.1.3  

	
 

 

	
(A)  

	
all Letters of Credit issued under Tranche C at its request for the purposes of providing credit support or enhancement for its obligations to pay the Field Security Costs and/or the Decommissioning Costs; and

 

	
(B)  

	
all Loans made to it under Tranche C in or towards meeting its liabilities under this Agreement in relation to each Letter of Credit and/or refinancing maturing Loans under Tranche C.

 

	
3.2 

	
Monitoring

 

No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

 

	
4.  

	
CONDITIONS OF UTILISATION

 

	
4.1  

	
Initial conditions precedent

 

The Borrower may not deliver a Utilisation Request unless the Facility Agent has received all of the documents and other evidence listed in Schedule 2 (Initial conditions precedent) in form and substance satisfactory to the Facility Agent.  The Facility Agent shall notify the Borrower and the Lenders promptly upon being so satisfied.

 

	
4.2  

	
Further conditions precedent

 

The Lenders will only be obliged to comply with Clause 5.4 (Lenders' participation) and the Fronting Bank will only be obliged to comply with Clause 6.5 (Issue of Letters of Credit) if:

 

	
4.2.1  

	
on the date of the Utilisation Request and on the proposed Utilisation Date:

 

	
(A)  

	
in the case of a Rollover Loan or Renewal Letter of Credit, no Event of Default is continuing or would result from the proposed Utilisation and, in the case of any other Utilisation, no Default is continuing or would result from the proposed Utilisation;

 

	
(B)  

	
the Repeating Representations to be made by each Obligor are true in all material respects;

 

 

41

Index

 

	
4.2.2  

	
other than in the case of a Rollover Loan or a Renewal Letter of Credit the Projection which is due to be adopted by the most recent Recalculation Date has been so adopted in accordance with Clause 7 (Projections) (unless it has not been so adopted as a result of any failure on the part of any Finance Party to perform its obligations under this Agreement);

 

 

	
4.2.3  

	
in the case of any Loan:

 

 

	
(A)  

	
under Tranche A the aggregate of:

 

	
(1)  

	
the Dollar Amount of the Loan proposed to be made on the proposed Utilisation Date; and

 

 

	
(2)  

	
the aggregate Dollar Amount of all outstanding Loans under Tranche A on the proposed Utilisation Date,

 

does not exceed the lesser of (i) the Aggregate Commitments for Tranche A applicable on the proposed Utilisation Date and (ii) the Tranche A Borrowing Base Amount applicable on the proposed Utilisation Date; and

 

 

	
(B)  

	
under Tranche B the aggregate of:

 

 

	
(1)  

	
the Dollar Amount of the Loan proposed to be made on the proposed Utilisation Date; and

 

 

	
(2)  

	
the aggregate Dollar Amount of all outstanding Loans under Tranche B on the proposed Utilisation Date,

 

does not exceed the lesser of (i) the Aggregate Commitments for Tranche B applicable on the proposed Utilisation Date and (ii) the Tranche B Borrowing Base Amount applicable on the proposed Utilisation Date;

 

	
4.2.4  

	
in the case of any Utilisation under Tranche C the aggregate of:

 

	
(A)  

	
the Dollar Amount of the Utilisation proposed to be made on the proposed Utilisation Date; and

 

	
(B)  

	
the aggregate Dollar Amount of all outstanding Utilisations under Tranche C on the proposed Utilisation Date less the aggregate Dollar Amount of all outstanding Utilisations under Tranche C due to be repaid or prepaid on the proposed Utilisation Date,

 

does not exceed the Aggregate Commitments for Tranche C applicable on such proposed Utilisation Date;

 

	
4.2.5  

	
in the case of the first Loan under Tranche A the Borrower has demonstrated to the satisfaction of the Technical Banks that all amounts standing to the credit of the Equity Contribution Account have been fully utilised or will be utilised simultaneously with such Loan in or towards payment of any item of Permitted Expenditure required to be incurred in connection with the Project;

 

	
4.2.6  

	
in the case of any Loan (other than the first Loan) under Tranche A if Clause 20.2 (Equity Contribution for Tranche A) applies:

 

 

42

Index

 

	
(A)  

	
the Parent has funded amounts into the Equity Contribution Account in accordance with the terms of Clause 20.2 (Equity Contribution for Tranche A); and

 

	
(B)  

	
the Borrower has demonstrated to the satisfaction of the Technical Banks that all amounts standing to the credit of the Equity Contribution Account have been fully utilised or will be utilised simultaneously with such Loan in or towards payment of any item of Permitted Expenditure required to be incurred in connection with the Project;

 

	
4.2.7  

	
in the case of any Loan under Tranche B if the Technical Banks have requested in accordance with Clause 7.1.3(B) (Adoption) that a new Projection is prepared and adopted in accordance with Clause 7 (Projections), such Projection has been so adopted in accordance with Clause 7 (Projections); and

 

	
4.2.8  

	
in the case of any Loan under Tranche B:

 

	
(A)  

	
on the proposed Utilisation Date no further Loan can be drawn under Tranche A by reason of Clause 4.2.3 (Further conditions precedent);

 

	
(B)  

	
the Facility Agent is satisfied (acting reasonably) (and the Facility Agent shall notify the Borrower and the Lenders promptly upon being so satisfied) that the Parent has funded amounts into the Equity Contribution Account in accordance with the terms of Clause 20.3.1 (Equity Contribution for Cost Overrun); and

 

	
(C)  

	
on the proposed Utilisation Date the Borrower has demonstrated to the satisfaction of the Technical Banks that an amount equal to or more than the aggregate of:

 

	
(1)  

	
the Dollar Amount of the Loan proposed to be made on the proposed Utilisation Date, and

 

	
(2)  

	
the aggregate Dollar Amount of all outstanding Loans under Tranche B on the proposed Utilisation Date,

 

 

has been utilised (in aggregate) from the Equity Contribution Account in or towards payment of any item of Cost Overrun required to be incurred in connection with the Project.

 

	
4.3  

	
Maximum number of Utilisations

 

	
4.3.1  

	
The Borrower may not deliver a Utilisation Request or a Selection Notice in respect of a Loan if as a result of the proposed Utilisation more than 10 Loans would be outstanding.

 

	
4.3.2  

	
The Borrower may not deliver a Utilisation Request in respect of a Letter of Credit if as a result of the proposed Utilisation more than 6 Letters of Credit would be outstanding.

 

 

43

Index

 

	
4.3.3  

	
Any Loan made by a single Lender under Clause 5.8 (Unavailability of a currency) shall not be taken into account in this Clause 4.3 (Maximum number of Utilisations).

 

	
4.3.4  

	
Any Separate Loan shall not be taken into account in this Clause 4.3 (Maximum number of Utilisations).

 

 

	
4.4  

	
Conditions relating to Optional Currencies

 

 

	
4.4.1  

	
A currency will constitute an Optional Currency in relation to a Utilisation if:

 

 

	
(A)  

	
it is euro or sterling; and

 

 

	
(B)  

	
it is readily available in the amount required and freely convertible into dollars (i) (in relation to euro) in the European interbank market, and (ii) (in relation to sterling) in the London interbank market, on the Quotation Day and the Utilisation Date for that Utilisation.

 

	
4.5  

	
Further conditions precedent for change of currency

 

The Lenders will only be obliged to comply with Clause 5.10 (Change of currency) if, on the first day of an Interest Period, no Default is continuing or would result from the change of currency and the Repeating Representations to be made by each Obligor are true in all material respects.

 

 

44

Index

UTILISATION

 

	
5.  

	
UTILISATION - LOANS

 

	
5.1  

	
Delivery of a Utilisation Request for Loans

 

	
5.1.1  

	
The Borrower may request for a Loan to be made under a Tranche by delivery to the Facility Agent of a duly completed Utilisation Request not later than 11.00 a.m. (London Time) on the fourth Business Day prior to the proposed Utilisation Date (or such later date as the Lenders may agree).

 

	
5.2  

	
Completion of a Utilisation Request for Loans

 

	
5.2.1  

	
Each Utilisation Request for a Loan is irrevocable and will not be regarded as having been duly completed unless:

 

	
(A)  

	
it specifies that it is for a Loan and specifies the applicable Tranche;

 

	
(B)  

	
the proposed Utilisation Date is a Business Day within the Availability Period;

 

	
(C)  

	
the currency and amount of the Loan comply with Clause 5.3 (Currency and amount);

 

	
(D)  

	
the proposed Interest Period complies with Clause 11 (Interest Periods);

 

	
(E)  

	
it has been duly signed by an authorised signatory of the Borrower; and

 

	
(F)  

	
it specifies the purpose for which the Loan is to be applied and attaches a copy of the relevant cash call by the operator of the Huntington Petroleum Field in relation to which the Loan is to be applied.

 

	
5.2.2  

	
Only one Loan may be requested in each Utilisation Request delivered under this Clause 5 (Utilisation – Loans).

 

	
5.3  

	
Currency and amount

 

	
5.3.1  

	
The currency specified in a Utilisation Request for a Loan must be dollars or an Optional Currency.

 

	
5.3.2  

	
The Dollar Amount of a proposed Loan under a Tranche must not exceed the maximum amount of that Tranche that may be utilised for such Loan under Clause 4.2 (Further conditions precedent) and the amount of the proposed Loan must be an amount which is a minimum of:

 

	
(A)  

	
if the currency selected is dollars, $1,000,000 (and an integral multiple of $1,000,000) or, if less, that maximum amount or, such lesser amount as the Facility Agent may agree;

 

	
(B)  

	
if the currency selected is sterling, £500,000 (and an integral multiple of £500,000) or, if less, the amount (in sterling) the Dollar Amount of which 

 

 

45

Index

 

is equal to that maximum amount or, such lesser amount as the Facility Agent may agree; or

 

	
(C)  

	
if the currency selected in euro, €750,000 (and an integral multiple of €750,000 or, if less, the amount (in euro) the Dollar Amount of which is equal to that maximum amount or, such lesser amount as the Facility Agent may agree.

 

	
5.4  

	
Lenders' participation

 

	
5.4.1  

	
If the conditions set out in this Agreement have been met, and subject to Clause 8.2 (Repayment of Tranche C Loans), each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office.

 

	
5.4.2  

	
The amount of each Lender's participation in each Loan will be equal to the proportion borne by its Available Commitment under that Tranche to the Total Available Commitments under that Tranche immediately prior to making the Loan.

 

	
5.4.3  

	
The Facility Agent shall determine the Dollar Amount of each Loan which is to be made in an Optional Currency and the Facility Agent shall notify each Lender of the amount of, currency and Dollar Amount of each Loan, the amount of its participation in that Loan and, if different, the amount of that participation to be made available in cash not later than 11.00 a.m. London time) on the fourth Business Day prior to the Utilisation Date for such Loan or, if (in the case of any Loan to be made pursuant to Clause 6.8 (Loans to cover demands)) it is not able to provide the same by such third Business Day, as soon as reasonably practicable after receiving the relevant notice from the Fronting Bank referred to in Clause 6.8.1 (Loans to cover demands).

 

	
5.5  

	
Deemed Utilisation Requests

 

	
5.5.1  

	
Notwithstanding any other provision of this Agreement, each Utilisation Request that is deemed to be issued pursuant to Clause 6.8 (Loans to cover demands) shall be deemed to have been issued in compliance with Clause 6.1 (Delivery of a Utilisation Request for Letters of Credit) and Clause 6.2 (Completion of a Utilisation Request for Letters of Credit) and all conditions (including the conditions set out in Clause 4.2 (Further conditions precedent)) that are required to be met in order for each Lender to make its participation in the Loan under Tranche C requested thereunder to be made available in accordance with Clause 5.4 (Lenders’ participation) shall be deemed to have been met on the Utilisation Date for such Loan.  The making of such Loan shall not be construed as a waiver of (i) any such conditions for any other purposes or (ii) any Default that may be continuing at such time.

 

	
5.5.2  

	
The proceeds of each Loan under Tranche C made pursuant to this Clause 5.5 (Deemed Utilisation Requests) shall be paid directly to the Fronting Bank.

 

	
5.6  

	
Cancellation of Commitments

 

The Total Available Commitments under each Tranche shall be immediately cancelled at the end of the Availability Period for that Tranche.

 

 

46

Index

 

	
5.7  

	
Selection of currency

 

	
5.7.1  

	
The Borrower shall select the currency of a Loan:

 

	
(A)  

	
(in the case of an initial Utilisation) in a Utilisation Request; and

 

 

	
(B)  

	
(afterwards in relation to a Tranche A Loan and a Tranche B Loan only) in a Selection Notice.

 

	
5.7.2  

	
If the Borrower fails to issue a Selection Notice in relation to a Tranche A Loan or a Tranche B Loan, the Tranche A Loan or Tranche B Loan (as the case may be) will remain denominated for its next Interest Period in the same currency in which it is then outstanding.

 

	
5.7.3  

	
If the Borrower issues a Selection Notice requesting a change of currency and the first day of the requested Interest Period is not a Business Day for the new currency, the Facility Agent shall promptly notify the Borrower and the Lenders and the Tranche A Loan or Tranche B Loan (as the case may be) will remain in the existing currency (with Interest Periods running from one Business Day until the next Business Day) until the next day which is a Business Day for both currencies, on which day the requested Interest Period will begin.

 

	
5.8  

	
Unavailability of a currency

 

If before 11.00 a.m. (London time) on any Quotation Day:

 

	
5.8.1  

	
a Lender notifies the Facility Agent that the Optional Currency requested is not readily available to it in the amount required; or

 

	
5.8.2  

	
a Lender notifies the Facility Agent that compliance with its obligation to participate in a Loan in the proposed Optional Currency would contravene a law or regulation applicable to it,

 

the Facility Agent will give notice to the Borrower to that effect on that day.  In this event, any Lender that gives notice pursuant to this Clause 5.8 will be required to participate in the Loan in dollars (in an amount equal to that Lender's proportion of the Dollar Amount or, in respect of a Rollover Loan, an amount equal to that Lender's proportion of the Dollar Amount of the maturing Loan that is due to be made) and its participation will be treated as a separate Loan denominated in dollars during the Interest Period.

 

	
5.9  

	
Participation in a Loan

 

Each Lender's participation in a Loan will be determined in accordance with Clause 5.4 (Lenders' participation).

 

	
5.10  

	
Change of currency

 

	
5.10.1  

	
If a Loan under Tranche A or Tranche B is to be denominated in different currencies during two successive Interest Periods:

 

 

	
(A)  

	
if the currency for the second Interest Period is an Optional Currency, the amount of the Loan under Tranche A or (as the case may be) Tranche B (the "relevant Loan") in that Optional Currency will be calculated by the Facility Agent as the amount of that Optional Currency equal to the Dollar 

 

 

47

Index

 

Amount of the relevant Loan at the Agent's Spot Rate of Exchange at 11.00 a.m (London time) three Business Days before the Quotation Day;

 

	
(B)  

	
if the currency for the second Interest Period is dollars, the amount of the relevant Loan will be equal to the Dollar Amount;

 

	
(C)  

	
(unless the Facility Agent and the Borrower agree otherwise in accordance with Clause 5.10.2 below) the Borrower shall repay the relevant Loan on the last day of the first Interest Period in the currency in which it was denominated for that Interest Period; and

 

	
(D)  

	
(subject to Clause 4.5 (Further conditions precedent for change of currency)) the Lenders shall re-advance the relevant Loan in the new currency in accordance with Clause 5.10 (Change of currency).

 

	
5.10.2  

	
If the Facility Agent and the Borrower have agreed, the Facility Agent shall:

 

	
(A)  

	
apply the amount paid to it by the Lenders pursuant to Clause 5.10.1(D) above (or so much of that amount as is necessary) in or towards purchase of an amount in the currency in which the relevant Loan is outstanding for the first Interest Period; and

 

	
(B)  

	
use the amount it purchases in or towards satisfaction of the Borrower's obligations under Clause 5.10.1(C) above.

 

	
5.10.3  

	
If the amount purchased by the Facility Agent pursuant to Clause 5.10.2(A) above is less than the amount required to be repaid by the relevant Borrower, the Facility Agent shall promptly notify the Borrower and the Borrower shall, on the last day of the first Interest Period, pay an amount to the Facility Agent (in the currency of the outstanding relevant Loan for the first Interest Period) equal to the difference.

 

	
5.10.4  

	
If any part of the amount paid to the Facility Agent by the Lenders pursuant to Clause 5.10.1(D) above is not needed to purchase the amount required to be repaid by the relevant Borrower, the Facility Agent shall promptly notify that Borrower and pay that Borrower, on the last day of the first Interest Period that part of that amount (in the new currency).

 

	
5.11  

	
Same Optional Currency during successive Interest Periods

 

	
5.11.1  

	
If a Loan under Tranche A or Tranche B is to be denominated in the same Optional Currency during two successive Interest Periods, the Facility Agent shall calculate the amount of the Loan under Tranche A or Tranche B (as the case may be) in the Optional Currency for the second of those Interest Periods (by calculating the amount of Optional Currency equal to the Dollar Amount of that Loan at the Agent's Spot Rate of Exchange at 11.00 a.m (London time) three Business Days before the Quotation Day and (subject to Clause 5.11.2 below):

 

	
(A)  

	
if the amount calculated is less than the existing amount of that Loan in the Optional Currency during the first Interest Period, promptly notify the Borrower and the Borrower shall pay, on the last day of the first Interest Period, an amount equal to the difference; or

 

 

48

Index

 

	
(B)  

	
if the amount calculated is more than the existing amount of that Loan in the Optional Currency during the first Interest Period, promptly notify each Lender and, if no Default is continuing, each Lender shall, on the last day of the first Interest Period, pay its participation in an amount equal to the difference.

 

	
5.11.2  

	
If the calculation made by the Facility Agent pursuant to Clause 5.11.1 above shows that the amount of the Loan in the Optional Currency (the "relevant Loan") for the second of those Interest Periods converted into dollars at the Agent's Spot Rate of Exchange at 11.00 a.m (London time) three Business Days before the Quotation Day (the "relevant day") has increased or decreased by less than 5 per cent. compared to its Dollar Amount (taking into account any payments made pursuant to Clause 5.11.1 above), no notification shall be made by the Facility Agent and no payment shall be required under Clause 5.11.1 above provided that:

 

	
(A)  

	
in case the relevant Loan is under Tranche A, the aggregate of:

 

	
(1)  

	
the Dollar Amount of the relevant Loan on the relevant day; and

 

	
(2)  

	
the Dollar Amount of all outstanding Loans under Tranche A on the relevant day,

 

does not exceed the lesser of (i) the Aggregate Commitments for Tranche A applicable on the relevant day, and (ii) the Tranche A Borrowing Base Amount applicable on the relevant day; and

 

	
(B)  

	
in case the relevant Loan is under Tranche B, the aggregate of:

 

	
(1)  

	
the Dollar Amount of the relevant Loan on the relevant day; and

 

	
(2)  

	
the Dollar Amount of all outstanding Loans under Tranche B on the relevant day,

 

does not exceed the lesser of (i) the Aggregate Commitments for Tranche B applicable on the relevant day, and (ii) the Tranche B Borrowing Base Amount applicable on the relevant day.

 

 

	
6.  

	
UTILISATION - LETTERS OF CREDIT

 

	
6.1  

	
Delivery of a Utilisation Request for Letters of Credit

 

The Borrower may request a Letter of Credit to be issued under Tranche C by delivery to the Facility Agent and the Fronting Bank of a duly completed Utilisation Request not later than 11.00 a.m. (London time) on the sixth Business Day prior to the proposed Utilisation Date (or such later date as the Lenders and the Fronting Bank may agree).

 

	
6.2  

	
Completion of a Utilisation Request for Letters of Credit

 

	
6.2.1  

	
Each Utilisation Request for a Letter of Credit is irrevocable and will not be regarded as having been duly completed unless:

 

	
(A)  

	
it specifies that it is for a Letter of Credit;

 

 

49

Index

 

	
(B)  

	
the proposed Utilisation Date is a Business Day within the Availability Period for Tranche C;

 

	
(C)  

	
the currency and amount of the Letter of Credit comply with Clause 6.3 (Currency and amount);

 

	
(D)  

	
the form of Letter of Credit is attached (and the same is in the form set out in Schedule 4 (Form of Letter of Credit) or in such other form as may be agreed between the Borrower, the Fronting Bank and the Facility Agent);

 

	
(E)  

	
the proposed Expiry Date of the Letter of Credit falls on or before the last Business Day of the Availability Period for Tranche C;

 

	
(F)  

	
the delivery instructions for the Letter of Credit are specified;

 

	
(G)  

	
it has been duly signed by an authorised signatory of the Borrower;

 

	
(H)  

	
the beneficiary of the Letter of Credit is not a person with whom the Fronting Bank or any Lender is restricted from transacting under any applicable law or regulation; and

 

	
(I)  

	
it specifies the purpose for which the Letter of Credit is to be delivered and such purpose complies with Clause 3.1.3(A) (Purpose).

 

	
6.2.2  

	
Only one Letter of Credit may be requested in each Utilisation Request delivered under this Clause 6.2 (Completion of a Utilisation Request for Letters of Credit).

 

	
6.3  

	
Currency and amount

 

	
6.3.1  

	
The currency specified in a Utilisation Request must be dollars or an Optional Currency.

 

	
6.3.2  

	
The Dollar Amount of the proposed Letter of Credit must not exceed the maximum amount of Tranche C that may be utilised for such Letter of Credit under Clause 4.2 (Further conditions precedent).

 

	
6.4  

	
Renewal of a Letter of Credit

 

	
6.4.1  

	
The Borrower may request any Letter of Credit issued on its behalf under Tranche C to be renewed or re-issued under Tranche C by delivery to the Facility Agent and the Fronting Bank of a Utilisation Request no earlier than 35 Business Days before the Expiry Date of the relevant Letter of Credit and no later than 11.00 a.m. (London time) on the sixth Business Day prior to the Expiry Date of the relevant Letter of Credit.

 

	
6.4.2  

	
Each Utilisation Request relating to the renewal of a Letter of Credit is irrevocable and will not be regarded as having been duly completed unless:

 

	
(A)  

	
it specifies that it is for the renewal of a Letter of Credit;

 

	
(B)  

	
the proposed Utilisation Date is a Business Day within the Availability Period for Tranche C;

 

 

50

Index

 

	
(C)  

	
the currency and amount of the Letter of Credit comply with Clause 6.3 (Currency and amount);

 

	
(D)  

	
a copy of the relevant Letter of Credit to be renewed is attached;

 

	
(E)  

	
the proposed new Expiry Date of the Letter of Credit falls on or before the last Business Day of the Availability Period for Tranche C; and

 

	
(F)  

	
the delivery instructions for the Letter of Credit are specified;

 

	
(G)  

	
it has been duly signed by an authorised signatory of the Borrower; and

 

	
(H)  

	
the beneficiary of the Letter of Credit is not a person with whom the Fronting Bank or any Lender is restricted from transacting under any applicable law or regulation.

 

	
6.4.3  

	
The terms of each renewed Letter of Credit shall be the same as those of the relevant Letter of Credit immediately prior to its renewal, except that:

 

	
(A)  

	
its amount may be less or more than the amount of the Letter of Credit immediately prior to its renewal; and

 

	
(B)  

	
its Term shall start on its Utilisation Date and shall end on the proposed Expiry Date specified in the relevant Utilisation Request relating to its renewal.

 

	
6.4.4  

	
Only one Letter of Credit may be requested in each Utilisation Request delivered under this Clause 6.4 (Renewal of a Letter of Credit).

 

	
6.5  

	
Issue of Letters of Credit

 

	
6.5.1  

	
If the conditions set out in this Agreement have been met, the Fronting Bank shall issue or, as the case may be, renew and re-issue, each Letter of Credit on its proposed Utilisation Date (provided, in the case of any Renewal Letter of Credit the Utilisation Date of which falls before the Expiry Date of the relevant Letter of Credit which is being renewed and replaced by that Renewal Letter of Credit, the Fronting Bank is satisfied it will, following such renewal or replacement, have no further liability under the relevant Letter of Credit being renewed and replaced).

 

	
6.5.2  

	
The Facility Agent shall determine the Dollar Amount of each Letter of Credit which is to be issued or re-issued in an Optional Currency and shall notify the Fronting Bank and each Lender of the details of each requested Letter of Credit and each Lender's L/C Proportion (as at the relevant Utilisation Date) with respect to that Letter of Credit no later than 11.00 a.m. on the fifth Business Day prior to the Utilisation Date for such Letter of Credit.

 

	
6.5.3  

	
If any Lender is restricted under any applicable law or regulation from transacting with the beneficiary of any Letter of Credit that has been requested under the preceding provisions of this Clause 6 (Utilisation – Letters of Credit), then that Lender must, for the purposes of Clause 6.2.1(H) (Completion of a Utilisation Request for Letters of Credit) or, as the case may be, Clause 6.4.2(H) (Renewal of a Letter of Credit), promptly upon being notified of the details of that Letter 

 

 

51

Index

 

Credit under Clause 6.5.2, notify each of the Facility Agent and the Fronting Bank of the same.

 

	
6.5.4  

	
In any event, each Lender that does not issue any notice to the Facility Agent and Fronting Bank under Clause 6.5.3 with respect to any Letter of Credit within three Business Days of being notified under Clause 6.5.2 of the details of that Letter of Credit shall, for the purposes of Clause 6.2.1(H) (Completion of a Utilisation Request for Letters of Credit) or, as the case may be, Clause 6.4.2(H) (Renewal of a Letter of Credit), be deemed not to be restricted under any applicable law or regulation from transacting with the beneficiary of that Letter of Credit.

 

	
6.5.5  

	
The amount of each Lender's participation in each Letter of Credit will be equal to the proportion borne by its Available Commitment under Tranche C to the Total Available Commitments under Tranche C immediately prior to the issue of the Letter of Credit.

 

	
6.6  

	
Re-valuation of Letters of Credit

 

On each Reduction Date, the Facility Agent will re-determine, and notify the Fronting Bank, the Borrower and each Lender of, the Dollar Amount of each Letter of Credit denominated in a currency other than dollars.

 

	
6.7  

	
Claims under a Letter of Credit

 

	
6.7.1  

	
The Borrower irrevocably and unconditionally authorises the Fronting Bank to pay any claim made or purported to be made under a Letter of Credit requested by it and which appears on its face to be in order (a "claim").

 

	
6.7.2  

	
Save to the extent that any Loan is made pursuant to Clause 6.8 (Loans to cover demands) in respect of any claim, the Borrower shall immediately on demand pay to the Facility Agent for the Fronting Bank an amount equal to the amount of any claim.

 

	
6.7.3  

	
The Borrower acknowledges that the Fronting Bank:

 

	
(A)  

	
is not obliged to carry out any investigation or seek any confirmation from any other person before paying a claim; and

 

	
(B)  

	
deals in documents only and will not be concerned with the legality of a claim or any underlying transaction or any available set-off, counterclaim or other defence of any person.

 

	
6.7.4  

	
The obligations of the Borrower under this Clause 6 (Utilisation – Letters of Credit) will not be affected by:

 

	
(A)  

	
the sufficiency, accuracy or genuineness of any claim or any other document; or

 

	
(B)  

	
any incapacity of, or limitation on the powers of, any person signing a claim or other document.

 

 

52

Index

 

	
6.8  

	
Loans to cover demands

 

	
6.8.1  

	
The Fronting Bank shall issue within 2 Business Days of any claim made under any Letter of Credit a notice (a "claim notice") to the Facility Agent and the Borrower to notify them of (i) that claim made under a Letter of Credit; (ii) the amount of that claim (in the currency in which it is due to be paid); and (iii) the date on which it is due to pay that claim.  Any failure by the Fronting Bank to provide any claim notice in accordance with this Clause 6.8.1 shall not release the Borrower and the Lenders from their obligations and liabilities under this Clause 6 (Utilisations – Letters of Credit) or otherwise prejudice such obligations and liabilities.

 

	
6.8.2  

	
If a claim notice has been issued, the Borrower shall be deemed to have issued a Utilisation Request for a Loan under Tranche C on the later of (a) the date on which that claim notice is issued and (b) 11.00 a.m. on the fourth Business Day prior to the date on which the Fronting Bank is due to pay the relevant claim.  The amount of such a proposed Loan shall be equal to (1) if the relevant Letter of Credit is denominated in dollars, the amount of the claim specified in dollars or (2) if the relevant Letter of Credit is denominated in an Optional Currency, the amount of the claim specified in the claim notice in such Optional Currency converted into dollars at the Agent's Spot Rate of Exchange on the deemed issue date.  The Utilisation Date for such Loan shall be (i) the date specified in the claim notice as the date on which the relevant claim is due to be paid or (ii) if later, the fourth Business Day after the date on which the claim notice was issued.  The Interest Period for such a Loan shall be determined by the Facility Agent (in consultation with the Borrower).

 

	
6.9  

	
Indemnities

 

	
6.9.1  

	
Save to the extent that any Loan is made pursuant to Clause 6.8 (Loans to cover demands) in respect of any claim, the Borrower shall immediately on demand indemnify the Fronting Bank against payment made, or any cost, loss or liability incurred, by the Fronting Bank (otherwise than by reason of the Fronting Bank's gross negligence or wilful misconduct) in acting as the fronting bank under any Letter of Credit requested by the Borrower.

 

	
6.9.2  

	
Save to the extent that any Loan is made pursuant to Clause 6.8 (Loans to cover demands) in respect of any claim, each Lender shall (according to its L/C Proportion) immediately on demand indemnify the Fronting Bank against any payment made, or cost, loss or liability incurred, by the Fronting Bank (otherwise than by reason of the Fronting Bank's gross negligence or wilful misconduct) in acting as the fronting bank under any Letter of Credit (unless the Fronting Bank has been reimbursed by the Borrower pursuant to a Finance Document).

 

	
6.9.3  

	
If any Lender is not permitted (by its constitutional documents or any applicable law) to comply with Clause 6.9.2), then that Lender will not be obliged to comply with Clause 6.9.2 and shall instead be deemed to have taken, on the first day of the Term of that Letter of Credit (or if later, on the date the Lender's participation in that Letter of Credit is transferred or assigned to the Lender in accordance with the terms of this Agreement), an undivided interest and participation in that Letter of Credit in an amount equal to its L/C Proportion of that Letter of Credit.  On 

 

 

53

Index

 

receipt of demand from the relevant Facility Agent, that Lender shall pay to the relevant Facility Agent (for the account of the Fronting Bank) an amount equal to its L/C Proportion of the total amount demanded under Clause 6.9.2.

 

	
6.9.4  

	
The Borrower shall immediately on demand reimburse any Lender for any payment it makes to the Fronting Bank under this Clause 6.9 (Indemnities) in respect of that Letter of Credit.

 

	
6.9.5  

	
The obligations of each Lender under this Clause 6.9 (Indemnities) are continuing obligations and will extend to the ultimate balance of sums payable by that Lender in respect of any Letter of Credit, regardless of any intermediate payment or discharge in whole or in part.

 

	
6.9.6  

	
The obligations of each Lender under this Clause 6.9 (Indemnities) will not be affected by (and the intention of each Lender is that its obligation shall continue in full force and effect notwithstanding) any act, omission, matter or thing which, but for this Clause 6.9.6, would reduce, release or prejudice any of its obligations under this Clause 6.9 (Indemnities) (without limitation and whether or not known to it or any other person) including:

 

	
(A)  

	
any time, waiver or consent granted to, or composition with, any Obligor, any beneficiary under a Letter of Credit or any other person;

 

	
(B)  

	
the release of any Obligor or any other person under the terms of any composition or arrangement with any creditor of any Obligor or any other person;

 

	
(C)  

	
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor, any beneficiary under a Letter of Credit or any other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

 

	
(D)  

	
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor, any beneficiary under a Letter of Credit or any other person;

 

	
(E)  

	
any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document, any Letter of Credit or any other document or security including any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;

 

	
(F)  

	
any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document, any Letter of Credit or any other document or security; or

 

	
(G)  

	
any insolvency or similar proceedings.

 

 

54

Index

 

	
6.10  

	
Reduction of a Letter of Credit

 

	
6.10.1  

	
If, on the proposed Utilisation Date of a Letter of Credit, any of the Lenders is a Non-Acceptable L/C Lender and:

 

	
(A)  

	
that Lender has failed to provide cash collateral to the Fronting Bank in accordance with Clause 6.11 (Cash collateral by Non-Acceptable L/C Lender); and

 

	
(B)  

	
either:

 

	
(1)  

	
the Fronting Bank has not required the Borrower to provide cash collateral pursuant to Clause 6.12 (Cash collateral by Borrower); or

 

	
(2)  

	
the Borrower has failed to provide cash cover to the Fronting Bank in accordance with Clause 6.12 (Cash collateral by Borrower),

 

the Fronting Bank may reduce the amount of that Letter of Credit by an amount equal to the amount of the participation of that Non-Acceptable L/C Lender in respect of that Letter of Credit and that Non-Acceptable L/C Lender shall be deemed not to have any participation or obligation to (i) indemnify the Fronting Bank or (ii) participate in any Loan made pursuant to Clause 6.8 (Loans to cover demands) in respect of that Letter of Credit for the purposes of the Finance Documents.

 

	
6.10.2  

	
The Fronting Bank shall notify the Facility Agent of each reduction made pursuant to this Clause 6.10 (Reduction of a Letter of Credit).

 

	
6.10.3  

	
This Clause 6.10 (Reduction of a Letter of Credit) shall not affect the participation of each other Lender in that Letter of Credit.

 

	
6.11  

	
Cash collateral by Non-Acceptable L/C Lender

 

	
6.11.1  

	
If, at any time, a Lender is a Non-Acceptable L/C Lender, the Fronting Bank may, by notice to that Lender, request that Lender to pay and that Lender shall pay, on or prior to the date falling five Business Days after the request by the Fronting Bank, an amount equal to that Lender's L/C Proportion of the outstanding amount of a Letter of Credit and in the currency of that Letter of Credit to an interest-bearing account held in the name of that Lender with the Fronting Bank.

 

	
6.11.2  

	
The Non-Acceptable L/C Lender to whom a request has been made in accordance with Clause 6.11.1 shall enter into a security document or other form of collateral arrangement over the account, in form and substance satisfactory to the Fronting Bank, as collateral for any amounts due and payable under the Finance Documents by that Lender to the Fronting Bank in respect of that Letter of Credit.

 

	
6.11.3  

	
Until no amount is or may be outstanding under that Letter of Credit, withdrawals from the account may only be made to pay to the Fronting Bank amounts due and 

 

 

55

Index

 

payable to the Fronting Bank by the Non-Acceptable L/C Lender under the Finance Documents in respect of that Letter of Credit.

 

	
6.11.4  

	
Each Lender shall notify the Facility Agent and the Borrower:

 

	
(A)  

	
on the date of this Agreement or on any later date on which it becomes such a Lender in accordance with Clause 2.2 (Increase) or Clause 25 (Changes to the Lenders) whether it is a Non-Acceptable L/C Lender; and

 

	
(B)  

	
as soon as practicable upon becoming aware of the same, that it has become a Non-Acceptable L/C Lender,

 

and an indication in Schedule 1 (Commitments), in a Transfer Certificate, in an Assignment Agreement or in an Increase Confirmation to that effect will constitute a notice under Clause 6.11.4(A) to the Facility Agent and, upon delivery in accordance with Clause 25.7 (Copy of Transfer Certificate etc. to Borrower), to the Borrower.

 

	
6.11.5  

	
Any notice received by the Facility Agent pursuant to Clause 6.11.4 shall constitute notice to the Fronting Bank of that Lender's status and the Facility Agent shall, upon receiving each such notice, promptly notify the Fronting Bank of that Lender's status as specified in that notice.

 

	
6.11.6  

	
If a Lender who has provided cash collateral in accordance with this Clause 6.11 (Cash collateral by Non-Acceptable L/C Lender):

 

	
(A)  

	
ceases to be a Non-Acceptable L/C Lender; and

 

	
(B)  

	
no amount is due and payable by that Lender in respect of a Letter of Credit,

 

that Lender may, at any time it is not a Non-Acceptable L/C Lender, by notice to the Fronting Bank request that an amount equal to the amount of the cash provided by it as collateral in respect of that Letter of Credit (together with any accrued interest) standing to the credit of the relevant account held with the Fronting Bank be returned to it and the Fronting Bank shall pay that amount to the Lender within five Business Days after the request from the Lender (and shall cooperate with the Lender in order to procure that the relevant security or collateral arrangement is released and discharged).

 

	
6.12  

	
Cash collateral by Borrower

 

	
6.12.1  

	
If a Lender which is a Non-Acceptable L/C Lender fails to provide cash collateral (or notifies the Fronting Bank that it will not provide cash collateral) in accordance with Clause 6.11 (Cash collateral by Non-Acceptable L/C Lender) and the Fronting Bank notifies the Borrower (with a copy to the Facility Agent) that it requires the Borrower of the relevant Letter of Credit or proposed Letter of Credit to provide cash collateral to an account with the Fronting Bank (an "Additional Cash Collateral Account") in an amount equal to that Lender's L/C Proportion of the outstanding amount of that Letter of Credit and in the currency of that Letter of Credit then the Borrower shall do so within five Business Days after the notice is given.

 

 

56

Index

 

	
6.12.2  

	
The Borrower shall enter into a security document or other form of collateral arrangement over the Additional Cash Collateral Account, in form and substance satisfactory to the Fronting Bank.

 

	
6.12.3  

	
No withdrawals may be made from the Additional Cash Collateral Account without the Fronting Bank's prior consent.  The Fronting Bank may agree to the withdrawals from the Additional Cash Collateral Account to the extent that:

 

	
(A)  

	
it is satisfied that the relevant Lender is no longer a Non-Acceptable L/C Lender; or

 

	
(B)  

	
the relevant Lender's obligations in respect of the relevant Letter of Credit are transferred to a New Lender in accordance with the terms of this Agreement; or

 

	
(C)  

	
an Increase Lender has agreed to undertake the obligations in respect of the relevant Lender's L/C Proportion of the relevant Letter of Credit.

 

	
6.12.4  

	
To the extent that the Borrower has complied with its obligations to provide cash collateral in accordance with this Clause 6.12 (Cash collateral by Borrower), the relevant Lender's L/C Proportion in respect of that Letter of Credit will remain (but that Lender's obligations in relation to that Letter of Credit may be satisfied in accordance by withdrawals made from the Additional Cash Collateral Account).  However, the Borrower's obligation to pay any letter of credit commission in relation to the relevant Letter of Credit to the Facility Agent (for the account of that Lender) in accordance with Clause 13.2 (LC commission) will be reduced proportionately as from the date on which it complies with that obligation to provide cash collateral (and for so long as the relevant amount of cash collateral continues to stand as collateral).

 

	
6.12.5  

	
The Fronting Bank shall promptly notify the Facility Agent of the extent to which the Borrower provides cash collateral pursuant to this Clause 6.12 (Cash collateral by Borrower) and of any change in the amount of cash cover so provided.

 

	
6.13  

	
Rights of contribution

 

The Borrower will not be entitled to any right of contribution or indemnity from any Finance Party in respect of any payment that the Borrower may make under this Clause 6 (Utilisation – Letters of Credit).

 

	
6.14  

	
Reserving requirements

 

	
6.14.1  

	
The Borrower shall ensure that on each Quarter End Date to occur after the date of this Agreement and on each Recalculation Date the cash cover provided in relation to a Letter of Credit is at least equal to the Reserve Amount relating to such Letter of Credit.

 

	
6.14.2  

	
For the purposes of this Agreement "Reserve Amount" means in relation to any Letter of Credit which has been issued in accordance with the terms of this Agreement:

 

 

57

Index

 

	
(A)  

	
in the period prior to the date falling 6 months after the Project Completion Date (the "first cut-off date"), an amount equal to 0% of the outstanding amount of that Letter of Credit;

 

	
(B)  

	
in the period commencing on the first cut-off date and ending on the day before the date falling 9 months after the Project Completion Date (the "second cut-off date"), an amount equal to 33% of the outstanding amount of that Letter of Credit;

 

	
(C)  

	
in the period commencing on the second cut-off date and ending on the day before the date falling 12 months after the Project Completion Date (the "third cut-off date"), an amount equal to 50% of the outstanding amount of that Letter of Credit;

 

	
(D)  

	
in the period commencing on the third cut-off date and ending on the day before the earlier of (i) the date falling 18 months after the Project Completion Date, and (ii) the Final Maturity Date in relation to Tranche A and Tranche B (the "fourth cut-off date"), an amount equal to 75% of the outstanding amount of that Letter of Credit; and

 

	
(E)  

	
on and from the fourth cut-off date 100% of the outstanding amount of that Letter of Credit.

 

 

58

Index

PROJECTIONS

 

	
7.  

	
PROJECTIONS

 

	
7.1  

	
Adoption

 

	
7.1.1  

	
Until the adoption of the first new Projection in accordance with this Clause 7. (Projections), the Projection delivered to the Facility Agent pursuant to Clause 4.1 (Initial conditions precedent) (the "Initial Projection") shall be the current Projection for the purposes of this Agreement.

 

	
7.1.2  

	
Subject to Clause 7.1.5, a new Projection (each, a "Scheduled Projection") shall be prepared in accordance with this Clause 7 (Projections) and adopted as of each Scheduled Recalculation Date.

 

	
7.1.3  

	
In addition, a new Projection (each, an "Interim Projection") shall be prepared in accordance with this Clause 7 (Projections) if:

 

	
(A)  

	
the Borrower or the Technical Banks so request(s) no earlier than 40 Business Days before and no later than 30 Business Days before the anticipated Project Completion Date;

 

	
(B)  

	
the Technical Banks so request following a request by the Borrower for a Loan under Tranche B;

 

	
(C)  

	
subject to Clause 7.1.6, if the Borrower so requests at any time;

 

	
(D)  

	
the Technical Banks so requests upon the Borrower entering into a unitisation and unit operating agreement or similar agreement relating to the Huntington Petroleum Field;

 

	
(E)  

	
subject to Clause 7.1.7, the Technical Banks or the Facility Agent (acting on instructions of the Majority Lenders) so requests at any time following the Project Completion Date; or

 

	
(F)  

	
subject to Clause 7.1.8, the Technical Banks so request following any notification in accordance with Clause 22.5.24 (Information: ad hoc) of any interruption or suspension of the production, recovery or transportation of any Petroleum derived from or relating to the Project for a continuous period of 15 days (or more) the effects of which have not been taken into account and reflected in the then current Projection provided that in the reasonable opinion of the Technical Banks such interruption or suspension is a material interruption or suspension.

 

	
7.1.4  

	
As soon as reasonably practicable following any request for a new Projection to be prepared pursuant to Clause 7.1.3, the Technical Banks (acting reasonably and in consultation with the Modelling Bank and the Borrower) shall determine, and notify the Borrower, the Facility Agent and the Lenders of the date (an "Interim Recalculation Date") as of which such new Projection is to be adopted; and such Interim Projection shall be adopted as of such Interim Recalculation Date.

 

 

59

Index

 

	
7.1.5  

	
If any Interim Projection is adopted not more than two months prior to any Scheduled Recalculation Date, or is in preparation not more than two months prior to any Scheduled Recalculation Date with the intention of adopting the same by that Scheduled Recalculation Date, the Scheduled Projection that was scheduled to be prepared pursuant to Clause 7.1.2 for adoption by that Scheduled Recalculation Date shall not be prepared.

 

	
7.1.6  

	
No more than one request may be made under Clause 7.1.3(C) for the preparation of an Interim Projection in any 3 Month period.

 

	
7.1.7  

	
No more than one request may be made under Clause 7.1.3(E) for the preparation of an Interim Projection in any 3 Month period.

 

	
7.1.8  

	
No request may be made under Clause 7.1.3(F) for the preparation of an Interim Projection other than during the period commencing on the date falling 30 days after the First Oil Date and ending on the Project Completion Date.

 

	
7.2  

	
Content

 

	
7.2.1  

	
Each Projection and draft Projection prepared pursuant to this Clause 7 (Projections) must:

 

	
(A)  

	
be prepared using the Computer Model;

 

	
(B)  

	
be in a form similar to the Initial Projection (or such other form the Modelling Bank and the Technical Banks may approve (in consultation with the Borrower)) and include the same type of information (and in the same level of detail) as that included in the Initial Projection;

 

	
(C)  

	
be prepared on the basis of the Assumptions that are proposed, approved, agreed and/or determined in accordance with the provisions of this Clause 7 (Projections);

 

	
(D)  

	
without prejudice to Clause 7.2.1(B), include:

 

	
(1)  

	
details of all the Assumptions on which it is based;

 

	
(2)  

	
the Projected Net Revenues for each Calculation Period ending on or before the Calculation End Date;

 

	
(3)  

	
the NPV (Project Life) and the PLCR relating to each Calculation Period ending on or before the Calculation End Date;

 

	
(4)  

	
the NPV (Loan Life) and the LLCR relating to each Calculation Period ending on or before the Final Maturity Date;

 

	
(5)  

	
the Tranche A Borrowing Base Amount and the Tranche B Borrowing Base Amount relating to each Calculation Period ending on or before the Final Maturity Date;

 

	
(6)  

	
the DSCR relating to each Calculation Period ending on or before the Final Maturity Date; and

 

 

60

Index

 

	
(7)  

	
the Reserve Tail Date.

 

	
7.2.2  

	
Each Projection must include data, forecasts and calculations for:

 

	
(A)  

	
the Calculation Period which commences on the day after the Recalculation Date on which that Projection is due to be adopted or (if the Recalculation Date on which that Projection is due to be adopted does not coincide with the last day of a Calculation Period) the Calculation Period in which that Recalculation Date occurs or such other Calculation Period as the Modelling Bank and the Technical Banks (each, acting reasonably) may select; and

 

	
(B)  

	
each subsequent Calculation Period ending on or before the Calculation End Date.

 

	
7.3  

	
Key principles

 

In (i) proposing, agreeing and/or determining Assumptions, (ii) preparing and/or approving any Projection or draft Projection or (iii) otherwise carrying out their obligations, and exercising their rights, under this Clause 7 (Projections), the Parties shall have regard to and comply with the following key principles:

 

	
7.3.1  

	
Each Projection shall be based on:

 

	
(A)  

	
at the Technical Banks' discretion, the P90 Reserves of the Project as risked by the Technical Banks (acting reasonably and after consultation with the Borrower) by reference to the latest Reserves Report or the low case production profile in the Field Development Plan as risked by the Technical Banks (acting reasonably and after consultation with the Borrower); or

 

	
(B)  

	
such other reserves basis as may be agreed between the Technical Banks and the Borrower and approved by the Majority Lenders.

 

	
7.3.2  

	
Each Projection shall disregard any Gross Expenditure or Gross Income relating to the Project which is projected to arise after the Field Life End Date for the Project other than any Gross Expenditure relating to the abandonment of the Huntington Petroleum Field (including the FPSO Termination Fees).

 

	
7.3.3  

	
Each Projection must, in projecting interest rates, exchange rates and Petroleum sale prices, take due account of the terms of any existing Hedging Agreement:

 

	
(A)  

	
that has been entered into by the Borrower in compliance with the Hedging Policy and otherwise in accordance with this Agreement;

 

	
(B)  

	
that has been entered into with a hedging counterparty that meets the minimum rating criteria or whose obligations under such Hedging Agreement are guaranteed upon terms satisfactory to the Technical Banks and the Modelling Bank by a person that meets the minimum rating criteria; and

 

 

61

Index

 

	
(C)  

	
over which the Finance Parties have, or Security Trustee (in its capacity as such) has, Security pursuant to a Security Document,

 

where, for these purposes, "minimum rating criteria" means a credit rating of at least A- from Standard & Poor's, Rating Services A3 from Moody's Investor Services Limited or an equivalent rating from any other Internationally recognised credit rating agency acceptable to the Technical Banks and the Modelling Bank (each, acting reasonably).

 

	
7.3.4  

	
All figures for Taxes included in any Projection must be based on tax legislation in force on the relevant Recalculation Date on which that Projection is due to be adopted and on any official announcements or publications in force as at such date stating that such legislation is to be altered, supplemented or replaced in whole or in part.

 

	
7.3.5  

	
Any proceeds of insurance paid or payable to the Borrower in respect of the Project shall only be included as an item of Gross Income to the extent that:

 

	
(A)  

	
the Borrower can demonstrate to the reasonable satisfaction of the Technical Banks and the Modelling Bank that such proceeds will be received by the Borrower when projected; and

 

	
(B)  

	
such proceeds are not paid or payable to the Borrower in respect of any third party liability.

 

	
7.3.6  

	
Any proceeds of insurances in respect of any third party liability which are paid or payable directly to the person to whom such liability relates shall not be included as an item of (i) Gross Expenditure in any Projection where any such proceeds of insurances are liabilities or (ii) Gross Income in any Projection where any such proceeds of insurances are payments.

 

	
7.4  

	
Preparatory steps

 

	
7.4.1  

	
By the date falling 30 Business Days before the relevant Recalculation Date or, in relation to any Interim Projection, such later date as the Technical Bank may specify on which each Projection is due to be adopted:

 

	
(A)  

	
the Technical Banks and the Modelling Bank shall submit to the Borrower their proposals for the Economic Assumptions to be used for that Projection; and

 

	
(B)  

	
the Borrower shall submit to the Technical Banks and the Modelling Bank its proposals for the Technical Assumptions to be used for that Projection.

 

	
7.4.2  

	
The Borrower and the Technical Banks shall seek to agree the Assumptions to be used for each Projection based on the proposals submitted in accordance with Clauses 7.4.1 by the date falling 20 Business Days before the Recalculation Date on which that Projection is due to be adopted.

 

 

62

Index

 

	
7.5  

	
Draft Projections

 

	
7.5.1  

	
The Modelling Banks shall (in consultation with the Technical Banks and the Borrower) prepare a draft Projection using:

 

	
(A)  

	
all the Assumptions that have been agreed between the Borrower and the Technical Banks pursuant to Clause 7.4.2 (Preparatory steps); and

 

	
(B)  

	
if the Borrower and the Technical Banks have not been able to reach agreement on any such Assumptions by the date referred to in Clause 7.4.2 (Preparatory steps), such Assumptions as determined by the Technical Banks (acting reasonably).

 

	
7.5.2  

	
The Modelling Bank shall endeavour to provide (through the Facility Agent) each draft Projection to the Lenders, the Technical Banks and the Borrower (together with any additional information or documents that have been provided to the Technical Banks or Modelling Bank under this Agreement in connection with such draft Projection) no later than (i) 15 Business Days prior to the Recalculation Date on which such Projection is due to be adopted or (ii) in the case of any draft Interim Projection, such later date as the Technical Banks may specify.

 

	
7.6  

	
Consideration by Lenders

 

	
7.6.1  

	
For the purposes of this Clause 7 (Projections), the "Delivery Date" means, in relation to any draft Projection, the date on which the Facility Agent delivers such copies of the draft Projection, and other information (if any), to all the Lenders under Clause 7.5.2 (Draft Projections).

 

	
7.6.2  

	
Each Lender may, within ten Business Days of the Delivery Date for any draft Projection, notify the Facility Agent of whether it approves of the Assumptions used in the preparation of the draft Projection.

 

	
7.6.3  

	
Any Lender that does not inform the Facility Agent to the contrary within ten Business Days of the Delivery Date for any draft Projection, shall be deemed to have approved of the Assumptions used in the preparation of the draft Projection.

 

	
7.6.4  

	
In any event, the Facility Agent shall on the date falling ten Business Days after the Delivery Date for any draft Projection, notify the Borrower and the Lenders of whether Clause 7.7 (Lenders approve) or Clause 7.8 (Lenders do not approve) applies with respect to such draft Projection.

 

	
7.7  

	
Lenders approve

 

If the Majority Lenders approve, or are deemed to have approved, the use of each of the Assumptions for the preparation of the relevant Projection then the draft Projection shall be adopted as the current Projection in accordance with Clause 7.9 (Adoption of Projections).

 

	
7.8  

	
Lenders do not approve

 

	
7.8.1  

	
If the Majority Lenders do not approve of any Assumption (the "rejected Assumption") used in any draft Projection, then:

 

 

63

Index

 

	
(A)  

	
the Majority Lenders (acting reasonably and through the Facility Agent) shall propose an alternative to the rejected Assumption to the Borrower;

 

	
(B)  

	
the Borrower and the Majority Lenders (through the Facility Agent) shall seek to agree the Assumption to be used for the purposes of the relevant Projection instead of the rejected Assumption in light of the rejected Assumption and the alternative thereto proposed by the Majority Lenders;

 

	
(C)  

	
if the Majority Lenders (through the Facility Agent) and the Borrower have not been able to reach agreement on the relevant Assumption to be used in the preparation of the relevant Projection instead of the rejected Assumption by the date falling five Business Days before the Recalculation Date on which the Projection is due to be adopted then such Assumptions will be determined by (in case of Technical Assumptions) an independent expert and (in case of Economic Assumptions) the Majority Lenders;

 

	
(D)  

	
the Modelling Bank (in consultation with the Technical Banks and the Borrower) shall promptly upon the relevant Assumption being agreed between the Majority Lenders and the Borrower or being determined pursuant to Clause 7.8.1(C):

 

	
(1)  

	
prepare a revised draft Projection using the Assumption so agreed or determined instead of the rejected Assumption; and

 

	
(2)  

	
deliver (through the Facility Agent) a copy of such revised draft Projection to the Technical Banks, the Borrower and the Lenders (and such draft Projection shall be adopted as the current draft Projection in accordance with Clause 7.9 (Adoption of Projections)).

 

	
7.9  

	
Adoption of Projections

 

	
7.9.1  

	
Each draft Projection prepared pursuant to (as the case may be) Clauses 7.5 (Draft Projections) and 7.8 (Lenders do not approve) shall not be adopted as the current Projection for the purposes of this Agreement until the latest of:

 

	
(A)  

	
the relevant Recalculation Date on which the relevant Projection is due to be adopted; and

 

	
(B)  

	
(in the case of any revised draft Projection that has been prepared pursuant to Clause 7.8 (Lenders do not approve)) the date on which the Modelling Bank and the Technical Banks confirm (through the Facility Agent) to the Lenders that they have verified that the relevant revised draft Projection has been prepared to their reasonable satisfaction in accordance with the requirements of this Clause 7 (Projections).

 

	
7.9.2  

	
If Clause 7.8 (Lenders do not approve) does not apply, the Facility Agent (at the same time as issuing any notice under Clause 7.6.4 (Consideration by Lenders)) shall confirm to the Borrower and the Lenders:

 

 

64

Index

 

	
(A)  

	
that the relevant Projection will be adopted in accordance with Clause 7.9.1; and

 

	
(B)  

	
the Tranche A Borrowing Base Amount and Tranche B Borrowing Base Amount for each Calculation Period ending on or before the Final Maturity Date that will be applicable upon the adoption of such Projection.

 

	
7.9.3  

	
If Clause 7.8 (Lenders do not approve) applies for any reason, the Facility Agent shall, upon the adoption of the relevant Projection in accordance with Clause 7.9.1 or as soon as reasonably possible before such adoption, confirm to the Borrower and the Lenders:

 

	
(A)  

	
that the relevant Projection has been, or (as the case may be) will be, adopted in accordance with Clause 7.9.1; and

 

	
(B)  

	
the Tranche A Borrowing Base Amount and Tranche B Borrowing Base Amount for each Calculation Period ending on or before the Final Maturity Date that will be applicable upon the adoption of such Projection.

 

	
7.10  

	
Computer Model

 

	
7.10.1  

	
The Modelling Bank and the Technical Banks may, with the prior consent of the Borrower and the Majority Lenders (in each case, such consent not to be unreasonably withheld or delayed), make amendments to the Computer Model from time to time to correct any errors in such Computer Model or otherwise to reflect any changes in circumstance since the date of this Agreement.

 

	
7.10.2  

	
The Borrower may, with the prior consent of the Modelling Bank, the Technical Banks and the Majority Lenders (in each case, such consent not to be unreasonably withheld or delayed), make amendments to the Computer Model from time to time to correct any errors in such Computer Model or otherwise to reflect any changes in circumstance since the date of this Agreement.

 

	
7.10.3  

	
Following any material amendment to the Computer Model, the Majority Lenders or the Borrower may request for the amended Computer Model to be audited.  If the Majority Lenders so request, the amended Computer Model shall forthwith be audited (at the cost of the Borrower) by a reputable and experienced firm of model auditors approved by the Majority Lenders having consulted with the Borrower.  Where an audit has been so requested, until a satisfactory audit in relation to the amended Computer Model has been delivered to the Majority Lenders, the existing unamended version shall continue to be the "Computer Model" for the purpose of this Agreement.

 

	
7.11  

	
Independent expert

 

	
7.11.1  

	
Where any Technical Assumption is required to be referred to an independent expert for determination under this Agreement, such independent expert shall be appointed promptly by agreement between the Borrower, the Modelling Bank and the Technical Banks (provided that if the Borrower, the Modelling Bank and the Technical Banks have failed to reach agreement as to the identity of such independent expert within two Business Days, the identity of the independent 

 

 

65

Index

 

expert shall be determined, upon the request of the Technical Banks, by the President of the Energy Institute, London).

 

	
7.11.2  

	
Any such independent expert shall be appointed on terms that:

 

	
(A)  

	
the independent expert shall act as an expert and not as arbitrator and shall be required to determine which of the submissions made pursuant to Clause 7.11.3 the independent expert believes to be the more appropriate having regard to the contents of such submissions, any evidence supporting the same and such other information as such independent expert thinks fit in the context of syndicated secured oil and gas financings in the London market;

 

	
(B)  

	
the independent expert's determination shall be made in writing in the form set out in Schedule 13 (Form of Independent Expert's Determination) and shall be delivered to the Borrower, the Modelling Bank, the Technical Banks and the Facility Agent within ten Business Days following the independent expert's appointment; and

 

	
(C)  

	
the independent expert's fees and other charges in respect of such appointment shall be borne by the Borrower.

 

	
7.11.3  

	
Upon appointing an independent expert, the Technical Banks and the Modelling Bank (acting together) and the Borrower shall promptly deliver to that independent expert written submissions setting out details of their respective opinions of how the question in dispute should be resolved together with such supporting evidence in writing as they consider appropriate. The Technical Banks and the Modelling Bank (acting together) and the Borrower will also supply to the independent expert such other information as the independent expert may require for the purposes of the independent expert's determination.

 

	
7.11.4  

	
The decision of the independent expert on any such question referred to such independent expert shall be final and binding on all the Parties and the question in dispute shall, accordingly, be resolved by adopting the proposed resolution set out in the submission which the independent expert determines to be the more appropriate.

 

 

66

Index

REPAYMENT, PREPAYMENT AND CANCELLATION

 

	
8.  

	
REPAYMENT

 

	
8.1  

	
Repayment of Tranche A and Tranche B Loans

 

	
8.1.1  

	
The Borrower shall repay the Tranche A Loans in instalments by repaying on the dates specified in the table in Part I (Tranche A Repayment Schedule) of Schedule 12 (Repayment Schedule) (each a "Scheduled Tranche A Repayment Date") an amount which reduces the Dollar Amount of the outstanding aggregate Tranche A Loans by an amount equal to the relevant percentage of all the Tranche A Loans borrowed by the Borrower as at the close of business in London on the last day of the Availability Period in relation to Tranche A set opposite the relevant Scheduled Tranche A Repayment Date in the table in Part I (Tranche A Repayment Schedule) of Schedule 12 (Repayment Schedule), and Tranche A shall be permanently reduced by the amount of such reduction.

 

	
8.1.2  

	
The Borrower shall repay the Tranche B Loans in instalments by repaying on the dates specified in the table in Part II (Tranche B Repayment Schedule) of Schedule 12 (Repayment Schedule) (each "Scheduled Tranche B Repayment Date") an amount which reduces the Dollar Amount of the outstanding Tranche B Loans by an amount equal to the relevant percentage of all the Tranche B Loans borrowed by the Borrower as at the close of business in London on the last day of the Availability Period in relation to Tranche B set opposite the relevant Schedule Tranche B Repayment Date in the table in Part II (Tranche B Repayment Schedule) of Schedule 12 (Repayment Schedule), and Tranche B shall be permanently reduced by the amount of such reduction.

 

	
8.1.3  

	
The Borrower may not reborrow (i) any part of Tranche A which is repaid in accordance with Clause 8.1.1 or (ii) any part of Tranche B which is repaid in accordance with Clause 8.1.2.

 

	
8.1.4  

	
Any repayment of Loans under Clauses 8.1.1 or 8.1.2 shall be applied to such Loans as the Facility Agent (acting in consultation with the Borrower) shall determine.

 

	
8.1.5  

	
Notwithstanding any other provision of this Agreement, all Utilisations and other amounts outstanding under Tranches A and B shall be repaid on the Final Maturity Date in relation to Tranches A and B.

 

	
8.2  

	
Repayment of Tranche C Loans

 

	
8.2.1  

	
The Borrower shall repay a Tranche C Loan on the last day of its Interest Period.

 

	
8.2.2  

	
Without prejudice to the Borrower's obligation under Clause 8.2.1, if one or more Loans under Tranche C are to be made available to the Borrower:

 

	
(A)  

	
on the same day that a maturing Tranche C Loan is due to be repaid by the Borrower;

 

	
(B)  

	
in the same currency as the maturing Tranche C Loan; and

 

 

67

Index

 

	
(C)  

	
in whole or in part for the purpose of refinancing the maturing Tranche C Loan,

 

the aggregate amount of the new Tranche C Loan(s) shall be treated as if applied in or towards repayment of the maturing Tranche C Loan so that:

 

	
(1)  

	
if the amount of the maturing Tranche C Loan exceeds the aggregate amount of the new Loan(s):

 

	
(a)  

	
the Borrower will only be required to pay an amount in cash in the relevant currency equal to that excess; and

 

	
(b)  

	
each Lender's participation (if any) in the new Tranche C Loan(s) shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lender's participation (if any) in the maturing Tranche C Loan and that Lender will not be required to make its participation in the new Tranche C Loan(s) available in cash; and

 

	
(2)  

	
if the amount of the maturing Tranche C Loan is equal to or less than the aggregate amount of the new Tranche C Loan(s):

 

	
(a)  

	
the Borrower will not be required to make any payment in cash; and

 

	
(b)  

	
each Lender will be required to make its participation in the new Tranche C Loan(s) available in cash only to the extent that its participation (if any) in the new Tranche C Loan(s) exceeds that Lender's participation (if any) in the maturing Loan and the remainder of that Lender's participation in the new Tranche C Loan(s) shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lender's participation in the maturing Tranche C Loan.

 

	
8.2.3  

	
At any time when a Lender becomes a Defaulting Lender, the maturity date of each of the participations of that Lender in the Tranche C Loans then outstanding will be automatically extended to the Final Maturity Date in relation to Tranche C and will be treated as separate Tranche C Loans (the "Separate Loans") denominated in the currency in which the relevant participations are outstanding.

 

	
8.2.4  

	
The Borrower may prepay the Separate Loan by giving five Business Days' prior notice to the Facility Agent. The Facility Agent will forward a copy of a prepayment notice received in accordance with this Clause 8.2.4 to the Defaulting Lender concerned as soon as practicable on receipt.

 

	
8.2.5  

	
Interest in respect of a Separate Loan will accrue for successive Interest Periods selected by the Borrower by the time and date specified by the Facility Agent (acting reasonably) and will be payable by the Borrower to the Defaulting Lender on the last day of each Interest Period of that Loan.

 

 

68

Index

 

	
8.2.6  

	
The terms of this Agreement relating to Tranche C Loans generally shall continue to apply to Separate Loans other than to the extent inconsistent with Clauses 8.2.3 to 8.2.5, in which case those Clauses shall prevail in respect of any Separate Loan.

 

	
8.2.7  

	
Notwithstanding any other provision of this Agreement, all Utilisations and other amounts outstanding under Tranche C shall be repaid on the Final Maturity Date in relation to Tranche C.

 

	
8.2.8  

	
The Borrower making the repayment of any Tranche C Loan in accordance with Clause 8.2.1 shall indicate to the Facility Agent to which Tranche C Loan the proceeds for such repayment shall be applied.

 

	
8.3  

	
Reduction of Utilisations

 

	
8.3.1  

	
On or before the fifth Business Day after each Reduction Date, the Borrower shall repay such amount of the Loans under Tranche A as is required to reduce the aggregate Dollar Amount of the Loans under Tranche A to the lower of the Tranche A Borrowing Base Amount and the Aggregate Commitments under Tranche A applicable on the day after such Reduction Date.

 

	
8.3.2  

	
On or before the fifth Business Day after each Reduction Date, the Borrower shall repay such amount of the Loans under Tranche B as is required to reduce the aggregate Dollar Amount of Loans under Tranche B to the lower of the Tranche B Borrowing Base Amount and the Aggregate Commitments under Tranche B applicable on the date after such Reduction Date.

 

	
8.3.3  

	
On or before the fifth Business Day after each Reduction Date, the Borrower shall repay such amount of Utilisations under Tranche C as is required to reduce the aggregate Dollar Amount of Utilisations under Trance C to the Aggregate Commitments under Tranche C applicable on the date after such Reduction Date.

 

	
8.3.4  

	
Any repayments under Clause 8.3.1, Clause 8.3.2 or Clause 8.3.3 shall be applied towards such Utilisations under the relevant Tranche as the Facility Agent (acting in consultation with the Borrower) shall determine.

 

	
9.  

	
PREPAYMENT AND CANCELLATION

 

	
9.1  

	
Illegality

 

	
9.1.1  

	
If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Utilisation:

 

	
(A)  

	
that Lender shall promptly notify the Facility Agent upon becoming aware of that event;

 

	
(B)  

	
upon the Facility Agent notifying the Borrower, the Commitment of that Lender in respect of each Tranche will be immediately cancelled; and

 

	
(C)  

	
the Borrower shall repay that Lender's participation in the Utilisations made to the Borrower on the last day of the Interest Period for each 

 

 

69

Index

 

Utilisation occurring after the Facility Agent has notified the Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Facility Agent (being no earlier than the last day of any applicable grace period permitted by law).

 

	
9.1.2  

	
If it becomes unlawful for the Fronting Bank to issue Letters of Credit, the Fronting Bank shall notify the Facility Agent upon becoming aware of that event, and upon the Facility Agent notifying the Borrower, the Facility shall cease to be available for the issue of Letters of Credit by the Fronting Bank.

 

	
9.2  

	
Change of control

 

	
9.2.1  

	
If a Change of Control Event occurs:

 

	
(A)  

	
the Borrower shall promptly notify the Facility Agent upon becoming aware of that event;

 

	
(B)  

	
no Lender shall be obliged to fund a Utilisation (except for a Rollover Loan);

 

	
(C)  

	
if the Majority Lenders so require, the Facility Agent shall, by not less than fifteen Business Days notice to the Borrower cancel the Facility and declare (1) all outstanding Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents (other than any Secured Hedging Agreement) immediately due and payable and (2) full cash cover in respect of each Letter of Credit is immediately due and payable, whereupon the Facility will be cancelled and all such outstanding amounts will become immediately due and payable.

 

	
9.2.2  

	
For the purposes of this Clause 9.2 (Change of control):

 

	
(A)  

	
a "Change of Control Event" shall occur if there is a change of control of the Borrower or a change in shareholding of the Borrower;

 

	
(B)  

	
a person or group of persons has "control" over the Borrower if;

 

	
(1)  

	
that person or that group of persons acting in concert (in each case, whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, the possession of their shareholding or management rights, contract or otherwise) has the power to:

 

	
(a)  

	
cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the Borrower; or

 

	
(b)  

	
appoint and/or remove all or the majority of the members of the board of directors or other governing body of the Borrower; or

 

	
(c)  

	
control the management or policy decisions of the Borrower; or

 

 

70

Index

 

	
(2)  

	
that person or that Group of persons acting in concert holds beneficially more than 50% of the issued share capital of the Borrower; and

 

	
(C)  

	
"acting in concert" means a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition of shares by any of them or otherwise, either directly or indirectly, to obtain or consolidate control of the Borrower (where, for these purposes, certain persons shall be deemed to be "acting in concert" in accordance with the definition of "acting in concert" set out in the City code on Takeover and Mergers as at the date of this Agreement.

 

	
9.3  

	
Insurance Proceeds

 

In the event of any claim in excess of $100,000 under any Agreed Insurance the Borrower shall procure that the proceeds of such claim received by the Borrower save to the extent that the same are to be applied in the prompt repair, replacement or reinstatement of the relevant asset(s) to which the claim relates, are applied in prepayment of the Facility, unless otherwise agreed with the Facility Agent.  Any prepayment under this Clause shall be applied first, towards prepayment of Loans under Tranche B, second, towards prepayment of Loans under Tranche A and third, towards prepayment of Loans under Tranche C.

 

	
9.4  

	
Cash sweep

 

	
9.4.1  

	
On and from the end of the Availability Period for Tranche A and Tranche B, the Borrower shall procure that on each Recalculation Date:

 

	
(A)  

	
to the extent that (i) there are any Loans outstanding and (ii) there are any outstanding Letters of Credit and the Borrower has not provided cash cover in an amount equal to 100% of the outstanding amount of such Letters of Credit, 75% of the Excess Revenues are applied in prepayment of the Loans under the Tranches and 25% of the Excess Revenues are applied for (a) the provision of cash cover for the Letters of Credit or (b) if the Borrower has elected by notice to the Facility Agent of its intent to make a Sinking Fund payment, for the provision of cash cover for Letters of Credit and payments into a Sinking Fund on a Proportional Basis;

 

	
(B)  

	
to the extent that (i) there are any Loans outstanding and (ii) there are no outstanding Letters of Credit or there are outstanding Letters of Credit and the Borrower has provided cash cover in an amount equal to 100% of the outstanding amount of such Letters of Credit, all Excess Revenues are applied in prepayment of the Loans under the Tranches; and

 

	
(C)  

	
to the extent that (i) there are no Loans outstanding and (ii) there are any outstanding Letters of Credit and the Borrower has not provided cash cover in an amount equal to 100% of the outstanding amount of each Letter of Credit, all Excess Revenues are applied for (a) the provision of cash cover for the Letters of Credit or (b) if the Borrower has elected by notice to the Facility Agent of its intent to make a Sinking Fund payment, 

 

 

71

Index

 

for the provision of cash cover for Letters of Credit and payments into a Sinking Fund on a Proportional Basis.

 

	
9.4.2  

	
Any prepayment of Loans pursuant to Clause 9.4.1 (Cash sweep) shall be applied first, towards prepayment of Loans under Tranche B, second, towards prepayment of Loans under Tranche A and third, towards prepayment of Loans under Tranche C.

 

	
9.4.3  

	
Any notice to be provided to the Facility Agent by the Borrower in accordance with Clause 9.4.1(A)(b) or Clause 9.4.1(C)(b) shall be provided not less than 10 Business Days before the relevant Recalculation Date and such notice shall contain in reasonable detail the amount and timing of payments to be made into a Sinking Fund.

 

	
9.4.4  

	
If any amount (the "Sinking Fund Amount") which is to be applied by the Borrower to make a Sinking Fund payment in accordance with Clause 9.4.1(A) or Clause 9.4.1(C) is not due for payment into such Sinking Fund on the relevant Recalculation Date, the Sinking Fund Amount shall be deposited by the Borrower into a sub-account of the Proceeds Account and shall be withdrawn when the Sinking Fund Amount is due for payment into such Sinking Fund and applied for that purpose.

 

	
9.5  

	
Voluntary cancellation

 

	
9.5.1  

	
The Borrower may, if it gives the Facility Agent not less than five Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of $2,000,000) of the Total Available Commitments under a Tranche.

 

	
9.5.2  

	
Any cancellation under Clause 9.5 (Voluntary cancellation) shall reduce the commitments of the Lenders rateably under that Tranche.

 

	
9.5.3  

	
Unless the Borrower has issued a notice with respect to cancellation of all the Commitments under all the Tranches together with notices of prepayment of all Utilisations under the Facility, the Borrower may only issue a notice under Clause 9.5.1 before the Project Completion Date if it can demonstrate to the reasonable satisfaction of the Technical Banks that, notwithstanding any cancellation of any Total Available Commitments under a Tranche pursuant to that notice, a Default under Clause 24.2.1 (Liquidity) shall not arise as a result of such cancellation.

 

	
9.6  

	
Voluntary Prepayment of Loans

 

	
9.6.1  

	
Subject to Clauses 9.6.2 and 9.6.3, the Borrower to which a Loan has been made may, if it gives the Facility Agent not less than five Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Loan (but if in part, being an amount that reduces the Dollar Amount of the Loan by a minimum amount of $2,000,000).  Any prepayment of Loans pursuant to this Clause shall be applied first, towards prepayment of Loans under Tranche B, second, towards prepayment of Loans under Tranche A and third, towards prepayment of Loans under Tranche C.

 

 

72

Index

 

	
9.6.2  

	
A Tranche A Loan may only be prepaid after the last day of the Availability Period for Tranche A (or, if earlier, the date on which the Total Available Commitment under Tranche A is zero).

 

	
9.6.3  

	
A Tranche B Loan may only be prepaid after the last day of the Availability Period for Tranche B (or, if earlier, the date on which the Total Available Commitment under Tranche B is zero).

 

	
9.6.4  

	
Any Loan made by a single Lender under Clause 5.8 (Unavailability of a currency) which would have been that Lender's participation in a Loan may only be prepaid at the same time and to the same pro rata extent as that Loan.

 

	
9.7  

	
Right of repayment and cancellation in relation to a single Lender

 

	
9.7.1  

	
If:

 

	
(A)  

	
any sum payable to any Lender by the Borrower is required to be increased under Clause 14.2.3 (Tax gross-up); or

 

	
(B)  

	
any Lender claims indemnification from the Borrower under Clause 14.3 (Tax indemnity) or Clause 15.1 (Increased costs),

 

the Borrower may, whilst the circumstance giving rise to the requirement for that increase or indemnification continues, give the Facility Agent notice of cancellation of the Commitments of that Lender under all the Tranches and its intention to procure the repayment of that Lender's participation in the Utilisations.

 

	
9.7.2  

	
On receipt of a notice referred to in Clause 9.7.1, the Commitment of that Lender under all the Tranches shall immediately be reduced to zero.

 

	
9.7.3  

	
On the last day of each Interest Period which ends after the Borrower has given notice under Clause 9.7.1 (or, if earlier, the date specified by the Borrower in that notice), the Borrower shall repay that Lender's participation in that Loan together with all interest and other amounts accrued under the Finance Documents.

 

	
9.7.4  

	
The Borrower shall, on demand made by the Facility Agent following the receipt by it of any notice referred to in Clause 9.7.1, provide or procure the provision of cash cover for the amount of the relevant Lender's aggregate participation in all outstanding Letters of Credit.

 

	
9.8  

	
Right of cancellation in relation to a Defaulting Lender

 

 

	
9.8.1  

	
If any Lender becomes a Defaulting Lender, the Borrower may, at any time whilst the Lender continues to be a Defaulting Lender, give the Facility Agent 10 Business Days' notice of cancellation of the Available Commitment of that Lender under each Tranche.

 

	
9.8.2  

	
On the date (the "cancellation date") on which the cancellation of the Available Commitment under each Tranche of any Defaulting Lender pursuant to Clause 9.8.1 takes effect the Commitment under each Tranche of that Defaulting Lender 

 

 

73

Index

 

shall be reduced by an amount equal to the Available Commitment so cancelled under each Tranche.

 

	
9.8.3  

	
The Facility Agent shall as soon as practicable after receipt of a notice referred to in Clause 9.8.1, notify all the Lenders.

 

	
9.9  

	
Restrictions

 

	
9.9.1  

	
Any notice of cancellation or prepayment given by any Party under this Clause 9 (Prepayment and cancellation) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

 

	
9.9.2  

	
Any repayment or prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

 

	
9.9.3  

	
Any part of Tranche C which is repaid or prepaid may be reborrowed in accordance with the terms of this Agreement.  No part of Tranche A or Tranche B which is repaid or prepaid may be reborrowed.

 

	
9.9.4  

	
The Borrower shall not repay or prepay all or any part of the Utilisations or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

 

	
9.9.5  

	
Subject to Clause 2.2 (Increase), no amount of the Commitments cancelled under this Agreement may be subsequently reinstated.

 

	
9.9.6  

	
If the Facility Agent receives a notice under this Clause 9 (Prepayment and cancellation) it shall promptly forward a copy of that notice to either the Borrower or the affected Lender, as appropriate.

 

	
9.9.7  

	
Subject to Clause 30.3.1(G)(Hedging Banks), upon the repayment or prepayment of any Loan or any cancellation of any Commitments for any reason, the Facility Agent, the Borrower and any Hedging Bank that is a party to any Secured Hedging Agreement (or Hedging Transaction thereunder) relating, in each case, to the Borrower's interest rate exposure under this Agreement shall consult in good faith with a view to amending the terms of such Secured Hedging Agreement and/or transaction to reflect any change in the Borrower's interest rate exposure under this Agreement arising as a result of such repayment, prepayment or cancellation.  Any amendments to any Secured Hedging Agreement and/or transaction under a Hedging Agreement to be effected pursuant to this Clause 9.9.7 shall be effected at the Borrower's sole cost and expense.

 

 

74

Index

COSTS OF UTILISATION

 

	
10.  

	
INTEREST

 

	
10.1  

	
Calculation of interest

 

The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

 

	
10.1.1  

	
Margin;

 

	
10.1.2  

	
LIBOR or, in relation to any Loan in euro, EURIBOR; and

 

	
10.1.3  

	
Mandatory Cost, if any.

 

	
10.2  

	
Payment of interest

 

The Borrower shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the Interest Period is longer than six Months, on the dates falling at six-monthly intervals after the first day of the Interest Period).

 

	
10.3  

	
Default interest

 

	
10.3.1  

	
If an Obligor fails to pay any amount payable by it under a Finance Document (other than a Secured Hedging Agreement) on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to Clause 10.3.2, is two per cent. higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Facility Agent (acting reasonably).  Any interest accruing under this Clause 10.3 shall be immediately payable by the Obligor on demand by the Facility Agent.

 

	
10.3.2  

	
If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:

 

	
(A)  

	
the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and

 

	
(B)  

	
the rate of interest applying to the overdue amount during that first Interest Period shall be two per cent. higher than the rate which would have applied if the overdue amount had not become due.

 

	
10.3.3  

	
Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

 

	
10.4  

	
Notification of rates of interest

 

The Facility Agent shall promptly notify the Lenders and the Borrower of the determination of a rate of interest under this Agreement.

 

 

75

Index

 

	
11.  

	
INTEREST PERIODS

 

	
11.1  

	
Selection of Interest Periods

 

	
11.1.1  

	
The Borrower may select an Interest Period for a Loan in the Utilisation Request for that Loan or in relation to a Tranche A Loan or a Tranche B Loan which has already been borrowed in a Selection Notice.

 

	
11.1.2  

	
Each Selection Notice for a Tranche A Loan or a Tranche B Loan is irrevocable and must be delivered to the Facility Agent by the Borrower not later than 11 a.m. (London time) on the fourth Business Day before the start of the relevant Interest Period.

 

	
11.1.3  

	
If the Borrower fails to deliver a Selection Notice for a Tranche to the Facility Agent in accordance with Clause 11.1.2 above, the relevant Interest Period will, subject to Clause 11.4 (Changes to Interest Periods), be three Months for that Tranche.

 

	
11.1.4  

	
Subject to this Clause 11 (Interest Periods) and the last sentence of Clause 6.8.2 (Loans to cover demands), the Borrower may select an Interest Period of three or six months or any other period agreed between the Borrower and the Facility Agent (acting on the instructions of all the Lenders).

 

	
11.1.5  

	
An Interest Period for a Loan shall not extend beyond the Final Maturity Date for the relevant Tranche.

 

	
11.1.6  

	
Each Interest Period for a Loan shall start on the Utilisation Date or (if already made) on the last day of its preceding Interest Period.

 

	
11.1.7  

	
A Tranche C Loan has one Interest Period only.

 

	
11.2  

	
Non-Business Days

 

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

 

	
11.3  

	
Consolidation and division of Loans

 

	
11.3.1  

	
Subject to Clause 11.3.2 below, in relation to Tranche A Loans or Tranche B Loans, if two or more Interest Periods:

 

	
(A)  

	
relate to Loans of the same Tranche in the same currency made to the Borrower; and

 

	
(B)  

	
end on the same date,

 

those Loans will, unless the Borrower specifies to the contrary in the Selection Notice, for the next Interest Period, be consolidated into, and treated as, a single Loan on the last day of the Interest Period.

 

 

76

Index

 

	
11.3.2  

	
Subject to Clause 4.3 (Maximum number of Utilisations) and Clause 5.3 (Currency and amount), if the Borrower requests in a Selection Notice that a Tranche A Loan or Tranche B Loan be divided into two or more Tranche A Loans or (as the case may be) Tranche B Loans, that Tranche A Loan or (as the case may be) Tranche B Loan will, on the last day of its Interest Period, be so divided with Dollar Amounts specified in that Selection Notice, being an aggregate Dollar Amount equal to the Dollar Amount of the Tranche A Loan or (as the case may be) Tranche B Loan immediately before its division.

 

	
11.4  

	
Changes to Interest Period

 

	
11.4.1  

	
Prior to determining the interest rate for a Loan, the Facility Agent may:

 

	
(A)  

	
shorten the Interest Period for any Loan to ensure that, in relation to a Tranche A Loan, no Interest Periods extend beyond the Scheduled Repayment Date for that Loan, in relation to a Tranche B Loan, no Interest Periods extend beyond the Scheduled Repayment Date for that Loan and, in relation to a Tranche C Loan, no Interest Periods extend beyond the Final Maturity Date in relation to Tranche C; or

 

	
(B)  

	
in consultation with the Borrower, shorten the Interest Period for any Loan to the extent necessary for the purpose of the primary syndication of the Facility.

 

	
11.4.2  

	
If the Facility Agent makes any change to an Interest Period referred to in this Clause 11.4 (Changes to Interest Period), it shall promptly notify the Borrower and, in relation to any change referred to in Clause 11.4.1(A), the Lenders.

 

	
12.  

	
CHANGES TO THE CALCULATION OF INTEREST

 

	
12.1  

	
Absence of quotations

 

Subject to Clause 12.2 (Market disruption) if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by 11.00 a.m. on the Quotation Day, the applicable LIBOR, or EURIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.

 

	
12.2  

	
Market disruption

 

	
12.2.1  

	
If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender's share of that Loan for the Interest Period shall be the percentage rate per annum which is the sum of:

 

	
(A)  

	
the applicable Margin;

 

	
(B)  

	
the rate notified to the Facility Agent by that Lender as soon as practicable and in any event by close of business on the date falling 2 Business Days after the Quotation Day to be that which expresses as a percentage rate per annum the cost to that Lender, or its good faith best estimate of the cost, of funding its participation in that Loan from whatever source it may reasonably select; and

 

 

77

Index

 

	
(C)  

	
the Mandatory Cost, if any, applicable to that Lender's participation in the Loan.

 

	
12.2.2  

	
If:

 

	
(A)  

	
the percentage rate per annum notified by a Lender pursuant to Clause 12.2.1(B) is less than LIBOR or, if applicable, EURIBOR; or

 

	
(B)  

	
a Lender has not notified the Facility Agent of a percentage rate per annum pursuant to Clause 12.2.1(B),

 

the cost to that Lender of funding its participation in that Loan for that Interest Period shall be deemed, for the purposes of Clause 12.2.1, to be LIBOR or, if applicable, EURIBOR.

 

	
12.2.3  

	
In this Agreement:

 

"Market Disruption Event" means:

 

	
  

	
(A)

	
at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Reference Banks supplies a rate to the Facility Agent to determine LIBOR or, if applicable, EURIBOR for the relevant currency and Interest Period; or

 

	
  

	
(B)

	
before close of business in London on the Quotation Day for the relevant Interest Period, the Facility Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 50 per cent. of that Loan) that the cost to it of funding its participation in that Loan from whatever source it may reasonably select would be in excess of LIBOR or, if applicable, EURIBOR.

 

	
12.3  

	
Alternative basis of interest or funding

 

	
12.3.1  

	
If a Market Disruption Event occurs and the Facility Agent or the Borrower so requires, the Facility Agent and the Borrower shall, without prejudice to the operation of Clause 12.2 (Market disruption) enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.

 

	
12.3.2  

	
Any alternative basis agreed pursuant to Clause 12.3.1 shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties.

 

	
12.4  

	
Break Costs

 

	
12.4.1  

	
The Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

 

	
12.4.2  

	
Each Lender shall, as soon as reasonably practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.

 

 

78

Index

 

	
13.  

	
FEES

 

	
13.1  

	
Commitment fee

 

	
13.1.1  

	
The Borrower shall pay to the Facility Agent (for the account of each Lender under Tranche A) in respect of each Fee Period a fee computed at 50% of the Applicable Margin under Tranche A on the daily amount (if any) by which the Aggregate Commitments under Tranche A exceeds the aggregate Dollar Amount of all outstanding Utilisations under Tranche A.

 

	
13.1.2  

	
The Borrower shall pay to the Facility Agent (for the account of each Lender under Tranche B) in respect of each Fee Period a fee computed at 50% of the Applicable Margin under Tranche B on the daily amount (if any) by which the Aggregate Commitments under Tranche B exceeds the aggregate Dollar Amount of all outstanding Utilisations under Tranche B.

 

	
13.1.3  

	
The Borrower shall pay to the Facility Agent (for account of each Lender under Tranche C) in respect of each Fee Period a fee computed at 50% of the Applicable Margin under Tranche C on the daily amount (if any) by which the Aggregate Commitments under Tranche C exceeds the aggregate Dollar Amount of all outstanding Utilisations under Tranche C.

 

	
13.2  

	
LC commission

 

	
13.2.1  

	
The Borrower shall, in respect of each Letter of Credit relating to the Field Security Costs and each Fee Period, pay to the Facility Agent (for the account of each Lender), (i) a letter of credit commission at the Applicable Margin under Tranche C on the daily amount of the LC Exposure in respect of which cash cover has not been provided, and (ii) a letter of credit commission at the rate of 50% of the Applicable Margin under Tranche C on the daily amount of the LC Exposure in respect of which cash cover has been provided.

 

	
13.2.2  

	
The Borrower shall, in respect of each Letter of Credit relating to the Decommissioning Costs and each Fee Period, pay to the Facility Agent (for the account of each Lender), (i) a letter of credit commission at the rate of 50% of the Applicable Margin under Tranche C on the daily amount of the LC Exposure in respect of which cash cover has not been provided, and (ii) a letter of credit commission at the rate of 25% of the Applicable Margin under Tranche C on the daily amount of the LC Exposure in respect of which cash cover has been provided.

 

	
13.3  

	
Fronting fee

 

The Borrower shall, in respect of each Letter of Credit and the LC Period, pay to the Fronting Bank (for its own account) on the Utilisation Date of such Letter of Credit a fronting fee of an amount computed at 0.20 per cent per annum of the principal face value of such Letter of Credit on such date.

 

	
13.4  

	
Computation and payment

 

	
13.4.1  

	
Any commitment fee and/or letter of credit commission payable under this Clause 13 (Fees) must be paid by the Borrower within five Business Days after receipt 

 

 

79

Index

 

by the Borrower of the calculation of such commitment fee or, as the case may be, such letter of credit commission from the Facility Agent under Clause 13.4.3.

 

	
13.4.2  

	
Any such commitment fee must be paid in dollars and any such letter of credit commission must be paid in the currency in which the Letter of Credit to which it relates is denominated.

 

	
13.4.3  

	
The Facility Agent shall calculate the commitment fee and/or the letter of credit commission payable for each Fee Period and shall notify the Borrower of the same within five Business Days after the end of the relevant Fee Period.  Each such calculation shall, in the absence of manifest error, be conclusive evidence of the amount thereof.

 

	
13.5  

	
Definitions

 

For the purposes of this Agreement:

 

	
13.5.1  

	
"Applicable Margin" means, in relation to a Tranche on any day in any Fee Period, the Margin applicable to Utilisations under such Tranche on such day.

 

	
13.5.2  

	
"Fee Period" means:

 

	
(A)  

	
in relation to the commitment fee payable under Clause 13.1 (Commitment fee):

 

	
(1)  

	
the period commencing on the date of this Agreement and ending on the first quarter date to occur thereafter; and thereafter,

 

	
(2)  

	
each successive period of three months (or, in the case of the last such period, less) commencing on the day after a quarter date and ending on the first quarter date to occur thereafter (or, in the case of the last such period, on the last day of the Availability Period for that Tranche or, if earlier, the date on which the Aggregate Commitments for that Tranche are reduced to nil); and

 

	
(B)  

	
in relation to the letter of credit commission payable under Clause 13.2 (LC commission) with respect to each Letter of Credit:

 

	
(1)  

	
the period commencing on the date of issue of that Letter of Credit and ending on the first quarter date to occur thereafter; and thereafter,

 

	
(2)  

	
each successive period of three months (or, in the case of the last such period, less) commencing on the day after a quarter date and ending on the first quarter date to occur thereafter (or, in the case of the last such period, the Expiry Date of the relevant Letter of Credit),

 

where, for these purposes, "quarter date" means each 31 March, 30 June, 30 September and 31 December of each year.

 

 

80

Index

 

	
13.5.3  

	
"LC Exposure" means, in relation to each Letter of Credit, the daily difference between (a) the face value of that Letter of Credit and (b) the aggregate amount of all claims thereunder that have been paid.

 

	
13.5.4  

	
"LC Period" means, in relation to the fronting fee payable under Clause 13.3 (Fronting fee) with respect to each Letter of Credit the period commencing on the date of issue of that Letter of Credit and ending on the Expiry Date of the relevant Letter of Credit.

 

	
13.6  

	
Other fees and costs

 

The Borrower will pay to the relevant Finance Parties the relevant fees and other costs and expenses in the amounts and at the times set out in the Fee Letters and the Mandate Letter.

 

81

Index

ADDITIONAL PAYMENT OBLIGATIONS

 

	
14.  

	
TAX GROSS UP AND INDEMNITIES

 

	
14.1  

	
Definitions

 

	
14.1.1  

	
In this Agreement:

 

"Protected Party" means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

 

"Qualifying Lender" means:

 

	
(A)  

	
a Lender (other than a Lender within Clause 14.1.1(B)) which is beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document and is:

 

	
(1)  

	
a Lender:

 

	
(a)  

	
which is a bank (as defined for the purpose of section 879 of the ITA) making an advance under a Finance Document; or

 

	
(b)  

	
in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 879 of the ITA) at the time that that advance was made,

 

and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or

 

	
(2)  

	
a Lender which is:

 

	
(a)  

	
a company resident in the United Kingdom for United Kingdom tax purposes;

 

	
(b)  

	
a partnership each member of which is:

 

	
(i)  

	
a company so resident in the United Kingdom; or

 

	
(ii)  

	
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA;

 

 

82

Index

 

	
(c)  

	
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing its chargeable profits (within the meaning of section 19 of the CTA); or

 

	
(3)  

	
a Treaty Lender; or

 

	
(B)  

	
a building society (as defined for the purpose of section 880 of the ITA) making an advance under a Finance Document.

 

"Tax Confirmation" means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:

 

	
  

	
(A)

	
a company resident in the United Kingdom for United Kingdom tax purposes;

 

	
  

	
(B)

	
a partnership each member of which is:

 

	
(1)  

	
a company so resident in the United Kingdom; or

 

	
  

	
(2)  

	
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or

 

	
  

	
(C)

	
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing its chargeable profits (within the meaning of section 19 of the CTA).

 

"Tax Credit" means a credit against, relief or remission for, or repayment of any Tax.

 

"Tax Deduction" means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

 

"Tax Payment" means either the increase in a payment made by an Obligor to a Finance Party under Clause 14.2 (Tax gross-up) or a payment under Clause 14.3 (Tax indemnity).

 

"Treaty Lender" means a Lender which:

 

	
  

	
(A)

	
in the case of an Obligor which is resident in the United Kingdom, is treated as a resident of a Treaty State for the purposes of the Treaty and does not carry on a business in the United Kingdom through a permanent 

 

 

83

Index

 

establishment with which that Lender's participation in the Loan(s) is effectively connected; or

 

	
  

	
(B)

	
in the case of an Obligor which is not resident in the United Kingdom, is treated as resident in a jurisdiction which has a double taxation agreement with the jurisdiction in which the Obligor is resident or treated as resident, which double taxation agreement makes provision (subject to satisfaction of any conditions provided therein) for full exemption from Tax Deductions imposed by the jurisdiction in which the Obligor is resident or treated as resident.

 

"Treaty State" means a jurisdiction having a double taxation agreement (a "Treaty") with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest.

 

"UK Non-Bank Lender" means:

 

	
  

	
(A)

	
where a Lender becomes a Party on the day on which this Agreement is entered into, a Lender listed in Schedule 1 (Commitments) and identified as a "UK Non-Bank Lender" in that Schedule; and

 

	
  

	
(B)

	
where a Lender becomes a Party after the day on which this Agreement is entered into, a Lender which gives a Tax Confirmation in the Assignment Agreement or Transfer Certificate which it executes on becoming a Party.

 

	
14.1.2  

	
Unless a contrary indication appears, in this Clause 14 (Tax gross-up and indemnities) a reference to "determines" or "determined" means a determination made in the absolute discretion of the person making the determination.

 

	
14.2  

	
Tax gross-up

 

	
14.2.1  

	
Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

 

	
14.2.2  

	
The Borrower shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Facility Agent accordingly.  Similarly, a Lender shall notify the Facility Agent on becoming so aware in respect of a payment payable to that Lender.  If the Facility Agent receives such notification from a Lender it shall notify the Borrower and that Obligor.

 

	
14.2.3  

	
If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

 

	
14.2.4  

	
A payment shall not be increased under Clause 14.2.3 by reason of a Tax Deduction on account of Tax imposed by the United Kingdom, if on the date on which the payment falls due:

 

 

84

Index

 

	
(A)  

	
the payment could have been made to the relevant Lender without a Tax Deduction if the Lender had been a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or published concession of any relevant taxing authority; or

 

	
(B)  

	
the relevant Lender is a Qualifying Lender solely by virtue of paragraph (A)(2) of the definition of "Qualifying Lender" set out in Clause 14.1.1 (Definitions) and:

 

	
(1)  

	
an officer of the H.M. Revenue & Customs has given (and not revoked) a direction (a "Direction") under section 931 of the ITA which relates to the payment and that Lender has received from the Obligor making the payment or from the Borrower a certified copy of that Direction; and

 

	
(2)  

	
the payment could have been made to the Lender without any Tax Deduction if that Direction had not been made; or

 

	
(C)  

	
the relevant Lender is a Qualifying Lender solely by virtue of paragraph (A)(2) of the definition of "Qualifying Lender" set out in Clause 14.1.1 (Definitions) and:

 

	
(1)  

	
the relevant Lender has not given a Tax Confirmation to the Borrower; and

 

	
(2)  

	
the payment could have been made to the Lender without any Tax Deduction if the Lender had given a Tax Confirmation to the Borrower, on the basis that the Tax Confirmation would have enabled the Borrower to have formed a reasonable belief that the payment was an "excepted payment" for the purpose of section 930 of the ITA; or

 

	
(D)  

	
the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under Clause 14.2.7 below.

 

	
14.2.5  

	
If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

 

	
14.2.6  

	
Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Facility Agent for the Finance Party entitled to the payment a statement under section 975 of the ITA or other evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

 

 

85

Index

 

	
14.2.7  

	
Subject to Clause 14.2.8, a Treaty Lender and each Obligor which makes a payment to which that Treaty Lender is entitled shall co-operate in completing any procedural formalities necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction.

 

	
14.2.8  

	
Nothing in Clause 14.2.7 shall require a Treaty Lender to:

 

	
(A)  

	
register under the HMRC DT Treaty Passport scheme;

 

	
(B)  

	
apply the HMRC DT Treaty Passport scheme to any Loan if it has so registered; or

 

	
(C)  

	
file Treaty forms if it has included an indication to the effect that it wishes the HMRC DT Treaty Passport scheme to apply to this Agreement in accordance with Clause 14.2.11 or 14.6.1 (HMRC DT Treaty Passport scheme confirmation) and the Borrower has not complied with its obligations under Clause 14.2.12 or Clause 14.6.2 (HMRC DT Treaty Passport scheme confirmation).

 

	
14.2.9  

	
A UK Non-Bank Lender which becomes a Party on the day on which this Agreement is entered into gives a Tax Confirmation to the Borrower by entering into this Agreement.

 

	
14.2.10  

	
A UK Non-Bank Lender shall promptly notify the Borrower and the Facility Agent if there is any change in the position from that set out in the Tax Confirmation.

 

	
14.2.11  

	
A Treaty Lender which becomes a Party on the day on which this Agreement is entered into that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement shall notify the Facility Agent before the date of this Agreement.

 

	
14.2.12  

	
Where a Lender notifies in accordance with clause 14.2.11, the Borrower shall, file a duly completed form DTTP-2 in respect of such Lender with HM Revenue & Customs within 30 days of the date of this Agreement and shall promptly provide the Lender with a copy of that filing.

 

	
14.3  

	
Tax indemnity

 

	
14.3.1  

	
The Borrower shall (within three Business Days of demand by the Facility Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

 

	
14.3.2  

	
Clause 14.3.1 above shall not apply:

 

	
(A)  

	
with respect to any Tax assessed on a Finance Party:

 

	
(1)  

	
under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

 

 

86

Index

 

	
(2)  

	
under the law of the jurisdiction in which that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction,

 

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or

 

	
(B)  

	
to the extent a loss, liability or cost:

 

	
(1)  

	
is compensated for by an increased payment under Clause 14.2 (Tax gross-up); or

 

	
(2)  

	
would have been compensated for by an increased payment under Clause 14.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in Clause 14.2.4 (Tax gross-up) applied.

 

	
14.3.3  

	
A Protected Party making, or intending to make a claim under Clause 14.3.1 above shall promptly notify the Facility Agent of the event which will give, or has given, rise to the claim, following which the Facility Agent shall notify the Borrower.

 

	
14.3.4  

	
A Protected Party shall, on receiving a payment from an Obligor under this Clause 14.3 (Tax indemnity), notify the Facility Agent.

 

	
14.4  

	
Tax Credit

 

If an Obligor makes a Tax Payment and the relevant Finance Party determines that:

 

	
14.4.1  

	
a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and

 

	
14.4.2  

	
that Finance Party has obtained, utilised and retained that Tax Credit,

 

the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.

 

	
14.5  

	
Lender Status Confirmation

 

	
14.5.1  

	
Each Lender which becomes a Party to this Agreement after the date of this Agreement shall indicate, in the Transfer Certificate, Assignment Agreement or Increase Confirmation which it executes on becoming a Party, and for the benefit of the Facility Agent and without liability to any Obligor, which of the following categories it falls in:

 

	
(A)  

	
not a Qualifying Lender;

 

	
(B)  

	
a Qualifying Lender (other than a Treaty Lender); or

 

	
(C)  

	
a Treaty Lender.

 

 

87

Index

 

	
14.5.2  

	
If a New Lender fails to indicate its status in accordance with this Clause 14.5 then such New Lender shall be treated for the purposes of this Agreement (including by each Obligor) as if it is not a Qualifying Lender until such time as it notifies the Facility Agent which category applies (and the Facility Agent, upon receipt of such notification, shall inform the Borrower).  For the avoidance of doubt, a Transfer Certificate, Assignment Agreement or Increase Confirmation shall not be invalidated by any failure of a Lender to comply with this Clause 14.5 (Lender Status Confirmation).

 

	
14.6  

	
HMRC DT Treaty Passport scheme confirmation

 

	
14.6.1  

	
A New Lender or an Increase Lender that is a Treaty Lender that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall include an indication to that effect (for the benefit of the Facility Agent and without liability to any Obligor) in the Transfer Certificate, Assignment Agreement or Increase Confirmation which it executes by including its scheme reference number in that Transfer Certificate Assignment Agreement or Increase Confirmation,

 

	
14.6.2  

	
Where a New Lender or an Increase Lender includes the indication described in Clause 14.6.2 in the relevant Transfer Certificate, Assignment Agreement or Increase Confirmation, the Borrower shall file a duly completed form DTTP-2 in respect of such Lender with HM Revenue & Customs within 30 days of that Transfer Date or that date on which the increase in Aggregate Commitments takes effect and shall promptly provide the Lender with a copy of that filing.

 

	
14.7  

	
Stamp taxes

 

The Borrower shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

 

	
14.8  

	
Value added tax

 

	
14.8.1  

	
All amounts set out or expressed in a Finance Document to be payable by any Party to a Finance Party which (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable on any such supply or supplies, and accordingly, subject to Clause 14.8.2, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party under a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of such VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).

 

	
14.8.2  

	
If VAT is or becomes chargeable on any supply made by any Finance Party (the "Supplier") to any other Finance Party (the "Recipient") under a Finance Document, and any Party other than the Recipient (the "Subject Party") is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse the Recipient in respect of that consideration), such Party shall also pay 

 

 

88

Index

 

to the Supplier (in addition to and at the same time as paying such amount) an amount equal to the amount of such VAT.  The Recipient will promptly pay to the Subject Party an amount equal to any credit or repayment obtained by the Recipient from the relevant tax authority which the Recipient reasonably determines is in respect of such VAT.

 

	
14.8.3  

	
Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.

 

	
14.8.4  

	
Any reference in this Clause 14.8 to any Party shall, at any time when such Party is treated as a member of a Group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such Group at such time (the term "representative member" to have the same meaning as in the Value Added Tax Act 1994).

 

	
15.  

	
INCREASED COSTS

 

	
15.1  

	
Increased costs

 

	
15.1.1  

	
Subject to Clause 15.3 (Exceptions), the Borrower shall, within three Business Days of a demand by the Facility Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.

 

	
15.1.2  

	
In this Agreement "Increased Costs" means:

 

	
(A)  

	
a reduction in the rate of return from the Facility or on a Finance Party's (or its Affiliate's) overall capital;

 

	
(B)  

	
an additional or increased cost; or

 

	
(C)  

	
a reduction of any amount due and payable under any Finance Document,

 

which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document or Letter of Credit.

 

	
15.2  

	
Increased cost claims

 

	
15.2.1  

	
A Finance Party intending to make a claim pursuant to Clause 15.1 (Increased costs) shall notify the Facility Agent of the event giving rise to the claim, following which the Facility Agent shall promptly notify the Borrower.

 

	
15.2.2  

	
Each Finance Party shall, as soon as practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Increased Costs.

 

 

89

Index

 

	
15.3  

	
Exceptions

 

	
15.3.1  

	
Clause 15.1 (Increased costs) does not apply to the extent any Increased Cost is:

 

	
(A)  

	
attributable to a Tax Deduction required by law to be made by an Obligor;

 

	
(B)  

	
compensated for by Clause 14.3 (Tax indemnity) (or would have been compensated for under Clause 14.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in Clause 14.3.2 (Tax indemnity) applied);

 

	
(C)  

	
compensated for by the payment of the Mandatory Cost; or

 

	
(D)  

	
attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.

 

	
15.3.2  

	
In this Clause 15.3 (Exceptions), a reference to a "Tax Deduction" has the same meaning given to the term in Clause 14.1 (Definitions).

 

	
16.  

	
OTHER INDEMNITIES

 

	
16.1  

	
Currency indemnity

 

	
16.1.1  

	
If any sum due from an Obligor under the Finance Documents (other than any Hedging Agreement) (a "Sum"), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the "First Currency") in which that Sum is payable into another currency (the "Second Currency") for the purpose of:

 

	
(A)  

	
making or filing a claim or proof against that Obligor;

 

	
(B)  

	
obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

 

that Obligor shall as an independent obligation, within three Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

 

	
16.1.2  

	
Without prejudice to Clause 16.1.1, each Obligor shall as an independent obligation, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability which that Finance Party incurs as a result of that Finance Party receiving an amount in respect of that Obligor's liability under any Finance Document (other than any Hedging Agreement) in a currency other than the currency in which that liability is expressed to be payable under that Finance Document.

 

	
16.1.3  

	
Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents (other than any Hedging Agreement) in a currency or currency unit other than that in which it is expressed to be payable.

 

 

90

Index

 

	
16.2  

	
Other indemnities

 

The Borrower shall (or shall procure that an Obligor will), within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:

 

	
16.2.1  

	
the occurrence of any Event of Default;

 

	
16.2.2  

	
a failure by an Obligor to pay any amount due under a Finance Document (other than any Hedging Agreement) on its due date, including any cost, loss or liability arising as a result of Clause 31 (Sharing among the Finance Parties);

 

	
16.2.3  

	
funding, or making arrangements to fund, its participation in a Utilisation requested by the Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone);

 

	
16.2.4  

	
issuing or making arrangements to issue a Letter of Credit requested by the Borrower in a Utilisation Request but not issued by reason of the operation of any one or more of the provisions of this Agreement;

 

	
16.2.5  

	
a Utilisation (or part of a Utilisation) not being prepaid in accordance with a notice of prepayment given by the Borrower;

 

	
16.2.6  

	
the release of any Security constituted by any Finance Document;

 

	
16.2.7  

	
any Environmental Contamination (where such cost, loss or liability (i) has arisen as a result of the relevant Finance Party being a party to this Agreement or any other Finance Document and (ii) is not caused by the gross negligence or wilful default of the relevant Finance Party);

 

	
16.2.8  

	
any Environmental Claim against the relevant Finance Party arising as a result of the relevant Finance Party being a party to this Agreement or any other Finance Document save to the extent that such cost, loss or liability is caused by the gross negligence or wilful default of the relevant Finance Party; or

 

	
16.2.9  

	
any abandonment of any Petroleum Asset in which the Borrower has an interest (where such cost, loss or liability (i) has arisen as result of the relevant Finance Party being a party to this Agreement or any other Finance Document and (ii) is not caused by the gross negligence or wilful default of the relevant Finance Party).

 

	
16.3  

	
Indemnity to the Administrative Finance Parties

 

The Borrower shall promptly indemnify each Administrative Finance Party against any cost, loss or liability properly incurred by that Administrative Finance Party (acting reasonably) as a result of:

 

	
16.3.1  

	
(in the case of the Facility Agent or Security Trustee) investigating any event which it reasonably believes is a Default;

 

 

91

Index

 

	
16.3.2  

	
acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or

 

	
16.3.3  

	
entering into or performing any foreign exchange contract for the purposes of Clause 5.10 (Change of currency).

 

	
17.  

	
MITIGATION BY THE LENDERS

 

	
17.1  

	
Mitigation

 

	
17.1.1  

	
Each Finance Party shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 9.1 (Illegality), Clause 14 (Tax gross-up and indemnities), Clause 15 (Increased costs) or Schedule 5 (Mandatory Cost Formulae) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

 

	
17.1.2  

	
Clause 17.1.1 does not in any way limit the obligations of any Obligor under the Finance Documents.

 

	
17.2  

	
Limitation of liability

 

	
17.2.1  

	
The Borrower shall promptly indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 17.1 (Mitigation).

 

	
17.2.2  

	
A Finance Party is not obliged to take any steps under Clause 17.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.

 

	
18.  

	
COSTS AND EXPENSES

 

	
18.1  

	
Transaction expenses

 

	
18.1.1  

	
Subject to (i) Clause 18.1.2 and (ii) (in the case of any fees of any Lenders' Adviser) Clause 18.4 (Advisers' fees), the Borrower shall, within five Business Days of demand, pay the Administrative Finance Parties the amount of all costs and expenses (including legal fees (subject to any cap)) reasonably incurred by any of them in connection with:

 

	
(A)  

	
the negotiation, preparation, printing, execution and syndication of any other Finance Documents executed after the date of this Agreement;

 

	
(B)  

	
the delivery of any legal opinion that the Security Trustee or Facility Agent may reasonably require in connection with the entry into of any Finance Document after the date of this Agreement;

 

	
(C)  

	
the completion of the transactions contemplated by any Finance Document and/or the perfection of the Security intended to be created pursuant to the Security Documents; and/or

 

 

92

Index

 

	
(D)  

	
the release of any Security constituted by any Finance Document.

 

	
18.1.2  

	
The Borrower shall pay, on the first Utilisation Date or on such earlier date as may be agreed between the Facility Agent and the Borrower, the Administrative Finance Parties the amount of all costs and expenses (including legal fees (subject to any cap)) reasonably incurred by any of them prior to such date (in the amount(s) agreed between the Borrower and the relevant Administrative Finance Party(ies) on or before such date) in connection with:

 

	
(A)  

	
the negotiation, preparation, printing, execution and syndication of the Finance Documents that are entered into on or before the first Utilisation Date; and

 

	
(B)  

	
the steps taken on or before the first Utilisation Date with respect to the completion of the transactions contemplated by any Finance Document and/or the perfection of the Security intended to be created pursuant to the Security Documents.

 

	
18.2  

	
Amendment costs

 

If (a) any person other than a Finance Party requests an amendment, waiver or consent to any Finance Document or (b) an amendment is required pursuant to Clause 32.10 (Change of currency), the Obligors shall, within three Business Days of demand, reimburse the Finance Parties for the amount of all costs and expenses (including legal fees) reasonably incurred by the Finance Parties in responding to, evaluating, negotiating or complying with that request or requirement.

 

	
18.3  

	
Enforcement costs

 

The Borrower shall, within five Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

 

	
18.4  

	
Advisers' fees

 

	
18.4.1  

	
Any Administrative Finance Party may appoint any legal adviser, insurance adviser, environmental consultant, engineering consultant or other independent expert or adviser (each, a "Lenders' Adviser") in connection with the exercise of that Administrative Finance Party's or, as the case may be, the Lenders' or the Finance Parties' rights and discretions, or the performance of its or their duties and obligations, under the Finance Documents, provided that (save where such appointment is made in circumstances where a Default has occurred and is continuing) the relevant Administrative Finance Party shall consult with the Borrower prior to making any such appointment.

 

	
18.4.2  

	
The Borrower shall, within five Business Days of demand by any Administrative Finance Party pay, or reimburse the relevant Administrative Finance Party for any payments that it has made in relation to, the properly incurred fees, costs and expenses of any Lenders' Adviser appointed by that Administrative Finance Party provided that (save where (i) such Lenders' Adviser has been appointed in circumstances where a Default has occurred and is continuing or (ii) such fee, 

 

 

93

Index

 

costs and expenses have been incurred pursuant to Clause 18.2 (Amendment costs) or Clause 18.3 (Enforcement costs)) the Borrower has approved the fee arrangements for that Lenders' Adviser (such approval not to be unreasonably withheld or delayed).

 

PROJECT ACCOUNTS

 

	
19.  

	
PROJECT ACCOUNTS

 

	
19.1  

	
General

 

	
19.1.1  

	
The Borrower shall maintain Project Accounts in accordance with this Clause 19 (Project Accounts) with the Account Bank in London.

 

	
19.1.2  

	
The Borrower shall give such notices, as the Facility Agent or the Security Trustee may require in connection with the perfection or protection of the Finance Parties' security over the Project Accounts or for the purpose of giving effect to the provisions of this Clause 19 (Project Accounts).

 

	
19.1.3  

	
Each Project Account must be denominated in dollars or such other currency(ies) as may be agreed between the Borrower and the Security Trustee including any Optional Currency (each, a "permitted currency").  If the Borrower receives any moneys for crediting to a Project Account in a currency other than a permitted currency, the Borrower must convert those moneys into a permitted currency (at the Account Bank's prevailing rates for comparable transactions), on the date on which they are received.  The amount must be paid into the relevant Project Account immediately after it is converted into a permitted currency.

 

	
19.1.4  

	
The restrictions on the withdrawal of funds from Project Accounts contained in this Agreement will not affect the obligations of the Obligors to make all payments required to be made to the Finance Parties on the respective due dates for payment in accordance with the Finance Documents.

 

	
19.1.5  

	
Neither the ability of the Borrower to make any withdrawal from a Project Account in accordance with this Agreement nor any such withdrawal will be construed as a waiver by any Finance Party of any Security over the Project Accounts.

 

 

	
19.1.6  

	
The detailed operating procedures for the Project Accounts will be agreed (with the consent of the Facility Agent and the Security Trustee) from time to time between the Borrower and the Account Bank.  In the event of any inconsistency between this Agreement and those procedures, this Agreement will prevail.

 

 

	
19.1.7  

	
The Borrower must pay to the Account Bank such transaction charges and other fees as the Borrower and the Account Bank, may from time to time agree.

 

 

	
19.1.8  

	
The Account Bank will not be obliged to make available to the Borrower any sum which it is expecting to receive for the account of the Borrower until it has been able to establish that it has received that sum.

 

 

94

Index

 

	
19.2  

	
Withdrawals

 

	
19.2.1  

	
No payments to, or withdrawals from, any Project Account may be made except as expressly permitted by this Agreement.

 

	
19.2.2  

	
The Borrower will not make any withdrawal from any Project Account:

 

	
(A)  

	
if such Project Account would become overdrawn as a result;

 

	
(B)  

	
at any time whilst an Event of Default is continuing; or

 

	
(C)  

	
if, prior to the date of the relevant proposed withdrawal, the Facility Agent or the Security Trustee notifies the Account Bank that the withdrawal is not or would not be permitted under any Finance Document, provided that nothing in this Clause will prevent the Account Bank complying with its obligations under law.

 

	
19.2.3  

	
Notwithstanding any other provision of this Agreement, if the Enforcement Date has occurred:

 

	
(A)  

	
no amount will be payable to the Borrower, or may be withdrawn by the Borrower, with respect to the Project Accounts; and

 

	
(B)  

	
the Security Trustee will be entitled (but not obliged) without prior notice to, or the consent of, the Borrower to be the sole signatory on the Project Accounts.

 

	
19.3  

	
Proceeds Accounts

 

	
19.3.1  

	
The Borrower shall:

 

	
(A)  

	
maintain accounts for the purpose, among other things, of receiving all its revenues derived from the Project (each, a "Proceeds Account"); and

 

	
(B)  

	
procure that:

 

	
(1)  

	
all proceeds of the Loans made to it;

 

	
(2)  

	
all amounts received by it (or to its order) under each Hedging Agreement to which it is a party;

 

	
(3)  

	
all other items of Gross Income received by it (or to its order); and

 

	
(4)  

	
all other amounts received by it (or to its order) in connection with the Project and/or its interests therein (other than any amount that is required under this Agreement to be paid into the Equity Contribution or the Fulmar Project Costs Account),

 

in each case, are paid directly to the Proceeds Accounts.

 

 

95

Index

 

	
19.3.2  

	
Subject to Clauses 19.2 (Withdrawals) and 9.4 (Cash sweep), the Borrower may withdraw amounts from the Proceeds Accounts at the following times and for the following purposes:

 

	
(A)  

	
first, at any time, in or towards payment of any item of Permitted Expenditure (other than Decommissioning Costs and Field Security Costs) payable by the Borrower when the same falls due (to the extent that the relevant item of Permitted Expenditure has been provided for in the then current Projection and such amount has not already been withdrawn for such purpose from the Equity Contribution Account under Clause 19.5.2(A) (Equity Contribution Account) and the aggregate amount withdrawn for such purpose from the Proceeds Accounts and the Equity Contribution Account by the Borrower in any Calculation Period under this Clause and Clause 19.5.2(A) (Equity Contribution Account), shall not exceed 100% of the aggregate amount of all items of Permitted Expenditure (other than Decommissioning Costs and Field Security Costs) provided for in the then current Projection in that Calculation Period);

 

	
(B)  

	
second, at any time, in or towards payment pro rata of any fees, commission, costs, expenses or accrued interest due but unpaid under the Finance Documents;

 

	
(C)  

	
third, at any time, in or towards payment pro rata of any principal;

 

	
(D)  

	
fourth, at any time, in or towards payment into the Cash Collateral Account or a Sinking Fund in accordance with Clause 9.4 (Cash sweep) and Clause 6.14 (Reserving requirements);

 

	
(E)  

	
fifth, at any time, in or towards voluntary prepayment of any Loans or any other outstanding amounts under the Finance Documents, provided that:

 

	
(1)  

	
the Projection that is due to be adopted on the most recent Recalculation Date (the "relevant Recalculation Date") has been so adopted in accordance with Clause 7 (Projections) unless it has not been so adopted as a result of any failure by any Finance Party to perform its obligations under Clause 7 (Projections);

 

	
(2)  

	
the Project Completion Date has occurred; and

 

	
(3)  

	
no Event of Default is continuing.

 

	
(F)  

	
sixth, at any time after (i) all outstanding Loans under the Tranches have been fully repaid, (ii) the whole of the Aggregate Commitments under Tranche A and Tranche B have been cancelled, and (iii) all outstanding Letters of Credit have been cash covered in an amount equal to 100% of the outstanding amount of each Letters of Credit, in or towards the lawful general corporate purposes of the Borrower.

 

	
19.3.3  

	
Any such withdrawals from a Proceeds Account may only be made in the order of priority set out in Clause 19.3.2 so that no withdrawal may be made for a 

 

 

96

Index

 

purpose set out in any paragraph or sub-clause of Clause 19.3.2 if any amount of a kind referred to in a preceding paragraph or sub clause is due but unpaid.

 

	
19.3.4  

	
The Borrower may, at any time, transfer amounts from a Proceeds Account maintained by it which is denominated in any one currency to any other Proceeds Account maintained by it which is denominated in another currency.

 

	
19.4  

	
Fulmar Project Costs Account

 

	
19.4.1  

	
The Borrower:

 

	
(A)  

	
shall maintain an account denominated in dollars for the purpose, among other things, of holding the amounts to be received from the Parent in connection with the Fulmar Project (the "Fulmar Project Costs Account"); and

 

	
(B)  

	
shall ensure that at all times the sum standing to the credit of the Fulmar Project Costs Account is not less than the Required Fulmar Balance.

 

	
19.4.2  

	
Subject to Clause 19.2 (Withdrawals), the Borrower may withdraw amounts from the Fulmar Project Costs Account at any time for payment of any item of Fulmar Project Costs when the same falls due (provided that the relevant item of Fulmar Project Cost has been provided for in the then current Working Capital Model and the aggregate amount withdrawn for such purpose from the Fulmar Project Costs Account in the Forecast Period of the then current Working Capital Model under this Clause shall not exceed 100% of the aggregate amount of all items of Fulmar Project Costs provided for in that Forecast Period in that current Working Capital Model).  If, at any time, the Fulmar Project Costs Account contains funds in excess of the Required Fulmar Balance, the Borrower may withdraw such excess funds at any time.

 

	
19.5  

	
Equity Contribution Account

 

	
19.5.1  

	
The Borrower shall maintain an account (the "Equity Contribution Account") denominated in dollars for the purpose, among other things, of holding the amounts to be received from the Parent pursuant to Clause 20.1 (Initial Equity Contribution), Clause 20.2 (Equity Contribution for Tranche A) and Clause  20.3 (Equity Contribution for Cost Overrun).

 

	
19.5.2  

	
The Borrower may withdraw amounts standing to the credit of the Equity Contribution Account at the following times and for the following purposes:

 

	
(A)  

	
at any time before the Project Completion Date, in or towards payment of any item of Permitted Expenditure required to be incurred in connection with the Project and the achievement of Project Completion when the same falls due (provided that the relevant item of Permitted Expenditure has been provided for in the then current Projection and such amount has not already been withdrawn for such purpose from the Proceeds Account under Clause 19.3.2(A) (Proceeds Accounts) or Clause 19.3.2(D) (Proceeds Accounts) and the aggregate amount withdrawn for such purpose from the Proceeds Accounts and the Equity Contributions Account by the Borrower in any Calculation Period under this Clause, 

 

 

97

Index

 

Clause 19.3.2(A) (Proceeds Accounts) and Clause 19.3.2(D) (Proceeds Accounts), shall not exceed 100% of the aggregate amount of all items of Permitted Expenditure provided for in the then current Projection in that Calculation Period);

 

	
(B)  

	
at any time, in or towards payment of any fees, commission, costs, expenses or accrued interest due but unpaid under the Finance Documents; and

 

	
(C)  

	
at any time on or after the Project Completion Date for its lawful general corporate purposes (provided no Default is continuing).

 

	
19.6  

	
Cash Collateral Accounts

 

	
19.6.1  

	
The Borrower shall:

 

	
(A)  

	
maintain accounts (each, a "Cash Collateral Account");

 

	
(B)  

	
ensure that each Cash Collateral Account is held with the Account Bank; and

 

	
(C)  

	
procure that all amounts of cash cover that it is required to provide under this Agreement (or otherwise elects to provide) in relation to any Letter of Credit are paid into such Cash Collateral Accounts.

 

	
19.6.2  

	
Subject to Clause 19.2 (Withdrawals), the Facility Agent may withdraw amounts from the Cash Collateral Accounts maintained by the Borrower at the following times and for the following purposes:

 

	
(A)  

	
first, at any time when the aggregate amount standing to the credit of all the Cash Collateral Accounts maintained by the Borrower exceeds the aggregate amount of cash cover that it is required to provide under Clause 6.14 (Reserving requirements) of this Agreement in respect of all Letters of Credit that have been issued, in or towards payment into a Sinking Fund (provided the Borrower has demonstrated to the reasonable satisfaction of the Fronting Bank and the Technical Banks that such withdrawal from the Cash Collateral Account for payment into a Sinking Fund is in respect of a Letter of Credit that has been repaid in full or will be repaid in full simultaneously with such withdrawal); and

 

	
(B)  

	
second, at any time following a request from the Borrower when:

 

	
(1)  

	
no Event of Default has occurred and is continuing;

 

	
(2)  

	
the aggregate amount standing to the credit of all the Cash Collateral Accounts maintained by the Borrower exceeds 100% of the aggregate outstanding amount of all Letters of Credit that have been issued;

 

	
(3)  

	
all outstanding Loans under the Tranches have been fully paid or will be fully repaid with the proceeds of such withdrawal; and

 

 

98

Index

 

	
(4)  

	
the whole of the Aggregate Commitments under Tranche A and Tranche B have been cancelled,

 

in or towards payment to the Borrower for its lawful general corporate purposes.

 

	
19.6.3  

	
The Borrower will not, at any time, make any withdrawals from the Cash Collateral Accounts.

 

	
19.7  

	
Hedging Agreement Account

 

	
19.7.1  

	
The Borrower shall maintain an account (the "Hedging Agreement Account") denominated in dollars for the purpose, of holding the amounts to be received from the Parent pursuant to Clause 20.5.1 (Hedging Costs and Payments).

 

	
19.7.2  

	
Subject to Clause 19.2 (Withdrawals), the Borrower may withdraw amounts from the Hedging Agreement Account (i) in or towards payment to the counterparty(ies) to the relevant Hedging Agreement(s) as the relevant Hedging Costs and/or Hedging Termination Payments fall due for payment or (ii) in accordance with Clause 20.5.2 (Hedging Costs and Payments).

 

	
19.8  

	
Administration and miscellaneous

 

	
19.8.1  

	
The Borrower shall provide the Facility Agent and/or the Security Trustee and any of their representatives with access on reasonable notice and during normal business hours to review the books and records of the Project Accounts.  The Account Bank must, and the Borrower authorises the Account Bank to, give the Facility Agent, the Security Trustee and their representatives unrestricted access to review such books and records held by the Account Bank.

 

	
19.8.2  

	
The Account Bank must provide to the Facility Agent, the Security Trustee and the Borrower, not less than five Business Days after the end of each month, a full statement of all payments into and from the Project Accounts.

 

	
19.8.3  

	
The Obligors must, within three Business Days of demand, indemnify the Account Bank against any cost, loss or liability incurred by the Account Bank (otherwise than by reason of its gross negligence or wilful misconduct) in acting as the Account Bank under or in connection with the Finance Documents.

 

	
19.8.4  

	
Except where this Agreement specifically provides otherwise, no Obligor may exercise any right which it may have under any applicable law to direct the Account Bank to transfer any amount standing to the credit of a Project Account to it or to its order.  The Account Bank must notify the Facility Agent and the Security Trustee if any Obligor purports to exercise any such right.

 

	
19.8.5  

	
The Account Bank will not be under any obligation to enquire as to the purpose of any withdrawal from a Project Account.

 

	
19.8.6  

	
The Account Bank must notify the Facility Agent promptly if it becomes aware of the occurrence of a Default.

 

	
19.8.7  

	
The Account Bank may not be required to act in a manner inconsistent with the Finance Documents.

 

 

99

Index

 

	
19.8.8  

	
Each sum credited to a Project Account will, from the time it is credited until the time it is withdrawn, bear interest at such rate as the Borrower may from time to time agree with the Account Bank.  Such interest will be credited to the relevant Project Account.

 

	
19.9  

	
Security

 

	
19.9.1  

	
The Borrower shall, to the extent that such Security has not been effected under the terms of an existing Security Document, enter into a Security Document (in form and substance satisfactory to the Security Trustee) for the purposes of creating Security over each of the Project Accounts maintained by it (and the sums standing to the credit of such Project Accounts) in favour of the Security Trustee and deliver to the Security Trustee, or procure the delivery to the Security Trustee of, any legal opinion or other document that the Security Trustee may reasonably require in connection with the entry into such Security Document.  Such Security must be granted and each such legal opinion or other document must be delivered:

 

	
(A)  

	
(in the case of any Project Account which (a) is in existence on the date of this Agreement or (b) is to be opened on or before the date of issue of the first Utilisation Request under this Agreement) pursuant to Clause 4.1 (Initial conditions precedent) on or before the date on which the first Utilisation Request is issued; and

 

	
(B)  

	
(in the case of any other Project Account) on the date on which such Project Account is opened.

 

	
19.9.2  

	
The Account Bank consents to the grant of such Security and on the date on which such Security is granted in favour of the Security Trustee, the Account Bank shall be deemed to have acknowledged that it has received notice of such Security over each Project Account that is the subject of such Security.

 

	
19.9.3  

	
The Account Bank acknowledges that is not entitled to, and undertakes not to, claim or exercise any lien, right of set-off, right to combine or consolidate accounts or any other right, remedy or security over, against or with respect to any Project Account (save to set-off transaction fees incurred by it in exercise of its obligations under this Agreement) or moneys standing to the credit of any Project Account or in the course of being credited to it without the consent of the Security Trustee.

 

	
19.9.4  

	
The Account Bank confirms that it has received no other notice of any Security in respect of any Project Account in favour of any person other than the Security Trustee.

 

 

100

Index

PARENT SUPPORT UNDERTAKINGS

 

	
20.  

	
PARENT SUPPORT UNDERTAKINGS

 

	
20.1  

	
Initial Equity Contribution

 

The Parent undertakes to the Borrower and the Finance Parties that the Initial Equity Contribution shall be paid in full into the Equity Contribution Account on or prior to the delivery of the first Utilisation Request.

 

	
20.2  

	
Equity Contribution for Tranche A

 

In the event that on any date (such date being the "relevant date") prior to Project Completion there is a reduction in the Tranche A Borrowing Base Amount as compared with the Tranche A Borrowing Base Amount as at the Financial Closing Date, then within two Business Days of such reduction in the Tranche A Borrowing Base Amount occurring, the Parent shall fund into the Equity Contribution Account an amount equal to the difference between (i) the highest Tranche A Borrowing Base Amount for any Calculation Period shown in the Initial Projection and (ii) the amount which would have been the highest Tranche A Borrowing Base Amount for any Calculation Period if a Projection was to be prepared as at the relevant date if the same had been calculated with an oil price which is the higher of (x) the actual oil price that would have been used if that Projection was to be prepared as at the relevant date in accordance with the terms of Clause 7 (Projections) and (y) $40 per barrel.

 

	
20.3  

	
Equity Contribution for Cost Overrun

 

	
20.3.1  

	
In the event that at any time prior to Project Completion the Technical Banks determine that there is any Cost Overrun, the Parent shall promptly fund amounts into the Equity Contribution Account such that the balance standing to the credit of the Equity Contribution Account is equal to or more than the Tranche B Required Amount.

 

	
20.3.2  

	
In the event that at any time after Project Completion the Technical Banks determine that additional capital expenditure with respect to the Project is required to be incurred by the Borrower (due to additional capital works programme to be undertaken which were not included in the Field Development Plan relating to the Huntington Petroleum Field as originally approved by DECC), the Parent shall fund such additional capital expenditure as and when the same falls due.

 

	
20.3.3  

	
To the extent that the aggregate of (i) the undrawn portion of the Tranche B Maximum Amount and (ii) the amounts provided by the Parent into the Equity Contribution Account under Clause 20.3.1 are insufficient for any Cost Overrun (any such insufficient amount being referred to as the "excess amount") when the same falls due, the Parent shall fund such excess amount as and when the same falls due.

 

	
20.4  

	
Reserving requirement

 

	
20.4.1  

	
Upon the occurrence of an Event of Default, the Parent shall ensure that cash cover is promptly provided into the Cash Collateral Account in relation to each 

 

 

101

Index

 

Letter of Credit in an amount equal to 100% of the outstanding amount of that Letter of Credit.

 

	
20.4.2  

	
If a Utilisation Request is deemed to be issued pursuant to Clause 6.8 (Loans to cover demands) in respect of a Letter of Credit, the Parent shall ensure that cash cover is promptly provided into the Cash Collateral Account in relation to that Letter of Credit in an amount equal to 100% of the outstanding amount of that Letter of Credit.

 

	
20.5  

	
Hedging Costs and Payments

 

	
20.5.1  

	
The Parent undertakes to the Borrower and the Finance Parties that all Hedging Costs and Hedging Termination Payments payable by the Borrower under any Hedging Agreement that has been entered into for the purposes of implementing the Hedging Policy shall be paid by the Parent into the Hedging Agreement Account on or prior to the same falling due.

 

	
20.5.2  

	
In the event that a refinancing or restructuring of any outstanding Hedging Agreements entered into pursuant to this Agreement which is permitted under this Agreement results in a Hedging Termination Payment payable to the Borrower, such payment may be applied by the Borrower in repayment of any subordinated Financial Indebtedness or as a dividend or distribution due to the Parent (provided no Default has occurred and is continuing) or transferred to the Equity Contribution Account.

 

	
20.6  

	
Fees

 

The Parent undertakes to the Borrower and the Finance Parties that prior to the Project Completion Date any fees, commission, costs, expenses or accrued interest due under the Finance Documents shall be paid by the Parent when the same falls due unless such fees, commission, costs, expenses or accrued interest have already been paid by the Parent through its contribution towards the Initial Equity Contribution.

 

	
20.7  

	
Fulmar Project Cost

 

The Parent undertakes to the Borrower and the Finance Parties that all Fulmar Project Costs shall be paid by the Parent into the Fulmar Project Costs Account such that on any date the sum standing to the credit of the Fulmar Project Costs Account is not less than the Required Fulmar Balance.

 

	
20.8  

	
Existing Borrowing Base Facility

 

	
20.8.1  

	
The Parent shall supply to the Facility Agent, at the same time as the same is submitted (and in any event on a quarterly basis), a copy of the compliance certificate that it provides to the lenders under the Existing Borrowing Base Facility Agreement.

 

 

	
20.8.2  

	
The Parent shall supply to the Facility Agent, as soon as reasonably practicable after the adoption of a new projection under the Existing Borrowing Base Facility Agreement, a report providing up to date details of the borrowing base amount and the outstanding utilisations under the Existing Borrowing Base Facility Agreement.

 

 

102

Index

 

	
20.9  

	
Waiver of defences

 

The obligations of the Parent under this Clause 20 (Parent Support Undertakings) will not be affected by (and the intention of the Parent is that its obligations shall continue in full force and effect notwithstanding) any act, omission, matter or thing which, but for this Clause 20.9, would reduce, release or prejudice any of its obligations under this Clause 20 (Parent Support Undertakings) (without limitation and whether or not known to it or any Finance Party) including:

 

	
20.9.1  

	
any time, waiver or consent granted to, or composition with, any Obligor or any other person;

 

	
20.9.2  

	
the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any Obligor or any other person;

 

	
20.9.3  

	
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or any other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

 

	
20.9.4  

	
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

 

	
20.9.5  

	
any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or security including any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;

 

	
20.9.6  

	
any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

 

	
20.9.7  

	
any insolvency or similar proceedings.

 

	
20.10  

	
Nature of payments made by Parent.

 

Each amount paid by the Parent pursuant to this Clause 20 (Parent Support Undertakings) or Clause 24.2(Liquidity) shall be subordinated pursuant to the Subordination Deed.

 

103

Index

REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

 

	
21.  

	
REPRESENTATIONS

 

	
21.1  

	
Timing and repetition

 

	
21.1.1  

	
The Borrower, or (where a representation refers to (i) "any Obligor", (ii) "no Obligor", (iii) "the Obligors", (iv) "each Obligor" or (v) "the Parent" and "the Borrower") each Obligor makes the representations and warranties set out in this Clause 21 (Representations) (other than the representations and warranties set out in Clause 21.9 (No filing or stamp taxes), Clause 21.13 (Monthly Reports), Clause 21.14 (Projections), Clause 21.15 (Working Capital Model) and Clause 21.21 (Security)) to each Finance Party on the date of this Agreement.

 

	
21.1.2  

	
Each Obligor makes the representation and warranty set out in Clause 21.21 (Security) to each Finance Party on each date on which a Security Document is entered into with respect to that Security Document.

 

	
21.1.3  

	
Each Obligor makes the representation and warranty set out in Clause 21.9 (No filing or stamp taxes) to each Finance Party on each date on which a Finance Document is entered into with respect to that Finance Document.

 

	
21.1.4  

	
Each Obligor makes the representation and warranty set out in Clause 21.13 (Monthly Reports) to each Finance Party on each date on which a Monthly Report is delivered to the Facility Agent with respect that Monthly Report.

 

	
21.1.5  

	
Each Obligor makes the representation and warranty set out in Clause 21.14 (Projections) to each Finance Party on each date on which a Projection is adopted pursuant to Clause 7 (Projections) with respect to that Projection.

 

	
21.1.6  

	
Each Obligor makes the representation and warranty set out in Clause 21.15 (Working Capital Model) to each Finance Party;

 

	
(A)  

	
on the date on which the Initial Working Capital Model is delivered to Facility Agent with respect to the Initial Working Capital Model; and

 

	
(B)  

	
on each date on which a Working Capital Model is delivered to Facility Agent with respect to that Working Capital Model.

 

	
21.1.7  

	
The Repeating Representations are deemed to be made by each Obligor to each Finance Party by reference to the facts and circumstances then existing on the date of each Utilisation Request, on the first day of each Interest Period and on each Reduction Date.

 

	
21.2  

	
Status

 

	
21.2.1  

	
Each Obligor is a corporation, duly incorporated and validly existing as a limited liability company under the laws of that Obligor's jurisdiction of incorporation.

 

	
21.2.2  

	
The Borrower and (so far as it concerns the Project) the Parent has the power to own its assets and to carry on its business as it is being conducted.

 

 

104

Index

 

	
21.3  

	
Binding obligations

 

	
21.3.1  

	
The obligations expressed to be assumed by each Obligor in the Transaction Documents to which that Obligor is a party are (subject to any general principles of law limiting that Obligor's obligations generally which are referred to in any legal opinion delivered pursuant to Clause 4.1 (Initial conditions precedent) legal, valid, binding and enforceable obligations.

 

	
21.3.2  

	
The obligations expressed to be assumed by each Obligor in the Drop-Down Documents to which it is a party are legal, valid, binding and enforceable obligations.

 

	
21.4  

	
Non-conflict with other obligations

 

	
21.4.1  

	
The entry into and performance by each Obligor of, and the transactions contemplated by, the Finance Documents to which it is a party do not and will not conflict with:

 

	
(A)  

	
any law or regulation applicable to it;

 

	
(B)  

	
its constitutional documents; or

 

	
(C)  

	
any agreement or instrument binding upon it or any of the its assets in any respect which would, or would be reasonably likely to, have a Material Adverse Effect.

 

	
21.4.2  

	
The entry into and performance by each Obligor of, and the transactions contemplated by, the Project Documents to which it is a party do not and will not conflict with:

 

	
(A)  

	
any law or regulation applicable to it;

 

	
(B)  

	
its constitutional documents of; or

 

	
(C)  

	
any agreement or instrument binding upon it or its assets,

 

(in each case) in any respect which would, or would be reasonably likely to, have a Material Adverse Effect.

 

	
21.5  

	
Power and authority

 

Each Obligor has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Transaction Documents to which it is a party and the transactions contemplated by those Transaction Documents.

 

	
21.6  

	
Authorisations

 

	
21.6.1  

	
All Authorisations required to:

 

	
(A)  

	
enable each Obligor to lawfully enter into and exercise its rights and comply with its obligations under the Finance Documents to which it is a party;

 

 

105

Index

 

	
(B)  

	
ensure the legality, validity or enforceability of the Finance Documents to which each Obligor is a party; and/or

 

	
(C)  

	
make the Finance Documents to which each Obligor is a party admissible in evidence in its jurisdiction of incorporation,

 

(in each case) have been obtained or effected and are in full force and effect or will be obtained or effected and will be in full force and effect by the date on which they are required.

 

	
21.6.2  

	
All material Authorisations required to:

 

	
(A)  

	
enable each Obligor to lawfully enter into and exercise its rights and comply with its obligations under the Project Documents to which it is a party;

 

	
(B)  

	
ensure the legality, validity or enforceability of the Project Documents to which each Obligor is a party; and/or

 

	
(C)  

	
make the Project Documents to which each Obligor is a party admissible in evidence in its jurisdiction of incorporation,

 

(in each case) have been obtained or effected and are in full force and effect or will be obtained or effected and will be in full force and effect by the date on which they are required.

 

	
21.6.3  

	
All material Authorisations required to enable each of the Borrower and (so far as it concerns the Project) the Parent to carry out its business and operations have been obtained or effected and are in full force and effect or will be obtained or effected and will be in full force and effect by the date on which they are required.

 

	
21.6.4  

	
No steps have been taken which are likely to lead to

 

	
(A)  

	
the revocation, termination or suspension of any Authorisation referred to in Clauses 21.6.1 21.6.2 or 21.6.3 which has been granted or

 

	
(B)  

	
any material and adverse variation of any such Authorisation.

 

	
21.7  

	
Governing law and enforcement

 

Subject to any general principles of law limiting the obligations of each Obligor which are referred to in any legal opinion delivered pursuant to Clause 4.1 (Initial conditions precedent):

 

	
21.7.1  

	
the chosen law of each of the Finance Documents to which that Obligor is a party will be recognised and enforced in its jurisdiction of incorporation.

 

	
21.7.2  

	
the submission by it to the jurisdiction of the courts of England under any relevant Finance Document to which it is a party is legal, valid and binding under the law of its jurisdiction of incorporation.

 

 

106

Index

 

	
21.7.3  

	
any judgment obtained in the jurisdiction of the chosen law of a Finance Document to which that Obligor is a party will be recognised and enforced in its jurisdiction of incorporation.

 

	
21.8  

	
Tax

 

	
21.8.1  

	
No Obligor is required to make any deduction for or on account of Tax from any payment it may make under a Finance Document.

 

	
21.8.2  

	
The Borrower has paid when due all Taxes payable by it under applicable law except to the extent that it is contesting payment in good faith and by appropriate means.

 

	
21.9  

	
No filing or stamp taxes

 

Except as provided for in any legal opinion delivered pursuant to Clause 4.1 (Initial conditions precedent), under the law of the jurisdiction of incorporation of each Obligor, it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

 

	
21.10  

	
No default

 

	
21.10.1  

	
Except as disclosed under Clause 22.2 (Information: Notification of default), no Default is continuing or might reasonably be expected to result from the making of any Utilisation.

 

	
21.10.2  

	
No other event or circumstance is outstanding which constitutes a default under any agreement or instrument which is binding on any Obligor or to which any Obligor's assets are subject which would, or would be reasonably likely to, have a Material Adverse Effect.

 

	
21.11  

	
Pari passu ranking

 

The claims of the Finance Parties under the Finance Documents rank at least pari passu with the claims of all its unsecured and unsubordinated creditors save those whose claims are preferred by any insolvency, liquidation or other similar laws of general application.

 

	
21.12  

	
Financial statements

 

	
21.12.1  

	
The audited financial statements, or as the case may be, the audited consolidated financial statements, most recently delivered to the Facility Agent:

 

	
(A)  

	
were prepared in accordance with IFRS/GAAP consistently applied;

 

	
(B)  

	
fairly represent the financial condition and operations (consolidated if applicable) of the relevant entity(ies) to which those financial statements relate during the relevant financial year; and

 

	
(C)  

	
have not been qualified in any adverse manner,

 

 

107

Index

 

except, in the case of (A) or (B), as disclosed to the contrary in those financial statements.

 

	
21.12.2  

	
There has been no change in its business, assets or financial condition since the date as of which the most recent financial statements were prepared which would, or would be reasonably likely to, have a Material Adverse Effect (where, for these purposes, the "most recent financial statements" means the audited financial statements, or as the case may be, the audited consolidated financial statements, most recently delivered to the Facility Agent under this Agreement).

 

	
21.13  

	
Monthly Reports

 

	
21.13.1  

	
The estimates, forecasts and financial projections contained in the Monthly Report most recently delivered to the Facility Agent have been prepared with due care and attention on the basis of recent historical information and assumptions which it considers to be reasonable.

 

	
21.13.2  

	
The factual information contained in the Monthly Report most recently delivered to the Facility Agent was in all material respects accurate, and not misleading, as at the date such Monthly Report was prepared.

 

	
21.13.3  

	
Each expression of opinion or intention in the Monthly Report most recently delivered to the Facility Agent has been made in good faith, with due care and after careful consideration and enquiry and on the basis of assumptions it considers to be reasonable.

 

	
21.14  

	
Projections

 

	
21.14.1  

	
The then current Projection:

 

	
(A)  

	
is based on assumptions it considers to be reasonable;

 

	
(B)  

	
is consistent with the provisions of the Transaction Documents in all material respects;

 

	
(C)  

	
(to the extent prepared by the Borrower) has been prepared in good faith and with due care; and

 

	
(D)  

	
fairly represents the Borrower's expectations as at the date the Projection is produced and adopted,

 

except, in the case of Clauses 21.14.1(A) and (D), to the extent its assumptions and expectations differ from those of the Technical Banks, the Modelling Bank or the Majority Lenders.

 

	
21.14.2  

	
The Computer Model:

 

	
(A)  

	
is consistent with the provisions of the Transaction Documents in all material respects; and

 

 

108

Index

 

	
(B)  

	
is accurate and does not contain any error which would render any information produced by the Computer Model misleading in any material respect.

 

	
21.14.3  

	
All information provided by, or on behalf of, the Borrower for the purposes of preparing the then current Projection:

 

	
(A)  

	
in the case of any factual information was true in all material respects as at the date it was provided;

 

	
(B)  

	
did not, when provided, omit any information which, if disclosed, would make such information untrue or misleading in any material respect; and

 

	
(C)  

	
has been prepared and provided in good faith and with due care on the basis of recent historical information and assumptions which it considers to be reasonable.

 

	
21.15  

	
Working Capital Model

 

The Relevant Working Capital Model:

 

	
21.15.1  

	
is based on assumptions the Obligors consider to be reasonable;

 

	
21.15.2  

	
has been prepared in good faith and with due care;

 

	
21.15.3  

	
fairly represents the Obligors' expectations as at the date the Relevant Working Capital Model is produced; and

 

	
21.15.4  

	
did not, when delivered to the Facility Agent, omit any information which, if disclosed, would make the information included in the Relevant Working Capital Model untrue or misleading in any material respect.

 

	
21.16  

	
No proceedings pending or threatened

 

No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which would reasonably be expected to be adversely determined and, if adversely determined, would reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against any Obligor.

 

	
21.17  

	
Environmental compliance

 

	
21.17.1  

	
All material Environmental Licences required in connection with each Petroleum Asset in which the Borrower and/or the Parent (in relation to its ownership of the Project) have an interest or the use, possession, ownership, exploration, development, construction, operation and/or exploitation of such Petroleum Asset or the production, transportation and/or sale of Petroleum from such Petroleum Asset, in each case, have been obtained or effected by the Borrower and the Parent (in relation to its ownership of the Project) and are in full force and effect or will be obtained or effected by the Borrower and the Parent (in relation to its ownership of the Project) and will be in full force and effect by the date on which they are required; and the Borrower and the Parent in relation to its ownership of 

 

 

109

Index

 

the Project, and (to the best of its knowledge and belief) each other party to the Project Documents, has at all times complied with all such Environmental Licences in all material respects with respect to any Petroleum Asset in which the Borrower and/or the Parent (in relation to its ownership of the Project) have an interest.

 

	
21.17.2  

	
The Borrower and the Parent in relation to its ownership of the Project, and (to the best of its knowledge and belief) each other party to the Project Documents, has at all times complied, in all material respects, with all Environmental Laws applicable to:

 

	
(A)  

	
each Petroleum Asset in which the Borrower and/or the Parent (in relation to its ownership of the Project) have an interest;

 

	
(B)  

	
the use, possession, ownership, exploration, development, construction, operation and/or exploitation of such Petroleum Asset; or

 

	
(C)  

	
the production, transportation and/or sale of Petroleum from such Petroleum Asset.

 

	
21.17.3  

	
To the best of its knowledge and belief there is no material Environmental Contamination.

 

	
21.17.4  

	
To the best of its knowledge and belief, there are no material Environmental Claims current, pending or threatened, against the Borrower or the Parent (in relation to its ownership of the Project) or connected with any Petroleum Asset in which the Borrower or the Parent (in relation to its ownership of the Project) has an interest.

 

	
21.18  

	
Project and Project Documents

 

	
21.18.1  

	
The Project Documents:

 

	
(A)  

	
are or shall be, from the date they are entered into, in full force and effect in all material respects; and

 

	
(B)  

	
contain no restrictions, covenants and conditions that would, in any material respect, adversely affect the use, possession, ownership, exploration, development, construction, operation and/or exploitation of the Development Asset (and/or the Petroleum fields comprised therein) in the manner contemplated by the Finance Documents, the Project Documents that have been provided to the Lenders, the then current Projection and the Monthly Report most recently delivered to the Facility Agent under this Agreement.

 

	
21.18.2  

	
No Obligor is in material default under any Project Document and, to the best of its knowledge and belief, no other party to any Project Document is in material default thereunder.

 

	
21.18.3  

	
All material Authorisations that are required in connection with the use, possession, ownership, exploration, development, construction, operation, and/or exploitation of the Development Asset (and/or the Petroleum fields comprised 

 

 

110

Index

 

therein) as contemplated by the Finance Documents, the Project Documents that have been provided to the Lenders, the then current Projection and the Monthly Report, most recently delivered to the Facility Agent (in each case) have been obtained or effected and are in full force and effect or will be obtained or effected and will be in full force and effect by the date on which they are required.

 

	
21.18.4  

	
No steps have been taken which are likely to lead to the revocation, termination or suspension of any Authorisation referred to in Clause 21.18.3 which has been granted or to any material and adverse variation of any such Authorisation.

 

	
21.18.5  

	
The Parent or (on and from the point at which it becomes a licensee under licence number P.1114) the Borrower along with its joint venture partners have sufficient access to and the right to use, all assets necessary for the use, possession, ownership, exploration, development, construction, operation and/or exploitation of the Development Asset (and/or the Petroleum fields comprised therein) as contemplated by the Finance Documents, the then current Projection and the Monthly Report most recently delivered to the Facility Agent under this Agreement.

 

	
21.18.6  

	
The Parent or (on and from the point at which it becomes a licensee under licence number P.1114) the Borrower is the absolute legal and beneficial owner of the Development Asset (and/or the Petroleum fields comprised therein) free from any Security or other interest of any kind other than (i) any Security permitted pursuant to Clause 23.3 (Negative pledge) and (ii) the interests (if any) of any co-venturers under the Project Documents.

 

	
21.18.7  

	
The Borrower is not under any obligation (other than under this Agreement) to create any Security over all or any part of the Project save for any Security permitted pursuant to Clause 23.3 (Negative pledge).

 

	
21.18.8  

	
Each copy of a Project Document delivered to the Facility Agent by it is, at the time it is delivered, a correct and complete copy of the relevant document as in force at that time.

 

	
21.18.9  

	
The Finance Parties have been provided with copies or details of all material documents and contracts relating to the Project and no other agreements or arrangements exist which would materially affect:

 

	
(A)  

	
the transactions or arrangements contemplated by the Finance Documents, the Project Documents that have been provided to the Lenders, the then current Projection and the Monthly Report most recently delivered to the Facility Agent under this Agreement; or

 

	
(B)  

	
the then current Projection and the Assumptions therein.

 

	
21.19  

	
Ownership

 

	
21.19.1  

	
The Borrower is a directly and wholly owned Subsidiary of the Parent.

 

	
21.19.2  

	
The Borrower does not own any Subsidiaries.

 

 

111

Index

 

	
21.19.3  

	
The Borrower owns or is a licensee of all data, software and systems or intellectual property rights necessary for it to carry on any part of its business.

 

	
21.20  

	
Information Package

 

	
21.20.1  

	
To the best of its knowledge and belief the factual information prepared by, or on behalf of, any Obligor and contained in the Information Package was in all material respects accurate, and not misleading, as at the date it was provided or as at the date (if any) at which it is stated to be given; and to the best of its knowledge and belief, any other factual information contained in the Information Package was in all material respects accurate and not misleading as at the date it was provided or as at the date (if any) at which it is stated to be given.

 

	
21.20.2  

	
To the best of its knowledge and belief the Information Package contains all information regarding each Obligor, the Development Asset and the Transaction Documents which is material as at its date or as at the date (if any) at which it is stated to be given.

 

	
21.20.3  

	
The estimates, forecasts and financial projections contained in the Information Package that have been prepared by, or on behalf of, any Obligor, have been prepared, to the best of its knowledge and belief in good faith and with due care on the basis of recent historical information and assumptions it considers to be reasonable.

 

	
21.20.4  

	
Each expression of opinion or intention made by, or on behalf of, any Obligor and contained in the Information Package has been made in good faith, with due care and after careful consideration and enquiry and on the basis of assumptions it considers to be reasonable.

 

	
21.20.5  

	
To the best of its knowledge and belief the Information Package did not, when provided to the Lenders, omit any information which, if disclosed, would make the Information Package untrue or misleading in any material respect.

 

	
21.21  

	
Security

 

	
21.21.1  

	
Each Obligor is the legal and beneficial owner of the assets over which Security is purported to be given under such Security Document and subject to any qualifications as to matters of law set out in any legal opinions delivered in relation to such Security Document or any required registration thereof, such Security Document:

 

	
(A)  

	
confers the Security of the type it purports to create over the assets over which such Security is purported to be given and such Security is first ranking; and

 

	
(B)  

	
is:

 

	
(1)  

	
valid and enforceable against that Obligor and its Insolvency Officer and creditors; and

 

	
(2)  

	
not capable of being avoided or set aside, whether in that Obligor's winding up, administration, dissolution or otherwise.

 

 

112

Index

 

	
21.21.2  

	
No Security (or agreement to create the same) exists over any of the Borrower's assets or over any of the Parent's assets which Security has been, or is purported to be, constituted under any Security Document, in each case, save for any Security permitted pursuant to Clause 23.3 (Negative pledge).

 

	
21.21.3  

	
To the extent that a Security Document creates, or purports to create, Security over any shares:

 

	
(A)  

	
such shares are free from any restrictions as to transfer or registration (including pursuant to the creation or enforcement of any Security);

 

	
(B)  

	
such shares are fully paid up and are not otherwise subject to any calls or other liability to pay money;

 

	
(C)  

	
such shares are not subject to any option to purchase or similar rights; and

 

	
(D)  

	
there are no agreements or other arrangements in place which provide for the issue or allotment of, or grant any person the right to call for the issue or allotment of, the share or loan capital of the relevant member of the Group that has issued such shares (including any option or right of pre-emption or conversion).

 

	
21.22  

	
No immunity

 

Neither any Obligor nor any of the assets of that Obligor is entitled to any right of immunity in that Obligor's jurisdiction of incorporation.

 

	
21.23  

	
Compliance with Laws

 

Each Obligor is in compliance in all material respects with all applicable laws and regulations.

 

	
21.24  

	
Insurances

 

All Insurances which are at any time required to be maintained or effected by the Borrower pursuant to the Finance Documents are in full force and effect at that time, and to the best of the Borrower's knowledge and belief, no event or circumstances has a fact, which would in either case entitle the insurer under those Insurances to avoid its liability or otherwise reduce its liability.

 

	
21.25  

	
Overseas Obligor

 

The Parent, which is not incorporated under the laws of any part of the United Kingdom, represents that it has registered an establishment in the UK at Companies House under its name and confirms that its UK establishment number is BR007271.

 

 

113

Index

 

	
22.  

	
INFORMATION UNDERTAKINGS

 

	
22.1  

	
Financial statements

 

	
22.1.1  

	
The Borrower shall supply to the Facility Agent:

 

	
(A)  

	
as soon as the same become available, but in any event within 120 days after the end of each of its financial years, its audited financial statements for each of its financial years; and

 

	
(B)  

	
as soon as the same become available, but in any event within 45 days after the end of each of its financial quarters, its unaudited management accounts for that quarter.

 

	
22.1.2  

	
Each financial statement supplied under this Clause 22.1 (Financial statements) must include income statements, cash flows and balance sheets (or an appropriate equivalent).

 

	
22.1.3  

	
Each set of financial statements delivered by the Borrower pursuant to Clause 22.1 (Financial statements), shall be certified by a director of the Borrower as giving a true and fair view (if audited) of the Borrower on its behalf as fairly representing (if unaudited) its financial condition as at the date as at and for the period ending on which those financial statements were drawn up.

 

	
22.1.4  

	
The Borrower shall procure that each set of financial statements and management accounts delivered pursuant to Clause 22.1 (Financial statements) is:

 

	
(A)  

	
prepared using GAAP/IFRS; and

 

	
(B)  

	
gives a true and fair view of (if audited) or fairly present (if unaudited) its financial condition as at the date as at which those financial statements were drawn up.

 

	
22.2  

	
Information: Notification of default

 

	
22.2.1  

	
Each Obligor shall notify the Facility Agent of any Default or any event which has or would in its reasonable opinion have a Material Adverse Effect (and the steps, if any, being taken to remedy any of the foregoing) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by the other Obligor).

 

	
22.2.2  

	
As soon as practicable upon a request by the Facility Agent the Borrower shall supply to the Facility Agent a certificate signed by a director on behalf of the Borrower (but without personal liability) certifying that no Default is continuing (or if a Default is continuing, specifying the relevant Default and the steps, if any, being taken to remedy it).

 

	
22.2.3  

	
Each Obligor shall allow any representative of the Facility Agent and/or the Technical Bank, upon reasonable notice following the occurrence of a Default, to have access to and to inspect any and all books, records and other relevant data or information in the possession of, or available to, such Obligor during regular business hours.

 

 

114

Index

 

	
22.3  

	
Information:  Monthly Report

 

The Borrower shall supply to the Facility Agent (in sufficient copies for all the Lenders if the Facility Agent so requires) by the 5th Business Day after the end of each calendar month that ends on or before the Project Completion Date, an up-to-date Monthly Report.

 

	
22.4  

	
Working Capital Model

 

	
22.4.1  

	
No earlier than 15 Business Days before, and no later than five Business Days before each Quarter End Date, the Borrower shall supply to the Facility Agent (in sufficient copies for all the Lenders if the Facility Agent so requires) a Working Capital Model relating to that Quarter End Date.

 

 

	
22.4.2  

	
To the extent costs and expenditures based on management estimates have been included as items of Total Borrower Uses for the purposes of the Working Capital Model most recently delivered to the Facility Agent, the Borrower shall notify the Facility Agent within 10 days of such costs and expenditures being approved by the joint operating committee in the budget in respect of the Development Asset provided that as a result of such budgetary approval the Total Borrower Uses (or any part thereof) in that Working Capital Model is projected to rise by $5,000,000 or more (or the equivalent amount in one or more other currencies).

 

	
22.4.3  

	
The Borrower shall promptly upon request by the Lenders (acting through the Facility Agent) provide all such information as may be reasonably required for the purposes of demonstrating compliance with Clause 24.2 (Liquidity).

 

	
22.5  

	
Information:  ad hoc

 

The Borrower must, supply to the Facility Agent (in sufficient copies for all the Lenders if the Facility Agent so requests):

 

	
22.5.1  

	
all documents dispatched by it to its shareholders (or any class of them) in their capacity as shareholders or its creditors generally at the same time as they are dispatched;

 

	
22.5.2  

	
promptly upon becoming aware of them, the details of any material litigation, arbitration or administrative proceedings which are current, threatened or pending in connection with the Project (or any activity relating thereto) or the Borrower;

 

	
22.5.3  

	
no later than 45 days after each Recalculation Date, a cashflow reconciliation for withdrawals from the Project Accounts during the most recent Calculation Period demonstrating compliance with Clause 19.3 (Proceeds Accounts) to Clause 19.7 (Hedging Agreement Account);

 

	
22.5.4  

	
promptly upon receipt of the same, a copy of any notice of material default (howsoever called) served upon any Obligor under any Project Document;

 

	
22.5.5  

	
promptly upon becoming aware of the same, details of the occurrence of any material default (howsoever called) under any Project Document;

 

	
22.5.6  

	
promptly upon becoming aware of the same, the details of any event or circumstance which has resulted in the suspension or interruption of the Project 

 

 

115

Index

 

or resulted in the production, recovery or transportation of Petroleum derived from the Project being suspended or interrupted for a period of 30 days or more;

 

	
22.5.7  

	
promptly upon becoming aware of the same, details of any potential or actual material claim or any other material dispute under any Project Document;

 

	
22.5.8  

	
promptly upon becoming aware of the same, details of (i) any incident involving any material physical damage to any part of any facilities or infrastructure connected with the Project and (ii) any proposal for reinstatement;

 

	
22.5.9  

	
promptly upon becoming aware of the same, any other information (to the extent not otherwise covered pursuant to the other provisions of this Clause 22.5 (Information:  ad hoc)) relating to the Project or any Obligor that could reasonably be expected to have a Material Adverse Effect on any Obligor or to impose any additional material liability on any Obligor or to change any Assumption in the then current Projection (in a material respect);

 

	
22.5.10  

	
promptly upon request by the Facility Agent, certified copies of any Authorisation referred to in Clause 23.1 (Authorisations);

 

	
22.5.11  

	
promptly upon becoming aware of the same notify the Facility Agent of:

 

	
(A)  

	
any material Environmental Claim connected with any Petroleum Asset in which the Borrower or the Parent (in relation to its ownership of the Project) has an interest or any activity relating to the Project, in each case, which is current, or to its knowledge, pending or threatened;

 

	
(B)  

	
any circumstances reasonably likely to result in a material Environmental Claim connected with any Petroleum Asset in which the Borrower or the Parent (in relation to its ownership of the Project) has an interest or any activity relating to any Petroleum Asset;

 

	
(C)  

	
any material Environmental Contamination;

 

	
22.5.12  

	
promptly upon request by the Facility Agent, a copy of any Project Document;

 

	
22.5.13  

	
promptly upon entering into any new Project Document or any material modification of any Project Document, details of that Project Document or material modification, in each case, together with copies of any documents relating thereto; and

 

	
22.5.14  

	
promptly upon receipt of the same (a) the policy, certificate or cover note relating to any Agreed Insurance and (b) the receipt for the payment of any premium for any Agreed Insurance;

 

	
22.5.15  

	
promptly, such further information relating to the Project, the Agreed Insurances, any Sinking Fund, the Monthly Report, the Working Capital Model, the Project Documents, the Borrower's forecast of production, investments and revenues or the financial condition, business and operations of any Obligor, in each case, as any Finance Party (through the Facility Agent) may reasonably request;

 

 

116

Index

 

	
22.5.16  

	
as soon as reasonably practicable (and in any event no later than 30 days) after preparation or receipt by it of the same, copies of development and production reports, forecasts, budgets (or updates thereof), development programmes, authorities for expenditure and/or other reports relating to the Development Asset prepared by it or the operator of the relevant Petroleum field comprised in the Development Asset;

 

	
22.5.17  

	
as soon as reasonably practicable following a request by the Facility Agent, a copy of any minutes of meetings, reports (including development and production reports the Borrower is permitted to request under the terms of any joint operating agreements) or budgets in respect of the Project prepared by the operator of the Huntington Petroleum Field or any operating committee or technical committee thereof;

 

	
22.5.18  

	
not less than 14 days before the Borrower enters into any agreement or arrangement to dispose or acquire any material asset, details of such agreement or arrangement;

 

	
22.5.19  

	
prior to the Fulmar Disposal, as early as practicable (having regard to circumstances such as an emergency and a rig on standby) prior to exercising any voting and/or other rights as it may have under the project documents in respect of the Fulmar Project (and the Fulmar Petroleum Field comprised therein), details of how it proposes to exercise such voting and/or other rights where the same might reasonably be considered to be relevant to the interest of the Lenders;

 

	
22.5.20  

	
as early as practicable (having regard to circumstances such as an emergency and a rig on standby) prior to exercising any voting and/or other rights as it may have under the project documents in respect of the Project (and the Huntington Petroleum Field comprised therein), details of how it proposes to exercise such voting and/or other rights where the same might reasonably be considered to be relevant to the interest of the Lenders;

 

	
22.5.21  

	
prior to the Fulmar Disposal, promptly following a request by the Facility Agent, a copy of any minutes of meetings, reports or budgets in respect of the Fulmar Project prepared by the operator of the Fulmar Petroleum Field or any operating committee or technical committee thereof where the same might reasonably be considered to be relevant to the interest of the Lenders;

 

	
22.5.22  

	
promptly upon becoming aware of them, the details of any updated calculation of the level of security required to be provided under the Decommissioning Agreement or the Field Security Agreement if it increases the security required to be posted thereunder;

 

	
22.5.23  

	
promptly upon becoming aware of them, the details of any adverse change in any estimated abandonment, tax or royalty liabilities; and

 

	
22.5.24  

	
promptly upon becoming aware of the same, the details of any interruption or suspension of the production, recovery or transportation of any Petroleum derived from or relating to the Project for a continuous period of 15 days (or more) the effects of which have not been taken into account and reflected in the then current Projection.

 

 

117

Index

 

	
22.6  

	
Information:  Reserves Reports

 

	
22.6.1  

	
The Borrower shall procure that a Reserves Report is commissioned, at its expense, and prepared:

 

	
(A)  

	
on an annual basis for the purposes of the Projections to be adopted in accordance with Clause 7 (Projections) (which Reserves Report shall be prepared as of 1 January of each year);

 

	
(B)  

	
if the Facility Agent (acting on instructions of the Majority Lenders) so requests in connection with the preparation and adoption of any new Projection pursuant to Clause 7 (Projections) where the Majority Lenders (acting reasonably) are of the opinion that if a new Reserves Report were to be prepared, it is likely to include data, analyses or other information which is different from that contained in the latest Reserves Report delivered under this Agreement in one or more material respects; and

 

	
(C)  

	
if the Technical Banks so request no earlier than 40 Business Days before and no later than 30 Business Days before the anticipated Project Completion Date.

 

	
22.6.2  

	
The Borrower shall use its reasonable endeavours to ensure that each Reserves Report which is commissioned and prepared:

 

	
(A)  

	
pursuant to Clause 22.6.1(A), is delivered to the Technical Banks and the Modelling Bank on or before 15 February (or, in case of calendar year 2011, 15 March) to occur after the 1 January as of which that Reserves Report is to be prepared;

 

	
(B)  

	
pursuant to Clause 22.6.1(B), is delivered to the Technical Banks and the Modelling Bank within 30 days of the same being required by the Majority Lenders; and

 

	
(C)  

	
pursuant to Clause 22.6.1(C), is delivered to the Technical Banks and the Modelling Bank within 30 days of the same being required by the Technical Banks.

 

	
22.6.3  

	
The Borrower shall ensure that each Reserves Report that is prepared pursuant to this Clause ‎22.6 (Information: Reserves Reports) is addressed to the Technical Banks, the Modelling Bank, the Security Trustee and the Finance Parties in a manner which ensures that the Independent Reserves Engineer owes a duty of care to the Technical Banks, the Modelling Bank, the Security Trustee and the Finance Parties.

 

	
22.6.4  

	
The Borrower shall prepare or procure the preparation of Borrower Updates and deliver each such Borrower Update to the Technical Banks on or before 15 August in each year (or, in case of calendar year 2011, 15 September) (unless a Reserves Report is scheduled pursuant to Clause 22.6.2 to be delivered to the Technical Banks within two months of such date).

 

 

118

Index

 

	
22.7  

	
Information:  insurance certificates

 

The Borrower shall procure that its insurance adviser, broker or provider issues, on (i) the Construction All Risk Back Stop Date, and (ii) an annual basis on such date as may be determined by the Facility Agent (acting reasonably), a certificate (in form and substance satisfactory to the Facility Agent (acting reasonably)) which confirms, among other things, (i) that the Borrower is in compliance with its obligations under Clause 23.9 (Insurance) and (ii) the level and adequacy of the insurances that have been effected with respect to the Borrower and its business and activities (including those relating to the Project).

 

	
22.8  

	
Use of websites

 

	
22.8.1  

	
Each Obligor may satisfy its obligation under a Finance Document to deliver any information in relation to those Lenders (the "Website Lenders") who accept this method of communication by posting this information onto an electronic website designated by the Borrower and the Facility Agent (the "Designated Website") if:

 

	
(A)  

	
the Facility Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;

 

	
(B)  

	
both the Borrower and the Facility Agent are aware of the address of and any relevant password specifications for the Designated Website; and

 

	
(C)  

	
the information is in a format previously agreed between the Borrower and the Facility Agent.

 

	
22.8.2  

	
The Facility Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Borrower and the Facility Agent.

 

	
22.8.3  

	
The Borrower shall promptly upon becoming aware of its occurrence notify the Facility Agent if:

 

	
(A)  

	
the Designated Website cannot be accessed due to technical failure;

 

	
(B)  

	
the password specifications for the Designated Website change;

 

	
(C)  

	
any new information which is required to be provided under this Agreement is posted onto the Designated Website;

 

	
(D)  

	
any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or

 

	
(E)  

	
the Borrower becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.

 

	
22.8.4  

	
If the Borrower notifies the Facility Agent under Clause 22.8.3(A) or 22.8.3(E), all information to be provided by the Borrower under this Agreement after the date of that notice shall be supplied in paper form unless and until the Facility 

 

 

119

Index

 

Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

 

	
22.8.5  

	
Any Website Lender may request, through the Facility Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website.  The Borrower shall comply with any such request within ten Business Days.

 

	
22.9  

	
"Know your customer" checks

 

	
22.9.1  

	
If:

 

	
(A)  

	
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

 

	
(B)  

	
any change in the status of an Obligor after the date of this Agreement; or

 

	
(C)  

	
a proposed assignment or transfer by a Lender of any of its rights and obligations under the Finance Documents to a party that is not a Lender prior to such assignment or transfer,

 

obliges any Administrative Finance Party or any Lender (or, in the case of Clause 22.9.1(C), any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of any Administrative Finance Party or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by any Administrative Finance Party (for itself or, in the case of the Facility Agent, on behalf of any Lender) or any Lender (for itself or, in the case of the event described in Clause 22.9.1(C), on behalf of any prospective new Lender) in order for such Administrative Finance Party, such Lender or, in the case of the event described in Clause 22.9.1(C), any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

 

	
22.9.2  

	
Each Lender shall promptly upon the request of any Administrative Finance Party supply, or procure the supply of, such documentation and other evidence as is reasonably requested by such Administrative Finance Party (for itself) in order for such Administrative Finance Party to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

 

	
23.  

	
GENERAL UNDERTAKINGS

 

	
23.1  

	
Authorisations

 

	
23.1.1  

	
Each Obligor shall, promptly obtain, comply with and do all that is necessary to maintain in full force and effect each Authorisation required under any law or regulation to:

 

 

120

Index

 

	
(A)  

	
enable it to lawfully enter into, and exercise its rights and comply with its obligations under, the Finance Documents to which it is a party;

 

	
(B)  

	
ensure the legality, validity or enforceability of the Finance Documents to which it is a party; and/or

 

	
(C)  

	
make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation.

 

	
23.1.2  

	
Each Obligor shall, promptly obtain, comply with and do all that is necessary to maintain in full force and effect each material Authorisation required under any law or regulation to:

 

	
(A)  

	
enable it to lawfully enter into, and exercise its rights and comply with its obligations under, the Project Documents to which it is a party;

 

	
(B)  

	
ensure the legality, validity or enforceability of the Project Documents to which it is a party; and/or

 

	
(C)  

	
make the Project Documents to which it is a party admissible in evidence in its jurisdiction of incorporation.

 

	
23.2  

	
Compliance with laws

 

Each Obligor shall, comply in all material respects with all laws applicable to it, the Project or any activity relating to the Project.

 

	
23.3  

	
Negative pledge

 

	
23.3.1  

	
Except as provided in Clause 23.3.3, the Borrower may not create or permit to subsist any Security over any of its assets.

 

	
23.3.2  

	
Except as provided in Clause 23.3.3, the Borrower may not:

 

	
(A)  

	
dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by a member of the Group;

 

	
(B)  

	
dispose of any of its receivables on recourse terms;

 

	
(C)  

	
enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

 

	
(D)  

	
enter into any other preferential arrangement having a similar effect,

 

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

 

	
23.3.3  

	
Clauses 23.3.1 and 23.3.2 shall not apply to:

 

	
(A)  

	
any Security constituted by any Security Document;

 

 

121

Index

 

	
(B)  

	
any Security comprising a netting or set-off arrangement entered into by the Borrower in the ordinary course of its banking arrangements which has the effect of netting debit and credit balances;

 

	
(C)  

	
any Security (i) granted by the Borrower under or pursuant to any Project Document or any other joint operating agreement and/or similar or analogous agreement to which the Borrower is a party (whether or not termed a joint operating agreement) (each, a "relevant agreement") in favour of any counterparty to such relevant agreement over the Borrower's interests in the relevant agreement and (ii) which only secures obligations owing under the relevant agreement to such counterparty and does not secure any Financial Indebtedness;

 

	
(D)  

	
any lien which arises by operation of law in the ordinary course of business; and

 

	
(E)  

	
any retention of title arrangements affecting goods that have been supplied to the Borrower in the ordinary course of the Borrower's business (provided that such retention of title arrangements are those that arise in the normal course of business of the Borrower and supplier.)

 

	
23.4  

	
Financial Indebtedness

 

	
23.4.1  

	
Except as provided in Clause 23.4.2, the Borrower may not incur or have outstanding any Financial Indebtedness.

 

	
23.4.2  

	
Clause 23.4.1 shall not apply to:

 

	
(A)  

	
any Financial Indebtedness incurred under the Finance Documents;

 

	
(B)  

	
any Financial Indebtedness incurred under any Hedging Agreement that has been entered into in accordance with this Agreement;

 

	
(C)  

	
any Financial Indebtedness incurred by the Borrower under any loans made to it by any member of the Group (a "Related Lender") provided that:

 

	
(1)  

	
such Financial Indebtedness has been subordinated to the Financial Indebtedness under the Finance Document upon terms satisfactory to the Majority Lenders;

 

	
(2)  

	
the Borrower and Related Lender have each taken all such steps, and delivered all such documents as the Facility Agent may reasonably request for the purposes of ensuring that such subordination is effective;

 

	
(3)  

	
Security, in form and substance satisfactory to the Security Trustee, has been granted by the relevant Related Lender extending such Financial Indebtedness over that Related Lender's rights and interests in respect of such Financial Indebtedness (and any agreements relating thereto) to the Finance Parties or the Security Trustee (in its capacity as such); and

 

 

122

Index

 

	
(4)  

	
the Borrower and the relevant Related Lender have taken all such steps and delivered all such documents as Security Trustee may reasonably request with respect to the creation of such Security;

 

	
23.5  

	
No loans and financial guarantees

 

	
23.5.1  

	
Except as provided in Clause 23.5.2, the Borrower may not be a creditor in respect of any Financial Indebtedness or provide any other form of credit to any person.

 

	
23.5.2  

	
Clause 23.5.1 does not apply to:

 

	
(A)  

	
any Financial Indebtedness owed to the Borrower under any Hedging Agreement that has been entered into in accordance with this Agreement; or

 

	
(B)  

	
any credit on normal trade terms given in the ordinary course of the Borrower's trading.

 

	
23.6  

	
Disposals

 

	
23.6.1  

	
Except as provided in Clause 23.6.2 the Borrower may not enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to dispose of all or any part of the Development Asset or any interests therein.

 

	
23.6.2  

	
Clause 23.6.1 does not apply to:

 

	
(A)  

	
the sales of Petroleum on arms' length terms for cash consideration in the ordinary course of trading;

 

	
(B)  

	
disposals arising solely by virtue of a unitisation or redetermination of the Huntington Petroleum Field comprised therein (provided that the Lenders have approved (acting reasonably) such disposal and the then current Projection takes into account and reflects the effects of such unitisation or redetermination);

 

	
(C)  

	
disposals of surplus materials or of materials that are forthwith replaced with materials of equivalent utility;

 

	
(D)  

	
disposals of obsolete or surplus assets;

 

	
(E)  

	
disposals of materials by the Borrower used in the course of its operations where such disposals are made in the ordinary course of business and on arms' length terms;

 

	
(F)  

	
(provided Available Commitments under all Tranches are zero) disposals pursuant to which the aggregate net proceeds of such disposal will be sufficient to repay all amounts outstanding under Tranche A and Tranche B and to fully cash collateralise any outstanding Letter of Credit under Tranche C;

 

 

123

Index

 

	
(G)  

	
disposal of all or any part of the Fulmar Petroleum Field provided the Technical Banks are satisfied (acting reasonably and having regard to available geological, geophysical and engineering data) that such disposal is in relation to assets which are geologically and contractually separate from the Huntington Petroleum Field; and

 

	
(H)  

	
disposal by the operator of assets that do not impact on the ability to operate the Project in accordance with the Field Development Plan relating to the Huntington Petroleum Field, the Transaction Documents and the Projection.

 

	
23.7  

	
Corporate existence and merger

 

	
23.7.1  

	
Each Obligor shall maintain its corporate existence under the laws of its jurisdiction of incorporation; and the Borrower may not change its corporate domicile or attempt to resolve to do so and the Parent may not change its corporate domicile or attempt to resolve to do so unless the Parent has demonstrated to the satisfaction of the Majority Lenders (acting reasonably) that such change will not have a Material Adverse Effect.

 

	
23.7.2  

	
The Borrower may not enter into any amalgamation, demerger, merger or corporate reconstruction.

 

	
23.7.3  

	
The Parent may not enter into any amalgamation, demerger, merger or corporate reconstruction unless the Parent has demonstrated to the satisfaction of the Majority Lenders (acting reasonably) that such amalgamation, demerger, merger or corporate reconstruction (as the case may be) will not have a Material Adverse Effect.

 

	
23.8  

	
Change of business

 

	
23.8.1  

	
The Borrower shall not:

 

	
(A)  

	
carry on any business other than the ownership and exploitation of interests in Petroleum Assets and the exploration for, and the production and disposal of, Petroleum from such Petroleum Assets;

 

	
(B)  

	
undertake any activities other than those associated with the activities described in Clause 23.8.1(A); or

 

	
(C)  

	
own any assets or incur any liabilities except for the purposes of carrying on that business or such activities.

 

	
23.8.2  

	
The Borrower shall ensure that its assets are maintained and/or operated in a reasonable and prudent manner and in accordance with good oil industry practice and all applicable laws and regulations.

 

	
23.9  

	
Insurance

 

	
23.9.1  

	
The Borrower shall:

 

 

124

Index

 

	
(A)  

	
take out and maintain, or cause to be taken out and maintained, insurance policies (other than construction all risk policy, which shall be taken out in accordance with Clause 23.9.4) with respect to all its assets and activities:

 

	
(1)  

	
in such amounts and at such times, on such terms and against such risks as would normally be maintained by prudent owners and/or operators (acting in accordance with good industry practice) of comparable assets in the region in which the relevant assets are located or activities are taking place; and

 

	
(2)  

	
against any other risks which the Facility Agent may reasonably require (having regard, among other things, the availability of the same at commercial rates and the risk profile of the Borrower);

 

	
(B)  

	
ensure that all Agreed Insurances are maintained:

 

	
(1)  

	
with insurers or underwriters that meet the minimum rating criteria or are otherwise acceptable to the Facility Agent (acting reasonably); and

 

	
(2)  

	
on terms consistent with those that would apply to the insurances taken out by prudent owners and/or operators (acting in accordance with good industry practice) of assets comparable to the Development Asset,

 

where, for these purposes, "minimum rating criteria" means a credit rating of at least A- from Standard and Poor's or Ratings Services, A3 from Moody's Investor Services Limited or an equivalent rating from an internationally recognised rating agency acceptable to the Facility Agent (acting reasonably);

 

	
(C)  

	
procure that all moneys received or receivable by it under any insurances relating to third party liability are applied directly to the person to whom the liability to which the sum relates was incurred, or to the relevant insured party in reimbursement of moneys expended in satisfaction of such liability;

 

	
(D)  

	
procure that the Security Trustee (as security trustee for the Finance Parties) is named as (i) a co-insured or an additional insured party and (ii) loss payee upon the policy, certificate or cover note relating to each Agreed Insurance;

 

	
(E)  

	
not do, anything or knowingly permit anything to be done, which may make any Agreed Insurance void, voidable, unavailable or unenforceable or render any sums which may be paid out under any Agreed Insurances repayable in whole or in part;

 

	
(F)  

	
promptly pay all premiums, calls and contributions and do all other things necessary to keep each Agreed Insurance maintained in full force and effect;

 

	
(G)  

	
ensure that:

 

 

125

Index

 

	
(1)  

	
if the Facility Agent so requires (acting reasonably having regard to any incremental cost to or of the policy) every policy of every Agreed Insurance contains a non-vitiation clause, a cross-liabilities clause, a waiver of subrogation and/or any other lender endorsement, in each case, in such form as the Facility Agent (acting reasonably) may approve (where, for these purposes, "lender endorsement" means any endorsements or clauses relating to the protection of the Security Trustee and/or the Finance Parties with respect to its or their interests in any Agreed Insurances); and

 

	
(2)  

	
if so requested by the Facility Agent (acting reasonably in consultation with the Borrower having regard to any incremental cost to or of the policy) with respect to any Agreed Insurances that have been reinsured and to the extent that such clauses or provisions are permitted under any applicable law or regulation, the relevant policies contain such cut-through clauses and/or provisions relating to the assignment of reinsurance proceeds as may be reasonably requested by the Facility Agent; and

 

	
(H)  

	
if the Security Trustee so requires:

 

	
(1)  

	
enter into a Security Document (in form and substance satisfactory to the Security Trustee) for the purposes of granting Security over the Agreed Insurances and the proceeds thereof in favour of the Security Trustee unless such Security has been granted under an existing Security Document;

 

	
(2)  

	
without prejudice to Clause 23.17 (Security Documents), promptly obtain all such Authorisations as may be necessary in order for such Security to be granted; and

 

	
(3)  

	
deliver to the Security Trustee, or procure the delivery to the Security Trustee of, any documents that may be required in connection with the provision of any legal opinion that the Security Trustee may reasonably require in connection with the entry into such Security Document.

 

	
23.9.2  

	
No Finance Party shall have any liability for the payment of premiums or any other amount owing in respect of any insurances and the Borrower shall ensure that this is the case notwithstanding the inclusion of the Security Trustee as co-insured, additional insured and/or loss payee upon the policy, certificate or cover note relating to any Agreed Insurances pursuant to Clause 23.9.1(D).

 

	
23.9.3  

	
If the Borrower fails to pay any costs relating to any Agreed Insurances the Facility Agent may, at its sole discretion, pay any costs due and the Borrower shall immediately on demand reimburse and indemnify the Facility Agent for all such payments made by it.

 

	
23.9.4  

	
On or before the Construction All Risk Back Stop Date the Borrower shall take out and maintain, or cause to be taken out and maintained, construction all risk policy(ies) with respect to all its assets and activities in such amounts and on such 

 

 

126

Index

 

terms and against construction risks as would normally be maintained by prudent owners and/or operators (acting in accordance with good industry practice) of comparable assets in the region in which the relevant assets are located or activities are taking place.

 

	
23.10  

	
Pari passu ranking

 

Each Obligor shall ensure that the claims of the Finance Parties under the Finance Documents rank at least pari passu with the claims of all of its unsecured and unsubordinated creditors save those whose claims are preferred by any insolvency, liquidation or other similar laws of general application.

 

	
23.11  

	
Dividends and distributions

 

	
23.11.1  

	
The Borrower may not make or declare payment of any Distribution.

 

	
23.11.2  

	
Clause 23.11.1 shall not apply to any Distribution that are made (i) from the Proceeds Account in accordance with Clause 19.3.2(F) (Proceeds Accounts) or Clause 19.5.2(C) (Equity Contribution Account) or (ii) in accordance with Clause 20.5.2 (Hedging Costs and Payments) and provided in each case no Default is continuing or will occur as a result of making such distribution.

 

	
23.12  

	
Hedging

 

	
23.12.1  

	
The Borrower shall implement and comply with the Hedging Policy.

 

	
23.12.2  

	
The Borrower may not enter into any Hedging Agreement unless:

 

	
(A)  

	
the entry into of such Hedging Agreement is permitted under the Hedging Policy;

 

	
(B)  

	
such Hedging Agreement has been entered into by the Borrower in compliance with, and on terms consistent with, the terms of this Agreement and the Hedging Policy; and

 

	
(C)  

	
such Hedging Agreement has been entered into for prudent treasury management purposes so as to cover the genuine commercial exposure of the Borrower and not for speculative purposes or for the purposes of raising finance.

 

	
23.12.3  

	
In connection with the preparation of each new Projection in accordance with Clause 7 (Projections), the Borrower shall provide to the Technical Banks, the Modelling Bank and the Lenders a report (in a form satisfactory to the Technical Banks and the Modelling Bank, each acting reasonably) which:

 

	
(A)  

	
summarises each existing Hedging Agreement to which the Borrower is a party, the counterparty(ies) thereto and the hedging arrangements thereunder; and

 

	
(B)  

	
confirms that the Borrower is in compliance with the requirements of the Hedging Policy

 

 

127

Index

 

	
23.12.4  

	
Save for any Security constituted by any Security Document the Borrower may not enter into any margin call arrangements, post any collateral or credit support, grant any Security or otherwise give any guarantee or indemnity in respect of any Hedging Agreement entered into by the Borrower.

 

	
23.12.5  

	
Without prejudice to Clause 23.12.1, the Borrower shall promptly, on becoming a party to any Hedging Agreement:

 

	
(A)  

	
enter into a Security Document (in the form and substance satisfactory to the Security Trustee) for the purposes of granting Security over that Hedging Agreement in favour of the Finance Parties or the Security Trustee (in its capacity as such) unless such Security has been granted under an existing Security Document;

 

	
(B)  

	
without prejudice to Clause 23.17 (Security Documents), promptly obtain all such Authorisations as may be necessary in order for such Security to be granted; and

 

	
(C)  

	
deliver to the Security Trustee, or procure the delivery to the Security Trustee of, documents that may be required in connection with the provision of any legal opinion that the Security Trustee may reasonably require in connection with the entry into such Security Document.

 

	
23.13  

	
The Project

 

The Borrower shall:

 

	
23.13.1  

	
exercise such voting and other rights as it may have under the Project Documents or otherwise for the purposes of ensuring that the Project is (and the Huntington Petroleum Field comprised therein) are at all times explored, developed, exploited and/or operated in a reasonable and prudent manner and in accordance with good oil industry practice and all applicable laws and regulations;

 

	
23.13.2  

	
exercise such voting and other rights as it may have under the Project Documents, the project documents relating to the Fulmar Petroleum Field or otherwise for the purposes of ensuring that all material Authorisations that are required for the use, possession, ownership, exploration, development, construction, operation, and/or exploitation of the Development Asset (and the Petroleum fields comprised therein) as contemplated by the then current Projection, the Finance Documents, the Project Documents that have been provided to the Lenders and the Monthly Report most recently delivered to the Facility Agent have been obtained, complied with and maintained in full force and effect;

 

	
23.13.3  

	
vote against, and not agree to, any proposal or decision to abandon all or any material part of the Project (or the Huntington Petroleum Field comprised therein) prior to the anticipated Abandonment Date for the Project included in the then current Projection;

 

	
23.13.4  

	
not exercise its rights on any operating, management or similar committee in a manner that would be materially prejudicial to the interests of any Finance Party under the Finance Documents; and

 

 

128

Index

 

	
23.13.5  

	
maintain full and proper technical and financial records in relation to the Development Asset (including each of the Project and (prior to the occurrence of Fulmar Disposal) the Fulmar Project), and use all reasonable endeavours to ensure that the Facility Agent, the Technical Banks, the Modelling Bank and/or any person nominated by the Facility Agent, the Technical Banks or the Modelling Bank (each a "relevant party") are afforded reasonable access to all such records, and any (provided the relevant party complies with all relevant safety and standard operator requirements for visitors before such site visit) site connected with the Development Asset (including each of the Project and (prior to the occurrence of Fulmar Disposal) the Fulmar Project), during normal business hours on reasonable notice.

 

	
23.14  

	
Project Documents

 

The Borrower shall:

 

	
23.14.1  

	
ensure that none of its rights under or in respect of any of the Project Documents are at any time terminated, materially suspended or materially limited as a result of any act or omission of the Borrower;

 

	
23.14.2  

	
not agree to any material waiver, material amendment, termination or cancellation of any of the Project Documents without the consent of the Facility Agent (acting on instructions of the Lenders);

 

	
23.14.3  

	
duly and properly perform, in all material respects, its obligations under the Project Documents (except to the extent, if any, they are inconsistent with the obligations of the Borrower under the Finance Documents);

 

	
23.14.4  

	
exercise its rights, and (so far as within its power) ensure that others exercise their respective rights, under and in respect of the Project Documents consistently with the obligations of the Borrower under the Finance Documents; and

 

	
23.14.5  

	
not enter into any Project Document the entry into or performance of which would, or would be reasonably likely to, result in a Material Adverse Effect.

 

	
23.15  

	
Environmental matters

 

The Borrower shall comply in all material respects with all Environmental Laws and all material Environmental Licences applicable to it in connection with any Petroleum Asset (and the Petroleum fields comprised therein) in respect of which the Borrower has an interest or any activity relating thereto.

 

	
23.16  

	
Taxes

 

The Borrower shall:

 

	
23.16.1  

	
not change its tax residence;

 

	
23.16.2  

	
procure that all Taxes payable by, or assessed upon, it are paid when due save to the extent that such payment is being contested in good faith and being lawfully withheld and a sufficient reserve (as reasonably determined by it) has been set aside for the purposes of meeting such payment;

 

 

129

Index

 

	
23.16.3  

	
to the fullest extent it is able to do so, apply any and all tax credits, losses, reliefs or allowances taken into account in any Projection at any time in the manner, at the time and to the extent that they were so taken into account; and

 

	
23.16.4  

	
file all tax returns required to be filed by it in any jurisdiction within the period required by law.

 

	
23.17  

	
Security Documents

 

	
23.17.1  

	
Save for any registration of the Security Documents which is to be undertaken by the Lenders' legal counsel, each Obligor shall take all such steps (including the obtaining and/or carrying out of all relevant approvals, filings, registrations or recordings) as are available to it and as are necessary for the purposes of ensuring that each Security Document entered into by any Obligor:

 

	
(A)  

	
confers the Security of the type it purports to create over the assets over which the Security is purported to be given by that Security Document;

 

	
(B)  

	
is valid and enforceable against the relevant Obligor which is party thereto and such Obligor's Insolvency Officers and creditors; and

 

	
(C)  

	
is not capable of being avoided or set aside, whether in the winding up, administration or dissolution or otherwise of such Obligor.

 

	
23.17.2  

	
Without prejudice to Clause 23.17.1, each Obligor shall promptly pay all stamp, registration and similar taxes and fees that are payable in connection with each Security Document to which it is a party.

 

	
23.18  

	
Centre of Main Interests

 

	
23.18.1  

	
The Borrower shall not permit its centre of main interests, both for the purposes of Council Regulation (EC) No 1346/2000 and The Cross-Border Insolvency Regulations 2006, to be in any jurisdiction other than its jurisdiction of incorporation or England and Wales.

 

	
23.18.2  

	
The Borrower shall not permit to exist an establishment, both for the purpose of Council Regulation (EC) No 1346/2000 and The Cross-Border Insolvency Regulations 2006, in any jurisdiction other than its jurisdiction of incorporation or England and Wales.

 

	
23.19  

	
Expenditure

 

	
23.19.1  

	
The Borrower may not incur any expenditure or make any payments save to the extent that the same:

 

	
(A)  

	
is incurred or made in accordance with the other provisions of this Agreement in accordance with the other provisions of this Agreement; or

 

	
(B)  

	
has been provided for in the Working Capital Report most recently delivered to the Facility Agent under this Agreement or (until the first such Working Capital Report is delivered to the Facility Agent) the Initial Working Capital Report.

 

 

130

Index

 

	
23.20  

	
Subsidiaries

 

The Borrower shall not at any time acquire or form a Subsidiary.

 

	
23.21  

	
Parent undertakings

 

The Parent undertakes that at all times from the date of this Agreement up to the Financial Closing Date it shall:

 

	
23.21.1  

	
exercise such voting and other rights as it may have under the Project Documents or otherwise for the purposes of ensuring that the Project is (and the Huntington Petroleum Field comprised therein) are at all times explored, developed, exploited and/or operated in a reasonable and prudent manner and in accordance with good oil industry practice and all applicable laws and regulations;

 

	
23.21.2  

	
exercise such voting and other rights as it may have under the Project Documents, the project documents relating to the Fulmar Petroleum Field or otherwise for the purposes of ensuring that all material Authorisations that are required for the use, possession, ownership, exploration, development, construction, operation, and/or exploitation of the Development Asset (and the Petroleum fields comprised therein) as contemplated by the then current Projection, the Finance Documents, the Project Documents that have been provided to the Lenders and the Monthly Report most recently delivered to the Facility Agent have been obtained, complied with and maintained in full force and effect;

 

	
23.21.3  

	
vote against, and not agree to, any proposal or decision to abandon all or any material part of the Project (or the Huntington Petroleum Field comprised therein) prior to the anticipated Abandonment Date for the Project included in the then current Projection;

 

	
23.21.4  

	
not exercise its rights on any operating, management or similar committee in a manner that would be materially prejudicial to the interests of any Finance Party under the Finance Documents;

 

	
23.21.5  

	
maintain full and proper technical and financial records in relation to the Development Asset (including each of the Project and (prior to the occurrence of Fulmar Disposal) the Fulmar Project), and use all reasonable endeavours to ensure that the Facility Agent, the Technical Banks, the Modelling Bank and/or any person nominated by the Facility Agent, the Technical Banks or the Modelling Bank (each a "relevant party") are afforded reasonable access to all such records, and any (provided the relevant party complies with all relevant safety and standard operator requirements for visitors before such site visit) site connected with the Development Asset (including each of the Project and (prior to the occurrence of Fulmar Disposal) the Fulmar Project), during normal business hours on reasonable notice;

 

	
23.21.6  

	
ensure that none of its rights under or in respect of any of the Project Documents are at any time terminated, materially suspended or materially limited as a result of any act or omission of the Parent;

 

 

131

Index

 

	
23.21.7  

	
not agree to any material waiver, material amendment, termination or cancellation of any of the Project Documents without the consent of the Facility Agent (acting on instructions of the Lenders);

 

	
23.21.8  

	
duly and properly perform, in all material respects, its obligations under the Project Documents (except to the extent, if any, they are inconsistent with the obligations of the Obligors under the Finance Documents);

 

	
23.21.9  

	
exercise its rights, and (so far as within its power) ensure that others exercise their respective rights, under and in respect of the Project Documents consistently with the obligations of the Obligors under the Finance Documents;

 

	
23.21.10  

	
not enter into any Project Document the entry into or performance of which would, or would be reasonably likely to, result in a Material Adverse Effect; and

 

	
23.21.11  

	
comply in all material respects with all Environmental Laws and all material Environmental Licences applicable to it in connection with the Development Asset (and the Petroleum fields comprised therein) or any activity relating thereto.

 

	
23.22  

	
Field Development Plan

 

	
23.22.1  

	
The Borrower shall (unless the Technical Banks otherwise consent) not concur in, and shall vote against, any proposal or decision to materially amend or modify the Field Development Plan for the Huntington Petroleum Field.

 

	
23.22.2  

	
The Borrower shall promptly notify the Facility Agent if there is any proposal for any material amendment or modification of the Field Development Plan for the Huntington Petroleum Field.

 

	
23.23  

	
Operator

 

The Borrower shall promptly notify the Technical Banks if there is any proposal for a change of the operator of the Project (and/or the Huntington Petroleum Field comprised therein) and consult with the Technical Banks in relation thereto.

 

	
23.24  

	
Acquisition

 

The Borrower shall not (unless the Majority Lenders and the Technical Banks otherwise consent) acquire or agree to acquire any interest in any Petroleum Asset other than the Development Asset.

 

	
23.25  

	
Execution of documents

 

Unless otherwise agreed by the Technical Banks, each Obligor shall ensure that the CATS Transportation and Processing Agreement is duly executed by each of the parties thereto substantially in the same form as the version of such agreement most recently provided to the Original Lenders prior to the date of this Agreement.

 

 

132

Index

 

	
24.  

	
EVENTS OF DEFAULT

 

	
24.1  

	
Non-payment

 

An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place and in the currency in which it is expressed to be payable unless:

 

	
24.1.1  

	
its failure to pay is caused by:

 

	
(A)  

	
an administrative or technical error; or

 

	
(B)  

	
a Disruption Event; and

 

	
24.1.2  

	
payment is made within three Business Days of its due date.

 

	
24.2  

	
Liquidity

 

	
24.2.1  

	
The Borrower has failed to provide a Working Capital Model in accordance with Clause 22.4 (Working Capital Model) in respect of any Quarter End Date that shows (i) Total Borrower Sources exceeding Total Borrower Uses in each month of the Forecast Period, and (ii) Total Borrower Sources exceeding Total Borrower Uses by at least 5% of that Forecast Period unless (in each case) payment is made into the Equity Contribution Account by the Parent within 10 Business Days such that the relevant excess would have shown in the relevant Working Capital Model.

 

	
24.2.2  

	
The Borrower does not comply with the provisions of Clause 19.4.1 (Fulmar Project Costs Account).

 

	
24.2.3  

	
The Borrower does not comply with the provisions of Clause 6.14 (Reserving requirements).

 

	
24.3  

	
Other obligations

 

	
24.3.1  

	
An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 24.1 (Non-payment) and Clause 24.2 (Liquidity)).

 

	
24.3.2  

	
No Event of Default under Clause 24.3.1 will occur if the failure to comply or the consequence of non-compliance is capable of remedy and is remedied within 5 Business Days of the Facility Agent giving notice to the Borrower, or if earlier, within 5 business Days of the Borrower becoming aware of the failure to comply.

 

	
24.4  

	
Misrepresentation

 

Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or in any other document delivered by or on behalf of an Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made unless the circumstances giving rise to, and the effects of, such misrepresentation:

 

	
24.4.1  

	
are capable of remedy; and

 

 

133

Index

 

	
24.4.2  

	
are remedied to the reasonable satisfaction of the Majority Lenders within 5 Business Days of the Facility Agent giving notice to the Borrower, or if earlier, the date on which the relevant representation or statement was made or deemed to be made.

 

	
24.5  

	
The Project

 

	
24.5.1  

	
All or any material part of the Project, or any Petroleum or revenues derived from the Project by the Borrower, is nationalised, expropriated, compulsorily acquired or seized by any government or other governmental or public sector agency or body or any government or any such agency or body takes, or officially announces that it will take, any step with a view to such nationalisation, expropriation, compulsory acquisition or seizure and in the reasonable opinion of the Majority Lenders the same has or can reasonably be expected to have a Material Adverse Effect.

 

	
24.5.2  

	
Any decision is taken to abandon all or part of the Project prior to the anticipated Abandonment Date for the Project included in the then current Projection.

 

	
24.6  

	
Project Documents

 

	
24.6.1  

	
Any production licence (or equivalent Authorisation) relating to the Project or any other material Authorisation that is required under any applicable law or regulation in order for any Petroleum production from the Project to be extracted or otherwise exploited, is revoked, rescinded or terminated or otherwise ceases to be in full force and effect.

 

	
24.6.2  

	
It is or becomes unlawful for any party to perform any of its obligations under any Project Document and the same has a material adverse effect on the position of the Lenders under the Facility or the Project taken as a whole.

 

	
24.6.3  

	
Any Project Document ceases to be valid, binding or enforceable in whole or in part or otherwise ceases to be in full force and the same has a material adverse effect on the position of the Lenders under the Facility or the Project taken as a whole.

 

	
24.6.4  

	
Any party to a Project Document repudiates, or evidences an intention in writing to repudiate, a Project Document and the same has a material adverse effect on the position of the Lenders under the Facility or the Project taken as a whole.

 

	
24.6.5  

	
There has been a default by any party to any Project Document and the same has a material adverse effect on the position of the Lenders under the Facility or the Project taken as a whole.

 

	
24.6.6  

	
Any Project Document is modified and the same in the reasonable opinion of the Majority Lenders has, or is likely to have, a Material Adverse Effect.

 

	
24.7  

	
Late completion

 

The Project Completion Date has not occurred on or before the Final Completion Date.

 

 

134

Index

 

	
24.8  

	
Cross default

 

	
24.8.1  

	
Any Financial Indebtedness of any Obligor is not paid when due or within any originally applicable grace period.

 

	
24.8.2  

	
Any Financial Indebtedness of any Obligor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

 

	
24.8.3  

	
Any commitment for any Financial Indebtedness of any Obligor is cancelled or suspended by a creditor of that Obligor as a result of an event of default (however described).

 

	
24.8.4  

	
Any creditor of any Obligor that is a party to a Finance Document becomes entitled to declare any Financial Indebtedness of that Obligor due and payable prior to its specified maturity as a result of an event of default (however described).

 

	
24.8.5  

	
No Event of Default will occur under this Clause 24.8 (Cross default) with respect to any Financial Indebtedness of the Parent unless the aggregate amount of Financial Indebtedness falling within Clauses 24.8.1 to 24.8.4 is equal to or greater than $10,000,000 (or its equivalent in one or more currencies) and in the reasonable opinion of the Majority Lenders the same will have a Material Adverse Effect.

 

	
24.9  

	
Insolvency

 

	
24.9.1  

	
An Obligor is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

 

	
24.9.2  

	
A moratorium is declared in respect of any indebtedness of any Obligor.

 

	
24.10  

	
Insolvency proceedings

 

	
24.10.1  

	
Any corporate action, legal proceedings or other procedure or step is taken in relation to:

 

	
(A)  

	
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any Obligor;

 

	
(B)  

	
a composition, assignment or arrangement with any creditor of any Obligor;

 

	
(C)  

	
the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of any Obligor or any of the assets of any Obligor; or

 

	
(D)  

	
enforcement of any Security over any assets of any Obligor,

 

 

135

Index

 

or any analogous procedure or step is taken in any jurisdiction.

 

	
24.10.2  

	
No Event of Default will occur under this Clause 24.10 with respect to the Borrower as a result of any petition for winding up or liquidation of the Borrower if the Borrower can demonstrate to the satisfaction of the Majority Lenders (acting reasonably) that such petition is being contested in good faith by the Borrower and that such petition will be stayed, discharged or dismissed within 15 days.

 

	
24.10.3  

	
No Event of Default will occur under this Clause 24.10 with respect to the Parent as a result of any petition for winding up or liquidation of, or any corporate action, legal proceedings or other procedure or step against the Parent if the Parent can demonstrate to the satisfaction of the Majority Lenders (acting reasonably) that such petition, corporate action, legal proceedings or other procedure or step is vexatious or frivolous, and being contested in good faith by the Parent or such petition, corporation action, legal proceedings or other procedure or step is or will be stayed, discharged or dismissed within 15 days.

 

	
24.11  

	
Creditors' process

 

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Borrower having an aggregate value of more than $500,000 (or its equivalent in one or more currencies).

 

	
24.12  

	
Analogous proceedings

 

There occurs, in relation to any Obligor, any event anywhere which, in the reasonable opinion of the Majority Lenders, corresponds with, or is analogous to, any of those mentioned in Clauses 24.10 (Insolvency proceedings) or 24.11 (Creditors' process).

 

	
24.13  

	
Proceedings

 

Any litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency is started or threatened against any Obligor, or in connection with the Project or any activity relating to the Project and the same, in the reasonable opinion of the Majority Lenders:

 

	
24.13.1  

	
is likely to be adversely determined; and

 

	
24.13.2  

	
if adversely determined, is likely to have a Material Adverse Effect.

 

	
24.14  

	
Finance Documents

 

	
24.14.1  

	
It is or becomes unlawful for any Obligor to perform any of its obligations under the Finance Documents.

 

	
24.14.2  

	
Any Finance Document ceases to be valid, binding or enforceable in whole or in part or otherwise ceases to be in full force and effect.

 

	
24.14.3  

	
Any Obligor repudiates, or evidences an intention in writing to repudiate, a Finance Document.

 

 

136

Index

 

	
24.15  

	
Qualification of Accounts

 

Any audited financial statements delivered to the Facility Agent under this Agreement are qualified in any manner by the relevant auditors which, in the opinion of the Facility Agent, is material and adverse.

 

	
24.16  

	
Material adverse change

 

Any event or series of events occurs which in the opinion of the Majority Lenders (acting reasonably) has or would be likely to have a Material Adverse Effect.

 

	
24.17  

	
Cessation of business

 

An Obligor ceases, or threatens to cease, to carry on all or a substantial part of its business.

 

	
24.18  

	
Reduction of Tranches

 

The Borrower does not comply with the provisions of Clause 8.3.1 (Reduction of Utilisations), Clause 8.3.2 (Reduction of Utilisations) or Clause 8.3.3 (Reduction of Utilisations).

 

	
24.19  

	
Ability to meet liabilities

 

	
24.19.1  

	
The Technical Banks determine by reference to the then current Projection that the Borrower is or will be unable to meet its liabilities as they fall due prior to the Final Maturity Date.

 

	
24.19.2  

	
The then current Projection demonstrates that:

 

	
(A)  

	
the PLCR for any Calculation Period is 1.20:1 or less;

 

	
(B)  

	
the LLCR for any Calculation Period is 1.10:1 or less; or

 

	
(C)  

	
the DSCR for any Calculation Period commencing after the Project Completion Date is 1.10:1 or less.

 

	
24.20  

	
Acceleration

 

On and at any time after the occurrence of an Event of Default which is continuing the Facility Agent may, and shall if so directed by the Majority Lenders, by notice to the Borrower:

 

	
24.20.1  

	
cancel the Aggregate Commitments whereupon they shall immediately be cancelled; and/or

 

	
24.20.2  

	
declare that all or part of the Utilisations, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents (other than any Secured Hedging Agreement) be immediately due and payable, whereupon they shall become immediately due and payable; and/or

 

 

137

Index

 

	
24.20.3  

	
declare that all or part of the Utilisations payable on demand, whereupon they shall immediately become payable on demand by the Facility Agent on the instructions of the Majority Lenders; and/or

 

	
24.20.4  

	
declare that full cash cover in respect of each Letter of Credit is immediately due and payable whereupon it shall become due and payable; and/or

 

	
24.20.5  

	
declare that full cash cover in respect of each Letter of Credit is payable on demand, whereupon it shall immediately become due and payable on demand by the Facility Agent on the instructions of the Majority Lenders.

 

 

138

Index

CHANGES TO PARTIES

 

	
25.  

	
CHANGES TO THE LENDERS

 

	
25.1  

	
Assignments and transfers by the Lenders

 

Subject to this Clause 25 (Changes to the Lenders) and to Clause 26 (Restriction on Debt Purchase Transactions), a Lender (the "Existing Lender") may:

 

	
25.1.1  

	
assign any of its rights; or

 

	
25.1.2  

	
transfer by novation any of its rights and obligations,

 

under any Finance Document to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the "New Lender").

 

	
25.2  

	
Conditions of assignment or transfer

 

	
25.2.1  

	
The consent of the Fronting Bank is required for any assignment or transfer by an Existing Lender.

 

	
25.2.2  

	
The consent of the Borrower is required for an assignment or transfer by an Existing Lender, unless (a) the assignment or transfer is to another Lender or an Affiliate of a Lender or (b) an Event of Default has occurred and is continuing.

 

	
25.2.3  

	
The consent of the Borrower to an assignment or transfer must not be unreasonably withheld or delayed.  The Borrower will be deemed to have given its consent five Business Days after the Existing Lender has requested it unless consent is expressly refused by the Borrower within that time.

 

	
25.2.4  

	
The consent of the Borrower to an assignment or transfer must not be withheld solely because the assignment or transfer may result in an increase to the Mandatory Cost.

 

	
25.2.5  

	
An assignment will only be effective on:

 

	
(A)  

	
receipt by the Facility Agent (whether in the Assignment Agreement or otherwise) of written confirmation from the New Lender (in form and substance satisfactory to the Facility Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender; and

 

	
(B)  

	
performance by the Facility Agent of all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Facility Agent shall promptly notify to the Existing Lender and the New Lender.

 

	
25.2.6  

	
A transfer will only be effective if the procedure set out in Clause 25.5 (Procedure for transfer) is complied with.

 

	
25.2.7  

	
If:

 

 

139

Index

 

	
(A)  

	
a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

 

 

	
(B)  

	
as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 14 (Tax gross-up and indemnities) or Clause 15 (Increased Costs),

 

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

 

 

	
25.2.8  

	
Each New Lender, by executing the relevant Transfer Certificate or Assignment Agreement, confirms, for the avoidance of doubt, that the Facility Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender.

 

	
25.2.9  

	
A Lender may not assign or transfer any of its Commitments or outstanding Utilisations under one Tranche without also assigning or transferring an equal proportion of its Commitments or outstanding Utilisations under the other Tranches.

 

	
25.2.10  

	
Subject to clause 30.3.12 (Hedging Banks), any Lender who transfers, assigns or novates to a New Lender all of its rights and obligations as a Lender under the Finance Documents at a time when it or its Affiliate is a party to a Hedging Agreement shall (or its Affiliate shall) nonetheless continue to benefit from and be bound by the Finance Documents as a Hedging Bank until no further amounts can become payable in respect of the relevant Hedging Agreement.

 

	
25.3  

	
Assignment or transfer fee

 

The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Facility Agent (for its own account) a fee of $2,500.

 

	
25.4  

	
Limitation of responsibility of Existing Lenders

 

	
25.4.1  

	
Unless expressly agreed to the contrary, an Existing Lender and an existing Finance Party makes no representation or warranty and assumes no responsibility to a New Lender for:

 

	
(A)  

	
the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;

 

	
(B)  

	
the financial condition of any Obligor;

 

	
(C)  

	
the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; or

 

 

140

Index

 

	
(D)  

	
the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,

 

and any representations or warranties implied by law are excluded.

 

	
25.4.2  

	
Each New Lender confirms to the Existing Lender and the other Finance Parties that it:

 

	
(A)  

	
has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender or any existing Finance Party in connection with any Finance Document; and

 

	
(B)  

	
will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

 

	
25.4.3  

	
Nothing in any Finance Document obliges an Existing Lender or any existing Finance Party to:

 

	
(A)  

	
accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 25 (Changes to the Lenders); or

 

	
(B)  

	
support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.

 

	
25.5  

	
Procedure for transfer

 

	
25.5.1  

	
Subject to the conditions set out in Clause 25.2 (Conditions of assignment or transfer) a transfer is effected in accordance with Clause 25.5.2 when the Facility Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender.  The Facility Agent shall, subject to Clause 25.5.2, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.

 

	
25.5.2  

	
The Facility Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.

 

	
25.5.3  

	
Subject to Clause 25.10 (Pro rata interest settlement), on the Transfer Date:

 

	
(A)  

	
to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents and in respect of the Transaction Security each of the Obligors 

 

 

141

Index

 

and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and in respect of the Transaction Security and their respective rights against one another under the Finance Documents and in respect of the Transaction Security shall be cancelled (being the "Discharged Rights and Obligations");

 

	
(B)  

	
each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;

 

	
(C)  

	
the existing Finance Parties and the New Lender shall acquire the same rights and assume the same obligations between themselves and in respect of the Transaction Security as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the existing Finance Parties and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and

 

	
(D)  

	
the New Lender shall become a Party as a "Lender".

 

	
25.6  

	
Procedure for assignment

 

	
25.6.1  

	
Subject to the conditions set out in Clause 25.2 (Conditions of assignment or transfer), an assignment may be effected in accordance with Clause 25.6.3 when the Facility Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender.  The Facility Agent shall, subject to Clause 25.6.2, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.

 

	
25.6.2  

	
The Facility Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.

 

	
25.6.3  

	
Subject to Clause 25.10 (Pro rata interest settlement), on the Transfer Date:

 

	
(A)  

	
the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents and in respect of the Transaction Security expressed to be the subject of the assignment in the Assignment Agreement;

 

	
(B)  

	
the Existing Lender will be released from the obligations (the "Relevant Obligations") expressed to be the subject of the release in the Assignment Agreement (and any corresponding obligations by which it is bound in respect of the Transaction Security); and

 

	
(C)  

	
the New Lender shall become a Party as a "Lender" and will be bound by obligations equivalent to the Relevant Obligations.

 

 

142

Index

 

	
25.6.4  

	
Lenders may utilise procedures other than those set out in this Clause 25.6 (Procedure for assignment) to assign their rights under the Finance Documents provided that they comply with the conditions set out in Clause 25.2 (Conditions of assignment or transfer).

 

	
25.7  

	
Copy of Transfer Certificate etc. to Borrower

 

The Facility Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, an Assignment Agreement or an Increase Confirmation, send to the Borrower a copy of that Transfer Certificate, Assignment Agreement or Increase Confirmation.

 

	
25.8  

	
Accession of Hedging Banks

 

Any Lender may, at any time, request that any of its Affiliates that has entered, or is to enter, into a Hedging Agreement with an Obligor in accordance with this Agreement be given the benefit of the Security constituted by the Security Documents by becoming a Hedging Bank.  Following any such request (which shall be submitted to the Facility Agent and the Security Trustee), and without prejudice to the definition of "Hedging Bank" set out in Clause 1.1 (Definitions), the relevant Affiliate shall accede, and become a party, to this Agreement as a Hedging Bank upon executing a Hedging Accession Agreement and delivering the same (together with all such other documents as the Security Trustee or the Facility Agent may reasonably request) to the Security Trustee and the Facility Agent.

 

	
25.9  

	
Security over Finance Parties' rights

 

In addition to the other rights provided to Finance Parties under this Clause 25 (Changes to the Lenders), each Finance Party may without consulting with or obtaining consent from any Obligor, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Finance Party including:

 

	
25.9.1  

	
any charge, assignment or other Security to secure obligations to a federal reserve or central bank; and

 

	
25.9.2  

	
in the case of any Finance Party which is a fund, any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Finance Party as security for those obligations or securities,

 

except that no such charge, assignment or Security shall:

 

	
  

	
(A)

	
release a Finance Party from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security for the Finance Party as a party to any of the Finance Documents; or

 

	
  

	
(B)

	
require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Finance Party under the Finance Documents.

 

	
25.10  

	
Pro rata interest settlement

 

If the Facility Agent has notified the Lenders that it is able to distribute interest payments on a "pro rata basis" to Existing Lenders and New Lenders then (in respect of any transfer 

 

 

143

Index

 

pursuant to Clause 25.5 (Procedure for transfer) or any assignment pursuant to Clause 25.6 (Procedure for assignment) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):

 

 

	
25.10.1  

	
any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date ("Accrued Amounts") and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six Months, on the next of the dates which falls at six Monthly intervals after the first day of that Interest Period); and

 

 

	
25.10.2  

	
the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts so that, for the avoidance of doubt:

 

 

	
(A)  

	
when the Accrued Amounts become payable, those Accrued Amounts will be payable for the account of the Existing Lender; and

 

 

	
(B)  

	
the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 25.10 (Pro rata interest settlement), have been payable to it on that date, but after deduction of the Accrued Amounts.

 

 

	
26.  

	
RESTRICTION ON DEBT PURCHASE TRANSACTIONS

 

The Borrower shall not, and shall procure that each other member of the Group and each Affiliate of each member of the Group shall not, enter into any Debt Purchase Transaction or beneficially own all or any part of the share capital of a company that is a Lender or a party to a Debt Purchase Transaction of the type referred to in paragraphs (B) or (C) of the definition of Debt Purchase Transaction.

 

	
27.  

	
ASSIGNMENTS AND TRANSFERS BY OBLIGORS

 

No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

 

144

Index

THE FINANCE PARTIES

 

 

	
28.  

	
ROLE OF THE ADMINISTRATIVE FINANCE PARTIES

 

	
28.1  

	
General

 

In this Clause 28 (Role of the Administrative Finance Parties):

 

	
28.1.1  

	
"Agent" means each of the Facility Agent, the Technical Banks and the Modelling Bank; and

 

	
28.1.2  

	
references to the Administrative Finance Parties shall be construed as excluding the Security Trustee.

 

	
28.2  

	
Appointment of the Agents

 

	
28.2.1  

	
Each other Finance Party appoints each Agent to act as its agent under and in connection with the Finance Documents.

 

	
28.2.2  

	
Each other Finance Party authorises each Agent to exercise the rights, powers, authorities and discretions specifically given to that Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

 

	
28.3  

	
Duties of the Agents

 

	
28.3.1  

	
Subject to Clause 28.3.2 below, each Agent shall promptly forward to a Party the original or a copy of any document which is delivered to that Agent for that Party by any other Party.

 

	
28.3.2  

	
Without prejudice to Clause 25.7 (Copy of Transfer Certificate etc. to Borrower) and Clause 6.11 (Cash collateral by Non-Acceptable L/C Lender), Clause 28.3.1 shall not apply to any Transfer Certificate, any Assignment Agreement or any Increase Confirmation.

 

	
28.3.3  

	
Except where a Finance Document specifically provides otherwise, no Agent is obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

 

	
28.3.4  

	
If any Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.

 

	
28.3.5  

	
If any Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than an Administrative Finance Party or the Security Trustee) under this Agreement it shall promptly notify the other Finance Parties.

 

	
28.3.6  

	
The Agents' duties under the Finance Documents are solely mechanical and administrative in nature.

 

 

145

Index

 

	
28.4  

	
No fiduciary duties

 

	
28.4.1  

	
Nothing in this Agreement constitutes any Administrative Finance Party as a trustee or fiduciary of any other person.

 

	
28.4.2  

	
No Administrative Finance Party shall be bound to account to any Finance Party for any sum or the profit element of any sum received by it for its own account.

 

	
28.5  

	
Business with the Group

 

Each Administrative Finance Party may accept deposits from, lend money to and generally engage in any kind of banking or other business with any Obligor or any other member of the Group.

 

	
28.6  

	
Rights and discretions of the Administrative Finance Parties

 

	
28.6.1  

	
Each Administrative Finance Party may rely on:

 

	
(A)  

	
any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and

 

	
(B)  

	
any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.

 

	
28.6.2  

	
Each Administrative Finance Party may assume (unless it has received notice to the contrary in its capacity as an Administrative Finance Party) that:

 

	
(A)  

	
no Default has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 (Non-payment));

 

	
B)  

	
any right, power, authority or discretion vested in any Party or any group of Parties (such as the Majority Lenders) has not been exercised; and

 

	
(C)  

	
any notice or request made by the Borrower (other than a Utilisation Request or Selection Notice) is made on behalf of and with the consent and knowledge of the Parent.

 

	
28.6.3  

	
Each Administrative Finance Party may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.

 

	
28.6.4  

	
Each Administrative Finance Party may act in relation to the Finance Documents through its personnel and agents.

 

	
28.6.5  

	
Each Administrative Finance Party may disclose to any other Party any information it reasonably believes it has received in its capacity as such under this Agreement.

 

	
28.6.6  

	
Without prejudice to the generality of Clause 28.6.5, the Facility Agent may disclose the identity of a Defaulting Lender to the other Finance Parties and the Borrower and shall disclose the same upon the written request of the Borrower or the Majority Lenders.

 

 

146

Index

 

	
28.6.7  

	
Notwithstanding any other provision of any Finance Document to the contrary, no Administrative Finance Party is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.

 

	
28.6.8  

	
The Facility Agent is not obliged to disclose to any Finance Party any details of the rate notified to the Facility Agent by any Lender or the identity of any such Lender for the purpose of Clause 12.2 (Market disruption).

 

	
28.7  

	
Instructions

 

	
28.7.1  

	
For the purposes of this Clause 28.7 (Instructions), "relevant instructing quorum" means, in relation to any Agent, (i) the Majority Lenders or (ii) any other Finance Party or quorum of Finance Parties that is expressly entitled to instruct that Agent or on whose instructions that Agent is expressly obliged under this Agreement to act.

 

	
28.7.2  

	
Unless a contrary indication appears in a Finance Document, each Agent shall (a) exercise any right, power, authority or discretion vested in it in such capacity in accordance with any instructions given to it by the relevant instructing quorum (or, if so instructed by the relevant instructing quorum, refrain from exercising any right, power, authority or discretion vested in it) and (b) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the relevant instructing quorum.

 

	
28.7.3  

	
Unless a contrary indication appears in a Finance Document, any instructions given by the relevant instructing quorum will be binding on all the Finance Parties.

 

	
28.7.4  

	
An Agent may refrain from acting in accordance with the instructions of the relevant instructing quorum until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.

 

	
28.7.5  

	
In the absence of instructions from the relevant instructing quorum each Agent may act (or refrain from taking action) as it considers to be in the best interest of the Finance Parties.

 

	
28.7.6  

	
No Agent is authorised to act on behalf of a Finance Party (without first obtaining that Finance Party's consent) in any legal or arbitration proceedings relating to any Finance Document.

 

	
28.8  

	
Responsibility for documentation

 

No Administrative Finance Party is liable for:

 

	
28.8.1  

	
the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by it, an Obligor or any other person given in or in connection with any Finance Document;

 

	
28.8.2  

	
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or the Transaction Security or any other agreement, arrangement or 

 

 

147

Index

 

document entered into, made or executed in anticipation of or in connection with any Finance Document or the Transaction Security; or

 

	
28.8.3  

	
any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.

 

	
28.9  

	
Exclusion of liability

 

	
28.9.1  

	
Without limiting Clause 28.9.2 and without prejudice to Clause 32.11.5 (Disruption to Payment Systems etc.), no Administrative Finance Party will be liable for any action taken by it under or in connection with any Finance Document or the Transaction Security, unless directly caused by its gross negligence or wilful misconduct.

 

	
28.9.2  

	
No Party (other than an Administrative Finance Party) may take any proceedings against any officer, employee or agent of that Administrative Finance Party in respect of any claim it might have against that Administrative Finance Party or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of that Administrative Finance Party may rely on this Clause subject to Clause 1.3 (Third party rights) and the provisions of the Third Parties Act.

 

	
28.9.3  

	
No Administrative Finance Party will be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by that Administrative Finance Party if it has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by it for that purpose.

 

	
28.9.4  

	
Nothing in this Agreement shall oblige any Administrative Finance Party to carry out any "know your customer" or other checks in relation to any person on behalf of any Finance Party; and each Finance Party confirms to the Administrative Finance Parties that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by any Administrative Finance Party.

 

	
28.10  

	
Lenders' indemnity

 

	
28.10.1  

	
Each Lender shall (in proportion to its share of the Global Commitments or, if the Global Commitments are then zero, to its share of the Global Commitments immediately prior to their reduction to zero) within three Business Days of demand, indemnify:

 

	
(A)  

	
each Administrative Finance Party against any cost, loss or liability incurred by that Administrative Finance Party (otherwise than by reason of that Administrative Finance Party's gross negligence or wilful misconduct) in acting in its capacity as such an Administrative Finance Party; and

 

	
(B)  

	
the Facility Agent against any cost, loss or liability incurred by the Facility Agent pursuant to Clause 32.11 (Disruption to Payment Systems etc.) (otherwise than by reason of the fraud of the Facility Agent),

 

 

148

Index

 

unless, in each case, that Administrative Finance Party has been reimbursed for the same by an Obligor pursuant to a Finance Document.

 

	
28.10.2  

	
The Obligors shall forthwith on demand reimburse each Finance Party for any payments made by it under this Clause 28.10 (Lenders' indemnity).

 

	
28.11  

	
Resignation

 

	
28.11.1  

	
Each Administrative Finance Party (other than the Mandated Lead Arrangers and the Fronting Bank) may resign at any time and appoint one of its Affiliates acting through an office in the United Kingdom as successor by giving notice to the other Finance Parties and the Borrower.

 

	
28.11.2  

	
Alternatively such an Administrative Finance Party may resign by giving notice to the other Finance Parties and the Borrower, in which case the Majority Lenders (after consultation with the Borrower) may appoint a successor Administrative Finance Party.

 

	
28.11.3  

	
If the Majority Lenders have not appointed a successor Administrative Finance Party in accordance with Clause 28.11.2 within 30 days after notice of resignation was given, the incumbent Administrative Finance Party (after consultation with the Borrower and the Majority Lenders) may appoint a successor Administrative Finance Party (acting through an office in the United Kingdom).

 

	
28.11.4  

	
After consultation with the Borrower, the Majority Lenders may by giving 30 days notice to any relevant Administrative Finance Party (or (in the case of the Facility Agent) at any time it is an Impaired Agent, by giving any shorter notice determined by the Majority Lenders) replace that relevant Administrative Finance Party by appointing a successor Administrative Finance Party (acting through an office in the United Kingdom).  For these purposes "relevant Administrative Finance Party" means each Administrative Finance Party other than any Mandated Lead Arranger.

 

	
28.11.5  

	
The retiring Administrative Finance Party shall, at its own cost, make available to the successor Administrative Finance Party such documents and records and provide such assistance as the successor Administrative Finance Party may reasonably request for the purposes of performing its functions as such an Administrative Finance Party under the Finance Documents.

 

	
28.11.6  

	
The resignation (or, as the case may be, the replacement) of the retiring Administrative Finance Party and the appointment of any successor Administrative Finance Party shall only take effect upon:

 

	
(A)  

	
the successor Administrative Finance Party notifying all the Parties that it accepts its appointment; and

 

	
(B)  

	
the successor Administrative Finance Party, the retiring Administrative Finance Party and/or the Obligors completing all such steps as may reasonably be required by the Majority Lenders in order to (1) ensure that the successor Administrative Finance Party accedes, and becomes a party, to all relevant Finance Documents in its relevant capacity as that Administrative Finance Party and (2) facilitate the change in identity of the relevant Administrative Finance Party.

 

 

149

Index

 

	
28.11.7  

	
Upon the appointment of a successor, the retiring Administrative Finance Party shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 28 (Role of the Administrative Finance Parties).  Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

 

	
28.12  

	
Confidentiality

 

	
28.12.1  

	
In acting under the Finance Documents the relevant division or department through which each Administrative Finance Party acts shall be treated as a separate entity from any other of its divisions or departments.

 

	
28.12.2  

	
If information is received by another division or department of an Administrative Finance Party, it may be treated as confidential to that division or department and that Administrative Finance Party shall not be deemed to have notice of it.

 

	
28.13  

	
Relationship with the Finance Parties

 

	
28.13.1  

	
Subject to Clause 25.10 (Pro rata interest settlement), each Administrative Finance Party may treat the person shown in its records as Finance Party at the opening of business (in the place of such Administrative Finance Party's principal office as notified to the Finance Parties from time to time) as the Finance Party acting through its Facility Office:

 

	
(A)  

	
entitled to or liable for any payment due under any Finance Document on that day; and

 

	
(B)  

	
entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,

 

unless it has received not less than five Business Days' prior notice from that Finance Party to the contrary in accordance with the terms of this Agreement.

 

	
28.13.2  

	
Each Lender shall supply the Facility Agent with any information required by the Facility Agent in order to calculate the Mandatory Cost in accordance with Schedule 5 (Mandatory Cost Formulae).

 

	
28.13.3  

	
Any Finance Party may by notice to the Facility Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Finance Party under the Finance Documents.  Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 34.6 (Electronic communications)) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 34.2 (Addresses) and Clause 34.6 (Electronic communications) and the Facility Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Finance Party.

 

 

150

Index

 

	
28.14  

	
Credit appraisal by the Finance Parties

 

Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Finance Party confirms to each Administrative Finance Party that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including:

 

	
28.14.1  

	
the financial condition, status and nature of each Obligor and each other member of the Group;

 

	
28.14.2  

	
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and the Transaction Security and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Transaction Security;

 

	
28.14.3  

	
whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the Transaction Security, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Transaction Security; and

 

	
28.14.4  

	
the adequacy, accuracy and/or completeness of any other information provided by that Administrative Finance Party, any other Party or by any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Transaction Security.

 

	
28.15  

	
Reference Banks

 

If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Facility Agent shall (in consultation with the Borrower) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.

 

	
28.16  

	
Management time

 

Any amount payable to the Administrative Finance Party under Clause 16.3 (Indemnity to the Administrative Finance Parties), Clause 18 (Costs and expenses) and Clause 28.10 (Lenders' indemnity) shall include the cost of utilising that Administrative Finance Party's management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as that Administrative Finance Party may notify to the Borrower and the Lenders, and is in addition to any fee paid or payable to that Administrative Finance Party under Clause 13 (Fees).

 

	
28.17  

	
Deduction from amounts payable by the Facility Agent

 

If any Party owes an amount to the Facility Agent under the Finance Documents the Facility Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Facility Agent would otherwise be 

 

 

151

Index

 

obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed.  For the purposes of the Finance Documents, that Party shall be regarded as having received any amount so deducted.

 

	
29.  

	
THE SECURITY TRUSTEE

 

	
29.1  

	
Appointment of the Security Trustee

 

	
29.1.1  

	
Each Finance Party:

 

	
(A)  

	
appoints the Security Trustee to act as its agent and trustee in connection with the Finance Documents;

 

	
(B)  

	
irrevocably authorises the Security Trustee (by itself or by such persons as it may nominate) on its behalf to:

 

	
(1)  

	
enter into each Finance Document to which it is a party;

 

	
(2)  

	
exercise the rights, powers, authorities and discretions specifically given to the Security Trustee under or in connection with the Finance Documents together with any incidental rights, powers, authorities and discretions necessary to give effect to the trusts hereby created; and

 

	
(3)  

	
enforce any Security granted by the Security Documents as trustee (or as otherwise provided) on its behalf, subject always to the terms of the Finance Documents.

 

	
29.1.2  

	
The powers conferred upon the Security Trustee by the Finance Documents shall be in addition to any powers which may from time to time be vested in trustees by the general law.

 

	
29.1.3  

	
If there is any conflict between the provisions of this Agreement and any Security Documents with regard to instructions to or the matters affecting the Security Trustee, this Agreement will prevail.

 

	
29.2  

	
Trust

 

	
29.2.1  

	
The Security Trustee shall hold the benefits of the Finance Documents in its capacity as Security Trustee on trust for (to the extent such benefits are capable of being secured in their favour) the Finance Parties.

 

	
29.2.2  

	
Save as expressly specified in any Finance Document, the Security Trustee:

 

	
(A)  

	
shall not be liable to any Party for any breach by any other Party of any Finance Document;

 

	
(B)  

	
shall have only those duties which are expressly specified in the Finance Documents;

 

	
(C)  

	
will turn over all payments and other benefits received by it under the Finance Documents to the Facility Agent for application in accordance with Clause 32.5 (Partial payments); and

 

 

152

Index

 

	
(D)  

	
shall exercise its rights, powers and duties under the Security Documents and/or this Agreement for the benefit of the Finance Parties.

 

	
29.2.3  

	
Section 1 of the Trustee Act 2000 shall not apply to any function of the Security Trustee under or in connection with the Finance Documents provided that nothing in this Agreement shall exempt the Security Trustee from any liability for gross negligence or wilful misconduct.

 

	
29.3  

	
Duties of the Security Trustee

 

	
29.3.1  

	
Subject to Clause 29.3.2, the Security Trustee shall promptly forward to a Party the original or a copy of any document which is delivered to the Security Trustee for that Party by any other Party.

 

	
29.3.2  

	
Clause 29.3.1 shall not apply to any Transfer Certificate, Assignment Agreement or any Increase Confirmation.

 

	
29.3.3  

	
Except where a Finance Document specifically provides otherwise, the Security Trustee is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

 

	
29.3.4  

	
If the Security Trustee receives notice from a Party referring to any Finance Document (i) describing the occurrence of any default (howsoever described) under that Finance Document and (ii) stating that the circumstance described is a default (howsoever described) under that Finance Document, it shall promptly notify the other Finance Parties.

 

	
29.3.5  

	
If the Security Trustee is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than an Administrative Finance Party) under the Finance Documents it shall promptly notify the other Finance Parties.

 

	
29.3.6  

	
Save as set out in Clause 29.2 (Trust), the Security Trustee's duties under the Finance Documents are of a mechanical and administrative nature.  Nothing in the Finance Documents shall constitute a partnership between any Party and the Security Trustee.

 

	
29.4  

	
No need to account for own profits

 

The Security Trustee shall not be bound to account to any Finance Party for any sum or the profit element of any sum received by it for its own account.

 

	
29.5  

	
Business with the Group

 

The Security Trustee may accept deposits from, lend money to and generally engage in any kind of banking or other business with any Obligor or any other member of the Group.

 

	
29.6  

	
Rights and discretions of the Security Trustee

 

	
29.6.1  

	
The Security Trustee may rely on:

 

	
(A)  

	
any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and

 

 

153

Index

 

	
(B)  

	
any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.

 

	
29.6.2  

	
The Security Trustee may assume (unless it has received notice to the contrary in its capacity as Security Trustee) that:

 

	
(A)  

	
no default (howsoever described) under any Finance Document has occurred (unless it has actual knowledge of (i) any such Default arising under Clause 24.1 (Non-payment) or (ii) any such default arising under any other Finance Document by reason of any failure to make any payments when due);

 

	
(B)  

	
any right, power, authority or discretion vested in any Party or any group of Parties (such as the Majority Lenders) has not been exercised; and

 

	
(C)  

	
any notice or request made by the Borrower (other than a Utilisation Request) is made on behalf of and with the consent and knowledge of all the Obligors.

 

	
29.6.3  

	
The Security Trustee may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.

 

	
29.6.4  

	
The Security Trustee may act in relation to the Finance Documents through its personnel and agents.

 

	
29.6.5  

	
The Security Trustee may disclose to any other Party any information it reasonably believes it has received in its capacity as such under the Finance Documents.

 

	
29.6.6  

	
Notwithstanding any other provision of any Finance Document to the contrary, the Security Trustee is not obliged to do or omit to do anything if it would, or might in its reasonable opinion, constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.

 

	
29.7  

	
Instructions

 

	
29.7.1  

	
For the purposes of this Clause 29.7 (Instructions), "relevant instructing quorum" means (i) the Majority Lenders or (ii) any other Finance Party or quorum of Finance Parties that is expressly entitled to instruct the Security Trustee or on whose instructions the Security Trustee is expressly obliged under this Agreement to act.

 

	
29.7.2  

	
Unless a contrary indication appears in a Finance Document, the Security Trustee shall (a) exercise any right, power, authority or discretion vested in it in its capacity as Security Trustee in accordance with any instructions given to it by the relevant instructing quorum (or, if so instructed by the relevant instructing quorum, refrain from exercising any right, power, authority or discretion vested in it) and (b) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the relevant instructing quorum.

 

 

154

Index

 

	
29.7.3  

	
Unless a contrary indication appears in a Finance Document, any instructions given by a relevant instructing quorum to the Security Trustee will be binding on all the Finance Parties.

 

	
29.7.4  

	
The Security Trustee may refrain from acting in accordance with the instructions of any relevant instructing quorum until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.

 

	
29.7.5  

	
In the absence of instructions from any relevant instructing quorum, the Security Trustee may act (or refrain from taking action) as it considers to be in the best interests of the Finance Parties.

 

	
29.7.6  

	
The Security Trustee is not authorised to act on behalf of a Finance Party (without first obtaining that Finance Party's consent) in any legal or arbitration proceedings relating to any Finance Document.

 

	
29.8  

	
Responsibility for documentation

 

The Security Trustee is not liable or responsible for:

 

	
29.8.1  

	
the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by it, an Obligor or any other person given in or in connection with any Finance Document;

 

	
29.8.2  

	
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or the Transaction Security or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document or the Transaction Security;

 

	
29.8.3  

	
any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise;

 

	
29.8.4  

	
any failure to give notice to any third party or to register, file or record (or any defect in such registration, filing or recording) any Transaction Security, or effect, procure the registration of or otherwise protect or perfect any Transaction Security, in each case, under any applicable laws or regulations in any jurisdiction;

 

	
29.8.5  

	
the obtaining of any Authorisation for the creation of any Transaction Security; or

 

	
29.8.6  

	
any failure, omission, or defect in perfecting or protecting the Transaction Security in any jurisdiction.

 

	
29.9  

	
Exclusion of liability

 

	
29.9.1  

	
Without limiting Clause 29.9.2, the Security Trustee will not be liable for any action taken by it under or in connection with any Finance Document or the Transaction Security, unless directly caused by its gross negligence or wilful misconduct.

 

	
29.9.2  

	
No Party (other than the Security Trustee) may take any proceedings against any officer, employee or agent of the Security Trustee in respect of any claim it might 

 

 

155

Index

 

have against the Security Trustee or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document or the Transaction Security; and any officer, employee or agent of the Security Trustee may rely on this Clause 29.9.2 subject to Clause 1.3 (Third party rights) and the provisions of the Third Parties Act.

 

	
29.9.3  

	
The Security Trustee will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Security Trustee if it has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by it for that purpose.

 

	
29.9.4  

	
Nothing in this Agreement shall oblige the Security Trustee to carry out any "know your customer" or other checks in relation to any person on behalf of any Finance Party; and each Finance Party confirms to the Security Trustee that it is solely responsible for any such checks that it is required to carry out and that it may not rely on any statement in relation to such checks made by the Security Trustee.

 

	
29.10  

	
Remuneration and indemnity

 

	
29.10.1  

	
For the benefit of the Security Trustee, nothing in this Clause 29 (The Security Trustee) shall prejudice any right of indemnity by law given to trustees.

 

	
29.10.2  

	
The Borrower agrees to indemnify, on demand, the Security Trustee and any receiver, attorney, Insolvency Officer, agent or other person appointed by the Security Trustee in accordance with the Finance Documents for any and all claims, liabilities, costs, fees, charges, losses and expenses which may be incurred by or asserted against the Security Trustee or any such person in any way relating to or arising out of:

 

	
(A)  

	
its execution or purported execution of any of its trusts, powers, authorities and/or discretions under the Finance Documents;

 

	
(B)  

	
the performance of its duties and functions in such capacity; or

 

	
(C)  

	
any action taken or omitted by the Security Trustee or any such person under the Finance Documents except to the extent arising directly from the Security Trustee's or any such person's gross negligence or wilful misconduct; or

 

	
(D)  

	
any proceedings instituted by or against the Security Trustee as a consequence of taking or holding any Transaction Security or exercising its rights under any Security Document.

 

	
29.10.3  

	
The Security Trustee may indemnify itself and each other person referred to in Clause 29.10.2 out of the assets over which the Transaction Security is granted against all such claims, liabilities, costs, fees, charges, losses and expenses referred to in Clause 29.10.2.

 

	
29.10.4  

	
The Security Trustee shall be entitled to such remuneration as it may agree from time to time with the Borrower.

 

 

156

Index

 

	
29.10.5  

	
Without prejudice to Clause 29.10.2, each Finance Party shall (in proportion to its share of the Global Commitments or, if the Global Commitments are then zero, to its shares of the Global Commitments immediately prior to their reduction to zero) within three Business Days of demand, indemnify the Security Trustee against any cost, loss or liability incurred by the Security Trustee (otherwise than by reason of the Security Trustee's gross negligence or wilful misconduct) in acting in its capacity as Security Trustee (unless the Security Trustee has been reimbursed for the same by an Obligor pursuant to a Finance Document).

 

	
29.10.6  

	
The Obligors shall forthwith on demand reimburse each Finance Party for any payments made by it under Clause 29.10.5.

 

	
29.11  

	
Resignation of Security Trustee

 

	
29.11.1  

	
The Security Trustee may resign at any time and appoint an Affiliate acting through an office in the United Kingdom as successor by giving notice to the other Finance Parties and the Borrower.

 

	
29.11.2  

	
Alternatively the Security Trustee may resign by giving notice to the other Finance Parties and the Borrower, in which case the Majority Lenders (after consultation with the Borrower) may appoint a successor Security Trustee.

 

	
29.11.3  

	
If the Majority Lenders have not appointed a successor Security Trustee in accordance with Clause 29.11.2 within 30 days after notice of resignation was given, the incumbent Security Trustee (after consultation with the Borrower) may appoint a successor Security Trustee (acting through an office in the United Kingdom).

 

	
29.11.4  

	
After consultation with the Borrower, the Majority Lenders may be giving 30 days notice to the Security Trustee (or at any time it is an Impaired Agent, by giving any shorter notice determined by the Majority Lenders) replace the Security Trustee by appointing a successor Security Trustee (acting through an office in the United Kingdom).

 

	
29.11.5  

	
The retiring Security Trustee shall, at its own cost, make available to the successor Security Trustee such documents and records and provide such assistance as the successor Security Trustee may reasonably request for the purposes of performing its functions as Security Trustee under the Finance Documents.

 

	
29.11.6  

	
The resignation (or, as the case may be, the replacement) of the retiring Security Trustee and the appointment of any successor Security Trustee shall only take effect upon:

 

	
(A)  

	
the successor Security Trustee notifying all the Parties that it accepts such appointment;

 

	
(B)  

	
the successor Security Trustee, the retiring Security Trustee and/or the Obligors completing all such steps as may reasonably be required by the Majority Lenders in order to (1) ensure that the successor Security Trustee accedes, and becomes a party, to all relevant Finance Documents in its capacity as Security Trustee and that all of the Security Documents will provide for enforceable Security in favour of the successor Security 

 

 

157

Index

 

Trustee and the Finance Parties and (2) facilitate the change in identity of the Security Trustee; and

 

	
(C)  

	
(if the Majority Lenders, acting reasonably, require the provision of such advice) receipt by the Facility Agent of advice acceptable to the Majority Lenders (acting reasonably) to the effect that all of the Security Documents provide for enforceable Security in favour of the successor Security Trustee and the Finance Parties.

 

	
29.11.7  

	
Upon the appointment of a successor, the retiring Security Trustee shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 29 (The Security Trustee).  Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

 

	
29.11.8  

	
The Parties shall take such action as the retiring Security Trustee, the successor Security Trustee, the Facility Agent, or the Majority Lenders may consider necessary in order that the Security Documents shall provide for perfected and enforceable Security in favour of any successor Security Trustee and the Finance Parties.

 

	
29.12  

	
Confidentiality

 

	
29.12.1  

	
In acting under the Finance Documents, the relevant division or department through which the Security Trustee acts shall be treated as a separate entity from any other of its divisions or departments.

 

	
29.12.2  

	
If information is received by another division or department of the Security Trustee, it may be treated as confidential to that division or department and the Security Trustee shall not be deemed to have notice of it.

 

	
29.13  

	
Relationship with the Finance Parties

 

The Security Trustee may treat the person shown in its records as Finance Party at the opening of business (in the place of the Security Trustee's principal office as notified to the Finance Parties from time to time) as the Finance Party acting through its Facility Office:

 

	
29.13.1  

	
entitled to or liable for any payment due under any Finance Document on that day; and

 

	
29.13.2  

	
entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,

 

unless it has received not less than five Business Days' prior notice from that Finance Party to the contrary in accordance with the terms of this Agreement.

 

	
29.14  

	
Credit appraisal by the Finance Parties

 

Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Finance Party confirms to the Security Trustee that it has been, and will continue to be, solely responsible for making its 

 

 

158

Index

 

own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including:

 

	
29.14.1  

	
the financial condition, status and nature of each Obligor and each other member of the Group;

 

	
29.14.2  

	
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document, any Transaction Security and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Transaction Security;

 

	
29.14.3  

	
whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the Transaction Security, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Transaction Security; and

 

	
29.14.4  

	
the adequacy, accuracy and/or completeness of any information provided by the Security Trustee, any other Party or by any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Transaction Security.

 

	
29.15  

	
Management time

 

Any amount payable to the Security Trustee under Clause 16.3 (Indemnity to the Administrative Finance Parties), Clause 18 (Costs and expenses) and Clause 29.10 (Remuneration and indemnity) shall include the cost of utilising the Security Trustee's management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Security Trustee may notify to the Borrower and the Lenders, and is in addition to any fee paid or payable to the Security Trustee under Clause 13 (Fees).

 

	
29.16  

	
Deduction from amounts payable by the Security Trustee

 

If any Party owes an amount to the Security Trustee under the Finance Documents the Security Trustee may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Security Trustee would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed.  For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.

 

	
29.17  

	
Additional trustees

 

	
29.17.1  

	
The Security Trustee may, upon giving prior notice to the other Finance Parties, appoint any person established or resident in any jurisdiction (whether a trust corporation or not) to act either as a separate trustee or as a co-trustee jointly with the Security Trustee if the Security Trustee considers such appointment to be in the interests of the Finance Parties.

 

 

159

Index

 

	
29.17.2  

	
Any such additional trustee shall have such trusts, powers, obligations, authorities and discretions (not exceeding those conferred on the Security Trustee by the Finance Documents) and remuneration as shall be conferred or imposed by the instrument of appointment.  The Security Trustee shall have power in like manner to remove any such person.  The Borrower shall indemnify such additional trustee as though it were the Security Trustee in accordance with Clause 29.10 (Remuneration and indemnity).  The Security Trustee shall not be under any obligation to supervise the proceedings or acts of any such delegate or sub-delegate or be in any way responsible for any liability incurred by reason of any misconduct or default on the part of any such delegate or sub-delegate.

 

	
29.18  

	
Title

 

The Security Trustee may accept without enquiry such title as any Obligor may have to the property over which Security is intended to be created by any Security Document.

 

	
29.19  

	
Investments

 

All moneys which are received by the Security Trustee in its capacity as trustee or otherwise may be invested in the name of or under the control of the Security Trustee in any investment for the time being authorised by law for the investment by trustees of trust money or in any other investments which may be selected by the Security Trustee.  Additionally, the same may be placed on deposit in the name of or under the control of the Security Trustee at such bank or institution (including the Security Trustee) and upon such terms as the Security Trustee may think fit.

 

	
29.20  

	
Tax

 

The Security Trustee shall have no responsibility whatsoever to any Finance Party as regards any deficiency which might arise because the Security Trustee is subject to any tax or withholding from any payment made by it under the Finance Documents.

 

	
29.21  

	
Receivers' indemnity

 

In no circumstances shall the Security Trustee itself be obliged to give an indemnity to any receiver or other Insolvency Officer who requires an indemnity as a condition of appointment.

 

	
29.22  

	
Security Trustee's functions

 

	
29.22.1  

	
The Security Trustee:

 

	
(A)  

	
shall not be required to hold any title deeds, Finance Documents or any other documents in connection with the assets which are the subject of any Transaction Security in its own possession or to take any steps to protect or preserve the same:

 

	
(B)  

	
may permit the Obligors to retain any title deeds and other related documents;

 

	
(C)  

	
without prejudice to Clause 29.22.1(A):

 

 

160

Index

 

	
(1)  

	
may hold the Finance Documents and any other documents relating thereto or deposit them in any part of the world with any bank or company whose business includes undertaking the safe custody of documents or firm of lawyers considered by the Security Trustee to be of good repute; and

 

	
(2)  

	
shall not be responsible for or required to insure against any liability incurred in connection with any such holding or deposit and may pay all sums required to be paid on account of or in respect of any such deposit;

 

	
(D)  

	
shall not be obliged to give notice to any person of the execution of any documents comprised or referred to in the Finance Documents or of any other matter in any way relating to the Finance Documents or to take any steps to ascertain whether any default under any Finance Document has happened or whether any party has breached any of its obligations under any Finance Document or whether any right, power, discretion or remedy has or may become exercisable by the Security Trustee; and

 

	
(E)  

	
(save as provided for in Clause 29.6.2(A) (Rights and discretions of the Security Trustee) shall be entitled to assume that no default under any Finance Document has happened and that each party is observing and performing all its obligations under any Finance Document and that no such right, power, discretion or remedy has or may become exercisable.

 

	
29.22.2  

	
Any consent or approval given by the Security Trustee for the purposes of the Finance Documents may be given on such terms and subject to such conditions (if any) as the Security Trustee thinks fit.

 

	
29.22.3  

	
The Security Trustee may in the conduct of the trusts instead of acting personally employ and pay an agent (whether being a lawyer or other professional person) to transact or conduct, or concur in transacting or conducting, any business and to do, or concur in doing, all acts required to be done in connection with the Finance Documents.  The Security Trustee shall not be in any way responsible for any liability incurred by reason of any misconduct or default on the part of any such agent or be bound to supervise the proceedings or acts of any such agent.

 

	
29.23  

	
Enforcement

 

The Finance Parties shall not have any independent power to enforce any of the Security Documents or any Transaction Security or to exercise any rights, discretions or powers to grant any consents or releases under or pursuant to the Security Documents or otherwise have direct recourse to the Transaction Security except through the Security Trustee.

 

	
29.24  

	
Release of Security

 

The Security Trustee may (without the prior consent of any other Finance Party) release any Security over any asset that is the subject of any Security Document if:

 

	
29.24.1  

	
the Security Trustee is obliged to release such Security under the terms of such Security;

 

 

161

Index

 

	
29.24.2  

	
that asset is disposed of in compliance with the Finance Documents; or

 

	
29.24.3  

	
that asset is disposed of by any receiver or other Insolvency Officer in accordance with the powers granted under the Security Documents.

 

	
30.  

	
CONDUCT OF BUSINESS BY THE FINANCE PARTIES

 

	
30.1  

	
Conduct of business

 

No provision of this Agreement will:

 

	
30.1.1  

	
interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

 

	
30.1.2  

	
oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

 

	
30.1.3  

	
oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) the sources and/or cost of funding its participation in a Loan or any computations in respect of Tax.

 

	
30.2  

	
No independent action

 

	
30.2.1  

	
Without prejudice to the rights of the Majority Lenders or, as the case may be, the Lenders to instruct the Security Trustee pursuant to Clause 29.7 (Instructions) to take any such action, none of the Finance Parties (other than the Security Trustee or any Finance Party acting on the instructions of the Security Trustee or the Majority Lenders) may (without the prior consent of the Security Trustee):

 

	
(A)  

	
enforce any Security constituted by any Security Document or exercise any rights discretions or powers to grant any consents or releases under or pursuant to any Security Document or otherwise have direct recourse to such Security;

 

	
(B)  

	
sue for or institute any creditor's process (including a Mareva injunction, garnishment, execution or levy, whether before or after judgement) in respect of (i) any obligation (whether or not for the payment of money) owing to it under or in respect of any Finance Document or (ii) any debt owed to it under any Finance Document or otherwise take action for the enforcement of such obligation or debt (including any enforcement by way of attachment, execution or otherwise);

 

	
(C)  

	
take any step (including petition, application, notice of meeting or proposal to creditors) for the liquidation, winding-up, administration, dissolution or bankruptcy (or analogous proceeding in any jurisdiction) of any Obligor, or take any step for a voluntary arrangement or scheme of arrangement or analogous proceeding in relation to any Obligor;

 

	
(D)  

	
apply for any order for an injunction or specific performance in respect of any Obligor in relation to any of the Finance Documents;

 

	
(E)  

	
sue or bring or support any proceedings against or make demand on any provider of any report in connection with any report provided by such 

 

 

162

Index

 

person or receive any payment in connection with such suit, proceedings or demand; or

 

	
(F)  

	
otherwise exercise any remedy for the recovery of any Secured Liabilities or any sums due to it under any Finance Document, in the case, save as expressly permitted or required under this Agreement.

 

	
30.2.2  

	
For the purposes of this Clause 30.2 (No independent action), "report" means any report or opinion which has been provided for the benefit of the Finance Parties by an independent expert or adviser and which has been delivered to the Finance Parties (or any of them) or the Security Trustee pursuant to the Finance Documents (including any legal opinion and any Reserves Reports).

 

	
30.3  

	
Hedging Banks

 

	
30.3.1  

	
Subject to Clause 30.2 (No independent action), a Hedging Bank may exercise its rights under any Secured Hedging Agreement to terminate, or close out of, any Hedging Transaction and to demand repayment of sums outstanding thereunder provided that (unless the Security Trustee or the Majority Lenders otherwise consents) it shall only exercise such rights if:

 

	
(A)  

	
an Illegality (as defined in the ISDA Master Agreement) has occurred;

 

	
(B)  

	
a Tax Event (as defined in the ISDA Master Agreement) has occurred;

 

	
(C)  

	
the Borrower has not paid an amount due under that Secured Hedging Agreement on its stated due date and such payment has not been made within 3 days of the date on which the relevant Hedging Bank notifies the Security Trustee and the Facility Agent of such failure to pay (and of such Hedging Bank's intention to terminate or close out);

 

	
(D)  

	
the Enforcement Date has occurred and all or any amounts accrued or outstanding under the Finance Documents (other than the Secured Hedging Agreements) have become immediately due and payable;

 

	
(E)  

	
the Security Trustee or the Facility Agent has confirmed that no amount under the Finance Documents (other than the Secured Hedging Agreements) is outstanding or is capable of being outstanding;

 

	
(F)  

	
is so required under Clause 30.3.4(C);

 

	
(G)  

	
(in case of any interest rate hedging) is so required following any repayment or prepayment of any Loan or cancellation of any Commitment to reflect any reduction in the Borrower's interest rate exposure as a result of such prepayment, repayment or cancellation; or

 

	
(H)  

	
an Event of Default under Clause 24.9 (Insolvency) or 24.10 (Insolvency proceedings) has occurred;

 

provided that there shall be no restriction on a Hedging Bank's ability to exercise such rights after the Security Trustee or the Facility Agent has confirmed that no amount under the Finance Documents (other than the Secured Hedging Agreements) is outstanding or is capable of being outstanding.

 

 

163

Index

 

	
30.3.2  

	
If a Hedging Bank exercises its termination rights:

 

	
(A)  

	
pursuant to Clause 30.3.1, then save where it exercises such rights pursuant to Clause 30.3.1(A), 30.3.1(B) or 30.3.1(G), it must terminate all the Hedging Transactions under the Secured Hedging Agreements to which it is a party; and

 

	
(B)  

	
pursuant to Clause 30.3.1(A), 30.3.1(B) or 30.3.1(G), it may only terminate the Affected Transactions  (as defined in the ISDA Master Agreement).

 

	
30.3.3  

	
Save for any Security or guarantee constituted by any Security Documents and the guarantees given under this Agreement, no Hedging Bank shall permit to subsist or receive the benefit of any margin call arrangement, any collateral or credit support, any Security or any guarantee or other assurance against financial loss for, or in respect of, any Hedging Liability.

 

	
30.3.4  

	
Each Obligor and each Hedging Bank agrees that unless the Security Trustee otherwise consents:

 

	
(A)  

	
each Secured Hedging Agreement to which it is a party shall be entered into under the terms of an ISDA Master Agreement;

 

	
(B)  

	
at any time on or after the Enforcement Date, if an amount falls due from a Hedging Bank to the Borrower under any Secured Hedging Agreement, that amount shall be paid by that Hedging Bank to the Facility Agent (in full discharge of its obligations to make such payments to the Borrower) for application in accordance with Clause ‎31 (Sharing among the Finance Parties) and Clause 32 (Payment mechanics); and

 

	
(C)  

	
promptly on the occurrence of the Enforcement Date, each Hedging Bank and the Borrower will, if so instructed by the Security Trustee, exercise any rights it may have to terminate or close out all or any of the Hedging Transactions under each Secured Hedging Agreement to which it is a party (provided that the Security Trustee shall not be entitled to issue any instructions under this Clause ‎30.3.4(C) once all amounts outstanding under the Finance Documents (other than under any Secured Hedging Agreements) have been paid or repaid in full).

 

	
30.3.5  

	
Promptly upon request, the Borrower and each Hedging Bank will provide to the Facility Agent and the Security Trustee copies of all Secured Hedging Agreements to which it is a party.

 

	
30.3.6  

	
If (i) any Secured Hedging Agreement or any Hedging Transaction thereunder is terminated or closed out or (ii) any Secured Hedging Agreement is modified in any material respect, the relevant Hedging Bank and the Borrower shall:

 

	
(A)  

	
promptly notify the Security Trustee of the same; and

 

	
(B)  

	
if so requested by the Security Trustee, promptly provide any documents relating to such termination, closing out or modification (as the case may be).

 

 

164

Index

 

	
30.3.7  

	
Each of the Hedging Banks shall on request by the Security Trustee from time to time notify the Security Trustee of the details of the outstanding amount of all of the Hedging Liabilities (if any) owed to that Hedging Bank.

 

	
30.3.8  

	
Each Hedging Bank and the Borrower agrees that each Secured Hedging Agreement to which it is a party shall operate subject to the terms of this Agreement and, accordingly, in the event of any inconsistency between the terms of such Secured Hedging Agreement and this Agreement, the terms of this Agreement shall prevail.

 

	
30.3.9  

	
Each Hedging Bank waives any rights or remedies that it may have against the Borrower or any Finance Party by reason of (a) the entry into any Finance Document between the Borrower and any Finance Party, (b) the compliance by the Borrower of its obligations, or the exercise by the Borrower of its rights, under any Finance Document, (c) any modification of any Finance Document effected in accordance with this Agreement, or (d) any requirement or condition imposed by any Finance Party under any Finance Document in accordance with the terms thereof, in the case of (a), (b), (c) or (d), which:

 

	
(A)  

	
breaches or contravenes any term of any Secured Hedging Agreement to which that Hedging Bank is a party; or

 

	
(B)  

	
results in a potential event of default, event of default or termination event (in each case, howsoever described) under any such Secured Hedging Agreement.

 

	
30.3.10  

	
Each Hedging Bank that is a party to any Hedging Agreement with the Borrower:

 

	
(A)  

	
consents to the grant by the Borrower of Security over its rights and interests in such Hedging Agreement in favour of the Finance Parties or, as the case may be, the Security Trustee (in its capacity as such); and

 

	
(B)  

	
to the extent that such Security has been granted pursuant to a Security Document, acknowledges that it has received notice that each such Hedging Agreement to which it is a party is the subject of such Security.

 

	
30.3.11  

	
No Hedging Bank may terminate, or close out of any transaction under, any Secured Hedging Agreement solely by reason of it ceasing to be a "Hedging Bank" pursuant to the definition of "Hedging Bank" set out in Clause 1.1 (Definitions) as a result of the transfer, assignment, sale or other disposal by the relevant Lender of its interests under this Agreement which has been carried out by the relevant Lender voluntarily.  Each Hedging Bank agrees to continue to be bound by this Clause ‎30.3.11 notwithstanding that it may cease to be a "Hedging Bank" pursuant to the definition of "Hedging Bank" set out in Clause 1.1 (Definitions).

 

	
30.3.12  

	
Notwithstanding paragraph 1.2 (Introduction) of Schedule 9 (Hedging Policy), in case a Hedging Bank ceases to be a Lender under this Agreement (such Hedging Bank being the "Outgoing Lender"), then such Outgoing Lender shall within 10 Business Days of the Outgoing Lender ceasing to be a Lender have the right, but not the obligation, to require the Borrower to execute any documentation required to effect the transfer or novation of such Outgoing Lender's or its Affiliate's Hedging Agreements to any other Hedging Bank if such Hedging Bank confirms 

 

 

165

Index

 

its willingness to assume and does assume all rights and obligations of the Outgoing Lender or its Affiliate under such Hedging Agreements, provided that any costs associated with such transfer or novation shall be borne by the Outgoing Lender.

 

	
30.4  

	
Hedging payments

 

	
30.4.1  

	
Before the Enforcement Date:

 

	
(A)  

	
each Obligor may make, and each Hedging Bank may receive and retain, (i) any scheduled payments arising under the terms of the relevant Secured Hedging Agreement and (ii) any Hedging Termination Payments payable to such Hedging Bank pursuant to the termination of any Secured Hedging Agreement (or Hedging Transaction thereunder) which is permitted under this Agreement;

 

	
(B)  

	
each Hedging Bank may only discharge any Hedging Liability by set-off in accordance with Clause 33 (Set-off) and only to the extent that such Hedging Liability is permitted to be paid under Clause 30.4.1(A); and

 

	
(C)  

	
each Hedging Bank may only discharge any Hedging Liability under any netting arrangements in accordance with the terms of the relevant Secured Hedging Agreement but only to the extent that such Hedging Liability is permitted to be paid under Clause 30.4.1(A).

 

	
30.4.2  

	
Prior to the Enforcement Date, no Hedging Bank may receive or retain any payment of, or any distribution in respect of (or on account of), any Hedging Liability in cash or in kind, or apply any money or assets in or towards the repayment or discharge of any Hedging Liability save as provided in Clause ‎30.4.1.

 

	
30.4.3  

	
On and from the Enforcement Date, no Hedging Bank may receive or retain any payment of, or any distribution in respect of (or on account of), any Hedging Liability in cash or in kind, or apply any money or assets in or towards the repayment or discharge of any Hedging Liability which would otherwise be permitted under the preceding provisions of this Clause 30.4 (Hedging payments); and on and from the Enforcement Date any Hedging Liability may only be repaid or discharged pursuant to a distribution by the Facility Agent made in accordance with Clause 31 (Sharing among the Finance Parties) and Clause ‎32 (Payment mechanics).

 

	
30.5  

	
Voting

 

	
30.5.1  

	
To take into account the interest of the Hedging Banks:

 

	
(A)  

	
for all purposes, at all times after an Acceleration; and

 

	
(B)  

	
for all purposes, at all times after the Lender Discharge Date,

 

all references to Majority Lenders shall be deemed to be references to Majority Creditors and all references to all Lenders shall be deemed to be references to all Creditors but, in the case of paragraph (A) above, only taking into account the 

 

 

166

Index

 

Hedging Bank that is no longer a Lender or an Affiliate of a Lender by virtue of the operation of Clause 25 (Changes to the Lenders).

 

	
30.5.2  

	
In this Agreement:

 

"Acceleration" means the date on which a notice is issued under Clause 24.20 (Acceleration) of this Agreement.

 

"Creditor" means any Lender or any Hedging Bank.

 

"Credit Participations" means, in relation to a Creditor, the aggregate of:

 

	
(A)  

	
its aggregate Commitments under the Tranches not already drawn, if any;

 

	
(B)  

	
its aggregate Utilisations under the Tranches, if any; and

 

	
(C)  

	
in respect of any Hedging Transaction of that Creditor under any Secured Hedging Agreement that has, as of the date the calculation is made, been early terminated or closed out in accordance with the terms of that Secured Hedging Agreement, the amounts, if any, payable under that Secured Hedging Agreement in respect of that termination or close-out after giving effect to any set-off between Hedging Transactions permitted under this Agreement, to the extent that the amounts are unpaid (that amount to be certified by the relevant Creditor and as calculated in accordance with the relevant Secured Hedging Agreement); and

 

	
(D)  

	
in respect of any Hedging Transaction of that Creditor under any Secured Hedging Agreement that has, as of the date the calculation is made, not been terminated or closed out, the amount, if any, which would be payable to it under that Secured Hedging Agreement in respect of that Hedging Transaction after giving effect to any set-off permitted under this Agreement, if the date on which the calculation is made was deemed to be an Early Termination Date (as defined in the relevant ISDA Master Agreement), that amount to be certified by the relevant Creditor and as calculated in accordance with the relevant Secured Hedging Agreement.

 

	
  

	
Majority Creditors means, at any time, those Creditors whose Credit Participations at that time aggregate more than 662/3% of the total Credit Participations at that time.

 

	
  

	
Lender Discharge Date means the date on which:

 

	
(A)  

	
the Lenders have ceased to be under any commitment, obligations or liability to provide financial accommodation to the Borrower under any of the Finance Documents; and

 

	
(B)  

	
all Utilisations have been repaid in full and no other amount is outstanding to any Lender under or pursuant to the terms of any of the Finance Documents (whether or not the same is due).

 

 

167

Index

 

	
31.  

	
SHARING AMONG THE FINANCE PARTIES

 

	
31.1  

	
Payments to Finance Parties

 

	
31.1.1  

	
Subject to Clause 31.1.2, if a Finance Party (a "Recovering Finance Party") receives or recovers any amount from an Obligor other than in accordance with Clause 32 (Payment Mechanics) or, in the case of any Hedging Bank or Clause 30.4 (Hedging payments) (a "Recovered Amount") and applies that amount to a payment due under the Finance Documents then:

 

	
(A)  

	
the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Facility Agent;

 

	
(B)  

	
the Facility Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by (i) the Facility Agent and distributed in accordance with Clause 32 (Payment Mechanics), without taking account of any Tax which would be imposed on the Facility Agent in relation to the receipt, recovery or distribution or (ii) (as the case may be) in accordance with Clause 30.4 (Hedging payments); and

 

	
(C)  

	
the Recovering Finance Party shall, within three Business Days of demand by the Facility Agent, pay to the Facility Agent an amount (the "Sharing Payment") equal to such receipt or recovery less any amount which the Facility Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 32.5 (Partial payments) or, (as the case may be) Clause 30.4 (Hedging payments).

 

	
31.1.2  

	
Clause 31.1.1 shall not apply to any amount received or recovered by the Fronting Bank in respect of any cash cover provided for the benefit of the Fronting Bank.

 

	
31.2  

	
Redistribution of payments

 

The Facility Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the "Sharing Finance Parties") in accordance with Clause 32.5 (Partial payments) and Clause 30.4 (Hedging payments) towards the obligations of that Obligor to the Sharing Finance Parties.

 

	
31.3  

	
Recovering Finance Party's rights

 

On a distribution by the Facility Agent under Clause 31.2 (Redistribution of payments) of a payment received by a Recovering Finance Party from an Obligor, as between the relevant Obligor and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Obligor.

 

	
31.4  

	
Reversal of redistribution

 

If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

 

 

168

Index

 

	
31.4.1  

	
each Sharing Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 31.2 (Redistribution of payments) shall, upon request of the Facility Agent, pay to the Facility Agent for account of that Recovering Finance Party an amount equal to the appropriate part of its share of the  Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the "Redistributed Amount"); and

 

	
31.4.2  

	
as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Obligor.

 

	
31.5  

	
Exceptions

 

	
31.5.1  

	
This Clause 31 (Sharing among the Finance Parties) shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Obligor.

 

	
31.5.2  

	
A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:

 

	
(A)  

	
it notified that other Finance Party of the legal or arbitration proceedings; and

 

	
(B)  

	
that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.

 

 

169

Index

ADMINISTRATION

 

 

	
32.  

	
PAYMENT MECHANICS

 

	
32.1  

	
Payments to the Facility Agent

 

	
32.1.1  

	
Subject to Clause 32.1.3 and Clause 32.1.4, on each date on which an Obligor or a Finance Party is required to make a payment under a Finance Document, that Obligor or Finance Party shall make the same available to the Facility Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Facility Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

 

	
32.1.2  

	
Payment shall be made to such account in the principal financial centre of the country of that currency with such bank as the Facility Agent specifies.

 

	
32.1.3  

	
At all times prior to the Enforcement Date, all payments by the Borrower or a Hedging Bank under or in respect of any Secured Hedging Agreement shall be made directly between the Borrower and the relevant Hedging Bank (and not through the Facility Agent pursuant to Clause 32.1.1 (Payments to the Facility Agent)) and, accordingly, at all such times, all references in Clause 32.5 (Partial payments) to:

 

	
(A)  

	
Secured Hedging Agreements, Hedging Costs and Hedging Termination Payments shall be disregarded; and

 

	
(B)  

	
Finance Documents shall exclude the Secured Hedging Agreements.

 

	
32.1.4  

	
On and from the Enforcement Date, all payments by the Borrower or a Hedging Bank under or in respect of any Secured Hedging Agreement shall be made to and/or through the Facility Agent in accordance with Clause 32.1.1 (Payments to the Facility Agent).

 

	
32.2  

	
Distributions by the Facility Agent or Security Trustee

 

Each payment received by the Facility Agent or the Security Trustee under the Finance Documents for another Party shall, subject to Clause 32.3 (Distributions to an Obligor) and Clause 32.4 (Clawback) be made available by the Facility Agent or the Security Trustee (as the case may be) as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Facility Agent or the Security Trustee (as the case may be) by not less than five Business Days' notice with a bank in the principal financial centre of the country of that currency.

 

	
32.3  

	
Distributions to an Obligor

 

Each of the Facility Agent and the Security Trustee may (with the consent of the Obligor or in accordance with Clause 33 (Set-off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.

 

 

170

Index

 

	
32.4  

	
Clawback

 

	
32.4.1  

	
Where a sum is to be paid to the Facility Agent or the Security Trustee under the Finance Documents for another Party, the Facility Agent or the Security Trustee (as the case may be) is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

 

	
32.4.2  

	
If the Facility Agent or the Security Trustee pays an amount to another Party and it proves to be the case that the Facility Agent or the Security Trustee (as the case may be) had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Facility Agent or the Security Trustee (as the case may be) shall on demand refund the same to the Facility Agent or the Security Trustee (as the case may be) together with interest on that amount from the date of payment to the date of receipt by the Facility Agent or the Security Trustee (as the case may be), calculated by the Facility Agent or the Security Trustee (as the case may be) to reflect its cost of funds.

 

	
32.5  

	
Partial payments

 

	
32.5.1  

	
If the Facility Agent receives a payment (including pursuant to Clause 29.2.2(C) (Trust) in connection with the enforcement of any Security or any other enforcement action taken in accordance with the Finance Documents) that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Facility Agent shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order:

 

	
(A)  

	
first, in or towards payment pro rata of any unpaid fees, costs and expenses incurred in connection with the enforcement of any Security under the Security Documents or any other enforcement action taken for the recovery of any amounts outstanding under the Finance Documents, in each case, carried out or taken in accordance with the Finance Documents by or on behalf of (i) any Finance Party or (ii) any receiver or similar officer or agent appointed under any Security Document or in connection with any such enforcement action for the recovery of any amounts outstanding under the Finance Documents;

 

	
(B)  

	
second, in or towards payment pro rata of any unpaid fees, costs and expenses of the Administrative Finance Parties under the Finance Documents which do not fall within Clause 32.5.1(A);

 

	
(C)  

	
third, in or towards payment pro rata of any accrued interest, letter of credit fees, commitment fees, commission, Hedging Costs or (to the extent not falling within Clause 32.5.1(A) or Clause 32.5.1(B)) any other fees due but unpaid under the Finance Documents;

 

	
(D)  

	
fourth, in or towards payment pro rata of any principal (including amounts payable under Clause 6.7 (Claims under a Letter of Credit) or Clause 6.9 (Indemnities)), Hedging Termination Payments and (to the extent that any 

 

 

171

Index

 

Letter(s) of Credit remain(s) outstanding) any cash cover due but unpaid under the Finance Documents; and

 

	
(E)  

	
fifth, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

 

	
32.5.2  

	
The Facility Agent shall, if so directed by all of the Lenders, vary the order set out in Clauses 32.5.1(C) to 32.5.1(E) above.

 

	
32.5.3  

	
Clauses 32.5.1 and 32.5.2 above will override any appropriation made by an Obligor.

 

	
32.5.4  

	
If the Enforcement Date has occurred, any Finance Party that holds, or has the benefit of, any cash cover that has been provided in respect of any Letter(s) of Credit, shall (unless the Security Trustee otherwise agrees or instructs), no later than three Business Days after the Enforcement Date, pay (or procure the payment of) the entire amount of such cash cover to the Security Trustee for application in accordance Clause ‎32.5.1.  Pending each such payment to the Security Trustee, the relevant Finance Party that holds, or has the benefit of, such cash cover shall not utilise the same for any purpose.

 

	
32.5.5  

	
If any amounts have been distributed pursuant to Clause 32.5.1(D) to any Finance Party with respect to the payment of sums comprising cash cover which is due but unpaid, then (notwithstanding the definition of "cash cover" set out in Clause 1.2.1(Y) (Construction)):

 

	
(A)  

	
any such amounts shall be:

 

	
(1)  

	
retained by that Finance Party for the purposes of covering the relevant Contingent Indebtedness in respect of which such cash cover was required to be provided; and

 

	
(2)  

	
applied by such Finance Party in the discharge of such Contingent Indebtedness as the same matures; and

 

	
(B)  

	
if any such Contingent Indebtedness expires or matures at less than the aggregate amount retained by that Finance Party, that Finance Party shall  pay the balance of such amount to the Security Trustee for application in accordance Clause ‎32.5.1.

 

	
32.5.6  

	
The Obligors shall take all such steps as the Security Trustee may require in order to ensure that the Finance Parties are able to comply with Clause ‎32.5.4 and/or 32.5.5.

 

	
32.6  

	
Impaired Agent

 

	
32.6.1  

	
If, at any time, the Facility Agent or the Security Trustee (as the case may be) becomes an Impaired Agent, an Obligor or a Finance Party which is required to make a payment under the Finance Documents to the Facility Agent or the Security Trustee (as the case may be) in accordance with the provisions of this Agreement or any provision of the Security Documents may instead either pay that amount direct to the required recipient or pay that amount to an interest-bearing account held with an Acceptable Bank within the meaning of paragraph 

 

 

172

Index

 

(A) of the definition of "Acceptable Bank" and in relation to which no Insolvency Event has occurred and is continuing, in the name of the Obligor or the Finance Party making the payment and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents.  In each case such payments must be made on the due date for payment under the Finance Documents.

 

	
32.6.2  

	
All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the beneficiaries of that trust account pro rata to their respective entitlements.

 

	
32.6.3  

	
A Party which has made a payment in accordance with this Clause 32.6 (Impaired Agent) shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account.

 

	
32.6.4  

	
Promptly upon the appointment of a successor Facility Agent in accordance with Clause 28.11 (Resignation) or, as the case may be, a successor Security Trustee pursuant to Clause 29.11 (Resignation of Security Trustee), each Party which has made a payment to a trust account in accordance with Clause 32.6 shall give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor Facility Agent or successor Security Trustee (as the case may be) for distribution in accordance with Clause 32.2 (Distributions by the Facility Agent or Security Trustee).

 

	
32.7  

	
No set-off by Obligors

 

All payments to be made by an Obligor under the Finance Documents (other than any Secured Hedging Agreement) shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

 

	
32.8  

	
Business Days

 

	
32.8.1  

	
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

 

	
32.8.2  

	
During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

 

	
32.9  

	
Currency of account

 

	
32.9.1  

	
Subject to Clauses 32.9.2 to 32.9.5, dollars is the currency of account and payment for any sum due from an Obligor under any Finance Document (other than any Secured Hedging Agreement).

 

	
32.9.2  

	
A repayment of a Utilisation or Unpaid Sum or a part of a Utilisation or Unpaid Sum shall be made in the currency in which that Utilisation or Unpaid Sum is denominated on its due date.  Any cash cover to be provided in relation to any Letter of Credit shall be made in the currency in which that Letter of Credit is denominated.

 

 

173

Index

 

	
32.9.3  

	
Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.

 

	
32.9.4  

	
Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

 

	
32.9.5  

	
Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

 

	
32.10  

	
Change of currency

 

	
32.10.1  

	
Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

 

	
(A)  

	
any reference in the Finance Documents (other than a Secured Hedging Agreement) to, and any obligations arising under the Finance Documents (other than a Secured Hedging Agreement) in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Facility Agent (after consultation with the Borrower); and

 

	
(B)  

	
any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Facility Agent (acting reasonably).

 

	
32.10.2  

	
If a change in any currency of a country occurs, this Agreement will, to the extent the Facility Agent (acting reasonably and after consultation with the Borrower) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the London interbank market and otherwise to reflect the change in currency.

 

	
32.11  

	
Disruption to Payment Systems etc.

 

If either the Facility Agent determines (in its discretion) that a Disruption Event has occurred or the Facility Agent is notified by the Borrower that a Disruption Event has occurred:

 

	
32.11.1  

	
the Facility Agent may, and shall if requested to do so by the Borrower, consult with the Borrower with a view to agreeing with the Borrower such changes to the operation or administration of the Facility as the Facility Agent may deem necessary in the circumstances;

 

	
32.11.2  

	
the Facility Agent shall not be obliged to consult with the Borrower in relation to any changes mentioned in Clause 32.11.1 if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree such to changes;

 

	
32.11.3  

	
the Facility Agent may consult with the Finance Parties in relation to any changes mentioned in Clause 32.11.1 but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;

 

 

174

Index

 

	
32.11.4  

	
any such changes agreed upon by the Facility Agent and the Borrower shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of Clause 38 (Amendments and waivers);

 

	
32.11.5  

	
the Facility Agent shall not be liable for any damages, costs or losses whatsoever (including for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Facility Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 32.11 (Disruption to Payment Systems etc.); and

 

	
32.11.6  

	
the Facility Agent shall notify the Finance Parties of all changes agreed pursuant to Clause 32.11.4.

 

	
33.  

	
SET-OFF

 

A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation.  If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

 

	
34.  

	
NOTICES

 

	
34.1  

	
Communications in writing

 

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.

 

	
34.2  

	
Addresses

 

The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

 

	
34.2.1  

	
in the case of each Obligor, that identified with its name below;

 

	
34.2.2  

	
in the case of each Finance Party, each Hedging Bank or any other Obligor, that notified in writing to the Facility Agent on or prior to the date on which it becomes a Party; and

 

	
34.2.3  

	
in the case of each of the Facility Agent and the Security Trustee, that identified with its name below,

 

or any substitute address, fax number or department or officer as the Party may notify to the Facility Agent (or the Facility Agent may notify to the other Parties, if a change is made by the Facility Agent) by not less than five Business Days' notice.

 

 

175

Index

 

	
  

	
      Address:

	
Carrizo UK Huntington Ltd

	
  

	
c/o Carrizo Oil & Gas Inc.

	
  

	
1000 Louuisiana, Suite 1500

	
  

	
Houston, Texas 77110

	
  

	
USA

 

	
 

	
Tel:

	
+ 1 713 328 1096

 

	
  

	
Fax:

	
+ 1 713 328 1049

 

Email:                             Paul.Boling@crzo.net

 

	
Attention:

	
Chief Financial Officer

 

	
  

	
With a copy to:

 

	
  

	
Address:

	
Carrizo Oil & Gas Inc.

	
  

	
1000 Louisiana, Suite 1500

	
  

	
Houston, Texas 77110

	
  

	
USA

 

	
  

	
Tel:

	
+ 1 713 328 1073

 

	
  

	
Fax:

	
+1 713 328 1035

 

Email:              Gerry.Morton@crzo.net

 

	
Attention:

	
Law Department

 

The Parent

 

	
  

	
Address:

	
Carrizo Oil & Gas Inc.

	
  

	
1000 Louisiana, Suite 1500

	
  

	
Houston, Texas 77110

	
  

	
USA

 

	
  

	
Tel:

	
+ 1 713 328 1096

 

	
  

	
Fax:

	
+ 1 713 328 1049

 

Email:                              Paul.Boling@crzo.net

 

	
Attention:

	
Chief Financial Officer

 

	
  

	
With a copy to:

 

	
  

	
Address:

	
Carrizo Oil & Gas Inc.

	
  

	
1000 Louisiana, Suite 1500

 

 

176

Index

 

	
  

	
Houston, Texas 77110

	
  

	
USA

 

	
  

	
Tel:

	
+ 1 713 328 1073

 

Fax:                                  +1 713 328 1035

 

Email:                              Gerry.Morton@crzo.net

 

	
  

	
Attention:

	
Gerald Morton

 

 

 

The Facility Agent and the Security Trustee

 

Address:                          SG House - 41 Tower Hill, London, EC3N 4SG, United Kingdom

 

Fax:                                 +44 (0) 20 7676 6661

 

	
  

	
Email:

	
brian.courtney@sgcib.com / john.hayes@sgcib.com / 

mirela.kubicka@sgcib.com

 

Attention:                        Brian Courtney / John Hayes / Mirela Kubicka

 

Phone:                             +44 (0) 20 7676 6248 / 6474 / 6877

 

 

	
34.3  

	
Delivery

 

	
34.3.1  

	
Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

 

	
(A)  

	
if by way of fax, when received in legible form; or

 

	
(B)  

	
if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

 

and, if a particular department or officer is specified as part of its address details provided under Clause 34.2 (Addresses), if addressed to that department or officer.

 

	
34.3.2  

	
Any communication or document to be made or delivered to any Administrative Finance Party will be effective only when actually received by that Administrative Finance Party and then only if it is expressly marked for the attention of the department or officer identified with that Administrative Finance Party's name above (or any substitute department or officer as that Administrative Finance Party shall specify for this purpose).

 

	
34.3.3  

	
All notices from or to an Obligor shall be sent through the Facility Agent.

 

 

177

Index

 

	
34.3.4  

	
Any communication or document made or delivered to the Borrower in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors.

 

	
34.4  

	
Notification of address and fax number

 

Promptly upon receipt of notification of an address or fax number or change of address or fax number pursuant to Clause 34.2 (Addresses) or changing its own address or fax number, the Facility Agent shall notify the other Parties.

 

	
34.5  

	
Communication when Facility Agent is Impaired Agent

 

If the Facility Agent is an Impaired Agent the Parties may, instead of communicating with each other through the Facility Agent, communicate with each other directly and (while the Facility Agent is an Impaired Agent) all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the Facility Agent shall be varied so that communications may be made and notices given to or by the relevant Parties directly.  This provision shall not operate after a replacement Facility Agent has been appointed.

 

	
34.6  

	
Electronic communications

 

	
34.6.1  

	
Any communication to be made between the Facility Agent and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Facility Agent and the relevant Lender:

 

	
(A)  

	
agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

 

	
(B)  

	
notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

 

	
(C)  

	
notify each other of any change to their address or any other such information supplied by them.

 

	
34.6.2  

	
Any electronic communication made between the Facility Agent and a Lender will be effective only when actually received in readable form and in the case of any electronic communication made by a Lender to the Facility Agent only if it is addressed in such a manner as the Facility Agent shall specify for this purpose.

 

	
34.7  

	
English language

 

	
34.7.1  

	
Any notice given under or in connection with any Finance Document must be in English.

 

	
34.7.2  

	
All other documents provided under or in connection with any Finance Document must be:

 

	
(A)  

	
in English; or

 

	
(B)  

	
if not in English, and if so required by the Facility Agent, accompanied by a certified English translation and, in this case, the English translation will 

 

 

178

Index

 

prevail unless the document is a constitutional, statutory or other official document.

 

	
35.  

	
CALCULATIONS AND CERTIFICATES

 

	
35.1  

	
Accounts

 

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.

 

	
35.2  

	
Certificates and Determinations

 

Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

 

	
35.3  

	
Day count convention

 

Any interest, commission or fee accruing under a Finance Document (other than a Hedging Agreement) will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the London interbank market differs, in accordance with that market practice.

 

	
36.  

	
PARTIAL INVALIDITY

 

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 

	
37.  

	
REMEDIES AND WAIVERS

 

No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy.  The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

 

	
38.  

	
AMENDMENTS AND WAIVERS

 

	
38.1  

	
Required consents

 

	
38.1.1  

	
Subject to Clause 38.2 (Exceptions) any term of the Finance Documents (other than any Secured Hedging Agreement) may be amended or waived only with the consent of the Majority Lenders and the Obligors and any such amendment or waiver will be binding on all Parties.

 

	
38.1.2  

	
The Facility Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 38 (Amendments and waivers).  In addition, each Obligor hereby authorises the Borrower to effect, on its behalf, any amendment 

 

 

179

Index

 

or waiver permitted by this Clause 38 (Amendments and waivers).  In any event, each Party shall take such action as the Facility Agent may reasonably request in order to ensure that such amendment or waiver that is permitted by this Clause 38 (Amendments and waivers) is promptly effected.

 

	
38.1.3  

	
Any amendment or waiver of any term of any Finance Document made in accordance with this Clause 38 (Amendments and waivers) shall be binding on all of the Parties.

 

	
38.1.4  

	
Any term of any Secured Hedging Agreement may be amended or waived in accordance with its terms (but without prejudice to any other provision of this Agreement).

 

	
38.2  

	
Exceptions

 

	
38.2.1  

	
An amendment or waiver that has the effect of changing or which relates to:

 

	
(A)  

	
the definition of "Majority Lenders" in Clause 1.1 (Definitions);

 

	
(B)  

	
the definition of "Super Majority Lenders" in Clause 1.1 (Definitions);

 

	
(C)  

	
an extension to the date of payment of any amount under the Finance Documents;

 

	
(D)  

	
a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;

 

	
(E)  

	
an increase in or an extension of any Commitment;

 

	
(F)  

	
any provision which expressly requires the consent of all the Lenders;

 

	
(G)  

	
Clause 2.3 (Finance Parties’ rights and obligations), Clause 25 (Changes to the Lenders) or this Clause 38 (Amendments and waivers);

 

	
(H)  

	
the release of any Security granted under any Security Document save where such release is (i) required pursuant to the terms of any Finance Document (other than any Secured Hedging Agreement) or (ii) a release effected by the Security Trustee in accordance with Clause 29.24 (Release of Security);

 

	
(I)  

	
the Hedging Policy; or

 

	
(J)  

	
Clause 24.7 (Late completion)

 

shall not be made without the prior consent of all the Lenders.

 

	
38.2.2  

	
An amendment or waiver which relates to the rights or obligations of any Administrative Finance Party or Hedging Bank (each in their capacity as such) may not be effected without the consent of that Finance Party.

 

	
38.2.3  

	
Any term of any Fee Letter may be amended or waived without the prior consent of the Majority Lenders.

 

	
38.2.4  

	
For the purposes of determining whether the consent of the Majority Lenders, the Super Majority Lenders or all the Lenders (as the case may be) has been obtained 

 

 

180

Index

 

with respect to any request for a consent, waiver or amendment requiring the consent of the Majority Lenders, the Super Majority Lenders or all the Lenders (as the case may be), if a Lender does not accept or reject such request for a consent, waiver or amendment within 10 Business Days (or such longer period as the Borrower and the Facility Agent may agree) of the date specified in such request by the Facility Agent as the date by which responses are to be provided by the Lenders, its Commitments and/or participation in any Utilisations under the Facility shall not be included for the purpose of calculating (as the case may be) the Aggregate Commitments, the Global Commitments or participations in the Utilisations under the Facility when determining whether the approval of the Lenders having the requisite percentage of Aggregate Commitments and/or Global Commitments and/or participations for the purpose of obtaining Majority Lenders', Super Majority Lenders' or all the Lenders' (as the case may be) approval have been obtained to approve the relevant consent, waiver or amendment.

 

	
38.3  

	
Disenfranchisement of Defaulting Lenders

 

	
38.3.1  

	
For so long as a Defaulting Lender has any Available Commitment, in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Global Commitments has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents, that Defaulting Lender's Commitments will be reduced by the amount of its Available Commitments.

 

	
38.3.2  

	
For the purposes of this Clause 38.3 (Disenfranchisement of Defaulting Lenders), the Facility Agent may assume that the following Lenders are Defaulting Lenders:

 

	
(A)  

	
any Lender which has notified the Facility Agent that it has become a Defaulting Lender; and

 

	
(B)  

	
any Lender in relation to which it is aware that any of the events or circumstances referred to in paragraphs (A), (B) or (C) of the definition of "Defaulting Lender" has occurred,

 

unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Facility Agent) or the Facility Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.

 

	
38.4  

	
Replacement of a Defaulting Lender

 

	
38.4.1  

	
The Borrower may, at any time a Lender has become and continues to be a Defaulting Lender, by giving ten Business Days' prior written notice to the Facility Agent and such Lender:

 

	
(A)  

	
replace such Lender by requiring such Lender to (and to the extent permitted by law such Lender shall) transfer pursuant to Clause 25 (Changes to the Lenders) all (and not part only) of its rights and obligations under this Agreement;

 

 

181

Index

 

	
(B)  

	
require such Lender to (and to the extent permitted by law such Lender shall) transfer pursuant to Clause 25 (Changes to the Lenders) all (and not part only) of the undrawn Commitment of the Lender; or

 

	
(C)  

	
require such Lender to (and to the extent permitted by law such Lender shall) transfer pursuant to Clause 25 (Changes to the Lenders) all (and not part only) of its rights and obligations in respect of the Facility,

 

to a Lender or other bank, financial institution, trust, fund or other entity (a "Replacement Lender") selected by the Borrower, and which (unless the Facility Agent is an Impaired Agent) is acceptable to the Majority Lenders (acting reasonably) and, in relation to a transfer under Tranche C, to the Fronting Bank which confirms its willingness to assume and does assume all the obligations or all the relevant obligations of the transferring Lender (including the assumption of the transferring Lender's participations or unfunded participations (as the case may be) on the same basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal amount of such Lender's participation in the outstanding Utilisations and all accrued interest and/or letter of credit commission (to the extent that the Facility Agent has not given a notification under Clause 25.10 (Pro rata interest settlement), Break Costs and other amounts payable in relation thereto under the Finance Documents.

 

	
38.4.2  

	
The Facility Agent may (and is authorised by each Finance Party to) execute, without requiring any further consent or action from any other Party, a Transfer Certificate on behalf of any Defaulting Lender which is required to transfer its rights and obligations under this Agreement pursuant to Clause 38.4.1 which shall be effective for the purposes of Clause 25.5 (Procedure for transfer). The Facility Agent shall not be liable in any way for any action taken by it pursuant to this Clause 38.4.2 and, for the avoidance of doubt, the provisions of Clause 28.9 (Exclusion of liability) shall apply in relation thereto.

 

	
38.4.3  

	
Any transfer of rights and obligations of a Defaulting Lender pursuant to this Clause 38.4 (Replacement of a Defaulting Lender) shall be subject to the following conditions:

 

	
(A)  

	
the Borrower shall have no right to replace an Administrative Finance Party;

 

	
(B)  

	
neither the Facility Agent nor the Defaulting Lender shall have any obligation to the Borrower to find a Replacement Lender;

 

	
(C)  

	
the transfer must take place no later than five days after the notice referred to in Clause 38.4.1; and

 

	
(D)  

	
in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents.

 

 

182

Index

 

	
39.  

	
CONFIDENTIALITY

 

	
39.1  

	
Confidential Information

 

	
  

	
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 39.2 (Disclosure of Confidential Information) and Clause 39.3 (Disclosure to numbering service providers), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.

 

	
39.2  

	
Disclosure of Confidential Information

 

	
  

	
Any Finance Party may disclose:

 

	
39.2.1  

	
to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this Clause 39.2.1 is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

 

	
39.2.2  

	
to any person:

 

	
(A)  

	
to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that person's Affiliates, Related Funds, Representatives and professional advisers;

 

	
(B)  

	
with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Obligors and to any of that person's Affiliates, Related Funds, Representatives and professional advisers;

 

	
(C)  

	
appointed by any Finance Party or by a person to whom Clause 39.2.2 (A) or (B) applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including any person appointed under Clause 28.13 (Relationship with the Finance Parties));

 

	
(D)  

	
who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in Clause 39.2.2 (A) or (B);

 

	
(E)  

	
to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;

 

 

183

Index

 

	
(F)  

	
to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 25.9 (Security over Finance Parties' rights);

 

	
(G)  

	
to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;

 

	
(H)  

	
who is a Party; or

 

	
(I)  

	
with the consent of the Borrower,

 

in each case, such Confidential Information as that Finance Party shall consider appropriate if:

 

	
(1)  

	
in relation to Clauses 39.2.2 (A), (B) and (C), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;

 

	
(2)  

	
in relation to Clause 39.2.2(D), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;

 

	
(3)  

	
in relation to Clauses 39.2.2 (E), (F) and (G), the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;

 

	
39.2.3  

	
to any person appointed by that Finance Party or by a person to whom Clause 39.2.2(A) or 39.2.2(B) applies to provide administration or settlement services in respect of one or more of the Finance Documents including, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this Clause 39.2.3 if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Borrower and the relevant Finance Party;

 

	
39.2.4  

	
to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Obligors if the rating agency to whom the Confidential Information is to be 

 

 

184

Index

 

given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.

 

	
39.3  

	
Disclosure to numbering service providers

 

	
39.3.1  

	
Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facility and/or one or more Obligors the following information:

 

	
(A)  

	
names of Obligors;

 

	
(B)  

	
country of domicile of Obligors;

 

	
(C)  

	
place of incorporation of Obligors;

 

	
(D)  

	
date of this Agreement;

 

	
(E)  

	
the names of the Facility Agent and the Mandated Lead Arrangers;

 

	
(F)  

	
date of each amendment and restatement of this Agreement;

 

	
(G)  

	
amount of Aggregate Commitments;

 

	
(H)  

	
currencies of the Facility;

 

	
(I)  

	
type of Facility;

 

	
(J)  

	
ranking of Facility;

 

	
(K)  

	
Final Maturity Date;

 

	
(L)  

	
changes to any of the information previously supplied pursuant to Clauses 39.3.1 (A) to (K); and

 

	
(M)  

	
such other information agreed between such Finance Party and the Borrower,

 

to enable such numbering service provider to provide its usual syndicated loan numbering identification services.

 

	
39.3.2  

	
The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facility and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.

 

	
39.3.3  

	
Each Obligor represents that none of the information set out in Clause 39.3.1(A) to 39.3.1(M) above is, nor will at any time be, unpublished price-sensitive information.

 

	
39.3.4  

	
The Facility Agent shall notify the Borrower and the other Finance Parties of:

 

 

185

Index

 

	
(A)  

	
the name of any numbering service provider appointed by the Facility Agent in respect of this Agreement, the Facility and/or one or more Obligors; and

 

	
(B)  

	
the number or, as the case may be, numbers assigned to this Agreement, the Facility and/or one or more Obligors by such numbering service provider.

 

	
39.4  

	
Entire agreement

 

This Clause 39 (Confidentiality) constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

 

	
39.5  

	
Inside information

 

Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.

 

	
39.6  

	
Notification of disclosure

 

Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrower:

 

	
39.6.1  

	
of the circumstances of any disclosure of Confidential Information made pursuant to Clause 39.2.2(E) (Disclosure of Confidential Information) except where such disclosure is made to any of the persons referred to in that Clause during the ordinary course of its supervisory or regulatory function; and

 

	
39.6.2  

	
upon becoming aware that Confidential Information has been disclosed in breach of this Clause 39 (Confidentiality).

 

	
39.7  

	
Continuing obligations

 

The obligations in this Clause 39 (Confidentiality) are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of twenty four months from the earlier of:

 

	
39.7.1  

	
the date on which all amounts payable by the Obligors under or in connection with the Finance Documents have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and

 

	
39.7.2  

	
the date on which such Finance Party otherwise ceases to be a Finance Party.

 

 

186

Index

 

	
40.  

	
MISCELLANEOUS

 

	
40.1  

	
Counterparts

 

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

 

	
40.2  

	
Usury savings clause

 

To the extent Texas law applies to this Agreement or any other Finance Document, in no event shall the Obligors or any other person be obligated to pay, or any Lender or Fronting Bank have any right or privilege to reserve, receive or retain, (i) any interest in excess of the maximum amount of nonusurious interest permitted under any applicable law or (ii) total interest in excess of the amount which such person could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of the obligations of the Obligors hereunder and under the other Finance Documents (as used in this section, the "Obligations") at the Highest Lawful Rate. On each day, if any, that the interest rate (the "Stated Rate") called for under this Agreement or any other Finance Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day.  If for any reason any Lender or Fronting Bank at any time is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be cancelled automatically as of the date of such event which produces the excess, and, if such excess interest has been paid to such Lender or Fronting Bank, it shall be credited against the then-outstanding principal balance of the Obligors' obligations to such Lender, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor. As used in this section, the term "interest" includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under applicable law.

 

GOVERNING LAW AND ENFORCEMENT

 

	
41.  

	
GOVERNING LAW

 

This Agreement and any dispute or claim arising out of or in connection with it or its subject matter, existence, negotiation, validity, termination or enforceability (including any non-contractual disputes or claims) shall be governed by and construed in accordance with English law.

 

	
42.  

	
ENFORCEMENT

 

	
42.1  

	
Jurisdiction

 

	
42.1.1  

	
Save where a Finance Document expressly provides to the contrary, the courts of England have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with any Finance Document or its subject matter, existence, negotiation, validity, termination or enforceability (including any non-contractual dispute or claim) (a "Dispute").

 

 

187

Index

 

	
42.1.2  

	
Subject to Clause 42.1.3, the Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Obligor will:

 

	
(A)  

	
argue to the contrary; or

 

	
(B)  

	
take any proceedings relating to a Dispute in any jurisdiction other than England.

 

	
42.1.3  

	
This Clause 42.1 (Jurisdiction) is for the benefit of the Finance Parties only.  As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction nor from contending that such courts are appropriate and convenient.  To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.

 

	
42.2  

	
Service of process

 

	
42.2.1  

	
Without prejudice to any other mode of service allowed under any relevant law, the Parent:

 

	
(A)  

	
irrevocably appoints the Borrower as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

 

	
(B)  

	
agrees that failure by a process agent to notify the Parent of the process will not invalidate the proceedings concerned.

 

	
42.2.2  

	
The Borrower confirms its acceptance of its irrevocable appointment as agent for service of process pursuant to Clause 42.2.1.

 

	
42.3  

	
This Agreement has been entered into on the date stated at the beginning of this Agreement.

 

 

188

Index

The Obligors

 

 

	 CARRIZO UK HUNTINGTON LTD, the Borrower	 	 
	 	 	 
	 SIGNED by     GERALD MORTON	)	 
	 	 	 
	 for and on behalf of	)	 /s/ Gerald Morton
	 	 	 
	 CARRIZO UK HUNTINGTON LTD	)	 
	 	 	 
	 	 	 
	 	 	 
	  

CARRIZO OIL & GAS, INC., the Parent

	 	 
	 	 	 
	 SIGNED by     GERALD MORTON 	)	 
	 	 	 
	 for and on behalf of	)	 /s/ Gerald Morton
	 	 	 
	 CARRIZO OIL & GAS, INC.	)	 
	 	 	 
	 	 	 
	 	 	 
	
 

The Banks

	 	 
	 	 	 
	BNP PARIBAS, in its capacity as the Mandated Lead Arranger, the Original Lender, the Technical Bank, the Modelling Bank and the Fronting Bank.
	 	 	 
	 SIGNED by    NICHOLAS BEATTIE	)	 /s/ Nicholas Beattie
	 	 	 
	                          BAPTISTE RAINSARD-	 	 
	                          FLORENTIN	)	 /s/ Baptiste Rainsard-Florentin
	 	 	 
	 for and on behalf of	)	 
	 	 	 
	 BNP PARIBAS	)	 
	 	 	 
	 	 	 
	 	 	 
	  

SOCIÉTÉ GÉNÉRALE, in its capacity as the Mandated Lead Arranger, the Original Lender, the Facility Agent, the Security Trustee, the Technical Bank and the Account Bank.

	 	 	 
	 SIGNED by    MARIA MARTIN	)	 
	 	 	 
	 for and on behalf of 	)	 /s/ Maria Martin
	 	 	 
	 SOCIÉTÉ GÉNÉRALE	)	 
	 	 	 
	 (acting through its London branch)	)	 

 

 

189

Index

SCHEDULE 1

 

COMMITMENTS

 

Part I

 

Tranche A Commitments

 

	  	
BNP Paribas

	
Société Générale

	
Aggregate Commitments

	
From the date of this Agreement up to and including the earlier of (i) the Project Completion Date, and (ii) the Final Completion Date

	
$27,500,000

	
$27,500,000

	
$55,000,000

 

Part II

 

Tranche B Commitments

 

	  	
BNP Paribas

	
Société Générale

	
Aggregate Commitments

	
From the date of this Agreement up to and including the earlier of (i) the Project Completion Date, and (ii) the Final Completion Date

	
$3,250,000

	
$3,250,000

	
$6,500,000

 

Part III

 

Tranche C Commitments

 

	  	
BNP Paribas

	
Société Générale

	
Aggregate Commitments

	
From the date of this Agreement up to 71 months from the Financial Close Date

	
$11,250,000

	
$11,250,000

	
$22,500,000

 

  

190

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