Document:

kci8k_3rdamndmentexhibit41.htm

 

AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT

 

 

This AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT (this "Amendment") dated as of October 2nd, 2009 is by and among Keystone Consolidated
Industries, Inc., a Delaware corporation ("Keystone"), Keystone Wire Products Inc., a Delaware corporation ("KWP"), Engineered Wire Products, Inc., an Ohio corporation ("EWP"), Keystone-Calumet, Inc., a Delaware corporation ("KCI"), F V Steel and Wire Company, a Wisconsin corporation ("F V Steel" and, together with Keystone, KWP, EWP and KCI each individually a "Borrower" and collectively, "Borrowers"), Keystone Energy Resources, LLC, a Delaware limited liability company ("KER"), the parties hereto as lenders
(each individually, a "Lender" and collectively, "Lenders" as hereinafter further defined) and Wachovia Capital Finance Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders (in such capacity, "Agent"). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement (defined below).

 

RECITALS:

 

WHEREAS, Borrowers, the Agent and the Lenders have entered into that certain Loan and Security Agreement dated as of August 31, 2005 (as amended, the "Loan Agreement");

 

WHEREAS, Borrowers have requested that Agent and Lenders agree to certain amendments to the Loan Agreement as set forth herein; and

 

WHEREAS, Agent and Lenders have agreed to such amendments upon the terms and conditions contained herein.

 

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

 

SECTION 1           Amendments to the Loan Agreement.    Immediately upon the satisfaction of each of the conditions precedent set forth in Section 3 below, the
Loan Agreement is hereby amended as follows:

 

(a)   The definition of "Adjusted Eurodollar Rate" set forth in Section 1 of the Loan Agreement is hereby amended by adding
the following new sentence to the end of such definition:

 

"Notwithstanding the foregoing, in no event shall the "Adjusted Eurodollar Rate" be less than 1.0%."

 

(b)   The definition of "Fixed Charges" set forth in Section 1 of the Loan Agreement is hereby amended and restated to read as follows:

 

"Fixed Charges" means, with respect to any Person for any fiscal period, (a) the aggregate of all Interest Expense paid or payable during such period, plus (b) scheduled payments of principal with respect to

	
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Indebtedness during such period including scheduled payments with respect to Capital Leases, plus (c) income taxes paid or payable in cash during such fiscal period, plus  (d
) all dividend payments and payments made to repurchase Capital Stock during such fiscal period, plus (e) all unfinanced Capital Expenditures made in such fiscal period. This definition of Fixed Charges shall exclude any scheduled lump sum payments required to be made by Borrowers in 2007, 2008 and 2009 on the Remaining Notes."

 

(c)    The definition of "Interest Rate" set forth in Section 1 of the Loan Agreement is hereby amended and restated to read as follows:

 

"Interest Rate" shall mean,

 

              (a)            Subject
to clause (b) of this definition below:

 

	
(i)  
	
as to Prime Rate Loans that are Revolving Loans, a rate equal to 1.0% plus the Prime Rate,

 

	
(ii)  
	
as to Prime Rate Loans that are Term Loans, a rate equal to 1.25% plus the Prime Rate,

 

	
(iii)  
	
as to Eurodollar Rate Loans that are Revolving Loans, a rate equal to 2.75% plus the Adjusted Eurodollar Rate (in each case, based on the London Interbank Offered Rate applicable for the Interest Period selected by a Borrower, or by Administrative Borrower on behalf of such Borrower, as in effect two (2) Business Days prior to the commencement of the Interest
Period, whether such rate is higher or lower than any rate previously quoted to any Borrower or Guarantor),

 

	
(iv)  
	
as to Eurodollar Rate Loans that are Term Loans, a rate equal to 3.00% plus the Adjusted Eurodollar Rate (in each case, based on the Eurodollar Rate applicable for the Interest Period selected by a Borrower, or by Administrative Borrower on behalf of such Borrower, as in effect two (2) Business Days prior to the commencement of the Interest Period, whether
such rate is higher or lower than any rate previously quoted to any Borrower or Guarantor), and

 

	
(v)  
	

as to fees for Letter of Credit Obligations, a rate equal to 3.00%; and;

 

 

	
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(b)           Notwithstanding anything to the contrary contained in clause (a) of this definition, the rates set forth in clause (a) for Prime Rate Loans, Eurodollar Rate Loans and fees for Letter of Credit Obligations shall be increased by an additional two percent (2%) per annum,
at Agent's option, (i) either (A) without notice, for the period on and after the date of termination or non-renewal hereof until such time as all Obligations (other than contingent indemnification obligations not asserted or due) are paid and satisfied in full in immediately available funds, or (B) upon notice to the Administrative Borrower (which notice shall not be required if an Event of Default has occurred and is continuing under Sections 10.1(g) and (h) of this Agreement), for the period from and after
the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing and (ii) on the Revolving Loans to any Borrower at any time outstanding in excess of the Borrowing Base of such Borrower or the Revolving Loan Limit of such Borrower (whether or not such excess(es) arise or are made with or without Agent's or any Lender's knowledge or consent and whether made before or after an Event of Default);

 

(d)   Section 3.2(a) of the Loan Agreement is hereby amended by deleting the language "one quarter of one (.25%) percent" and replacing it with the language "three-eights of
one percent (0.375%)"

 

(e)   Section 9.18 of the Loan Agreement is hereby amended and restated to read as follows:

 

"9.18 Minimum Fixed Charge Coverage Ratio. Borrowers and their Subsidiaries on a consolidated basis shall have, at the end of each calendar month, a Fixed Charge Coverage Ratio for the
12-month period then ending of not less than (a) 0.90:1.0 for the months ending December 31, 2009, January 31, 2010 and February 28, 2010 and (b) 1.0:1.0 for each month ending thereafter."

 

(f)    Section 9.19 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

"9.19 Minimum Excess Availability. Borrowers shall maintain at all times Aggregate Suppressed Availability of at least (a) $10,000,000 through and including March 31, 2010 and (b) $5,000,000 thereafter.

 

SECTION 2    Limited Waiver.Agent and Lenders hereby waive Borrowers compliance with Section 9.17 of the Loan Agreement solely for the period ending September 30, 2009 and Section 9.18
of the Loan Agreement solely for the periods ending September 30, 2009,

	
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October 31, 2009 and November 30, 2009; provided, that Borrowers shall continue to comply with Sections 9.17 and 9.18 of the Loan Agreement for all periods ending December 31, 2009 and thereafter.

 

SECTION 3    Conditions to Effectiveness. The effectiveness of the amendments and waivers set forth in Section 1 above are subject to the satisfaction of each of the following conditions and in each case
in form and substance, and with results, satisfactory to Agent:

 

(a)   Agent shall have received a duly executed counterpart of this Amendment from Borrowers, KER and Required Lenders;

 

(b)   Agent shall have received an amendment fee equal to $100,000 for the ratable benefit of the Lenders executing this Amendment which fee shall be earned in full and payable on the date hereof; and

 

(c)   Agent shall have received resolutions of the Borrowers certified by an officer of the Borrowers approving the transactions contemplated by this Amendment, in form and substance satisfactory to the Agent.

 

SECTION 4    Representations, Warranties and Covenants.In order to induce Agent and Lenders to enter into this Amendment, Borrowers and KER represent, warrant and covenant to Agent and
Lenders, upon the effectiveness of this Amendment, which representations, warranties and covenants shall survive the execution and delivery of this Amendment that:

 

(a)   No Default; etc.No Default or Event of Default has occurred and is continuing after giving effect to this Amendment or would result from the execution
or delivery of this Amendment or the consummation of the transactions contemplated hereby.

 

(b)   Corporate or Limited Liability Company Power and Authority;  Authorization.  Each
Borrower and KER have the power and authority to execute and deliver this Amendment and to carry out the terms and provisions of the Financing Agreements, as amended by this Amendment, to which they are a party and the execution and delivery by such Borrower and KER of this Amendment, and the performance by such Borrower and KER of their obligations hereunder have been duly authorized by all requisite action by such Borrower and KER.

 

(c)   Execution and Delivery.Each Borrower and KER have duly executed and delivered this Amendment.

 

(d)   Enforceability.This Amendment constitutes the legal, valid and binding obligations of each Borrower and KER, enforceable against each Borrower and
KER in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' right generally, and by general principles of equity.

 

(e)   Representations and Warranties.All of the representations and warranties contained in the Financing Agreements (other than those which speak expressly only as of a

	
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different date) are true and correct as of the date hereof after giving effect to this Amendment and the transactions contemplated hereby.

 

SECTION 5            Miscellaneous.

 

(a)   Effect; Ratification. Borrowers acknowledge that all of the reasonable legal expenses incurred by Agent
in connection herewith shall be reimbursable under Section 9.23 of the Loan Agreement. The amendments and waivers set forth herein are effective solely for the purposes set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Financing Agreement or (ii) prejudice any right or rights that any Lender may now have or may have
in the future under or in connection with any Financing Agreement. Each reference in the Financing Agreements to "this Agreement", "herein", "hereof' and words of like import shall mean such Financing Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Financing Agreements and all terms, conditions, representations, warranties, covenants and agreements set forth in the Financing Agreements, except as herein amended are hereby ratified and confirmed and shall remain
in full force and effect.

 

(b)   Counterparts; etc. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together one and the same instrument.
Delivery of an executed counterpart of this Amendment by fax shall have the same force and effect as the delivery of an original executed counterpart of this Amendment. Any party delivering an executed counterpart of this Amendment by fax shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment.

 

(c)   Governing Law. This Amendment shall be deemed a Financing Agreement and shall be governed by, and construed and interpreted in accordance with the internal laws of the
State of Illinois but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

 

(d)   Reaffirmation. Each Borrower and KER reaffirms all of its obligations under Section
14 of the Loan Agreement as a guarantor of the Obligations.

 

[Signature Pages Follow]

	
CH\1 125510 3

  

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IN WITNESS WHEREOF, Agent, Required Lenders, Borrowers and KER have caused this Amendment No. 3 to Loan and Security Agreement to be duly executed as of the day and year first above written.

BORROWERS:

KEYSTONE CONSOLIDATED INDUSTRIES, INC.

By: /s/ Bert E. Downing, Jr                                                    .

Title: V.P. – CFO                                                                 
    

Name:  Bert E. Downing, Jr.                                                   

KEYSTONE WIRE PRODUCTS INC.

By: Dissolved 12/28/07                                                          

Title: ______________________________________

Name: _____________________________________

 

ENGINEERED WIRE PRODUCTS, INC.

By: /s/ Bert E. Downing, Jr                                                    .

Title: V.P. – Treasurer                                                          
  

Name:  Bert E. Downing, Jr.                                                    

F V STEEL AND WIRE COMPANY

By: /s/ Bert E. Downing, Jr                                                    .

Title: V.P. – Treasurer                                                            
 

Name:  Bert E. Downing, Jr.                                         
          

KEYSTONE-CALUMET, INC.

By: /s/ Bert E. Downing, Jr                                                    .

Title: V.P. – CFO                                                                       

Name:  Bert E. Downing, Jr.                                                 
  

CH\ I I 25510 

  

 

  

 

 

 

Agreed and Acknowledged by:

 

KEYSTONE ENERGY RESOURCES, LLC

 

By: /s/ Bert E. Downing, Jr                                                .

Title: V.P. – Treasurer                                                         

Name:  Bert E. Downing, Jr.                                               

 

 

AGENT AND LENDERS:

 

WACHOVIA CAPITAL FINANCE CORPORATION 

(CENTRAL), as Agent and a Lender

 

By: /s/ Laura Dixon                                                           

Title: Vice President

Name: Laura Dixon

CAPITAL ONE LEVERAGE FINANCE CORP. (f/k/a/ 

North Fork Business Capital Corporation), as a Lender

 

By:     __________________________________                                                                  

Title:  __________________________________                                                                      

Name:  _________________________________                                                                     

 

PNC BANK NATIONAL ASSOCIATION, as a Lender

 

By:      __________________________________                                                                 

Title:   __________________________________                                                                    

Name: __________________________________                                                                      

	
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Agreed and Acknowledged by:

 

KEYSTONE ENERGY RESOURCES, LLC

 

By:   _______________________________                                                                                                                                             

Title:  ______________________________                                                                         

Name:   _____________________________                                                                       

 

AGENT AND LENDERS:

 

WACHOVIA CAPITAL FINANCE CORPORATION 

(CENTRAL), as Agent and a Lender

 

By:     _______________________________                                                                      

Title:  _______________________________                                                                         

Name:  ______________________________                                                                         

 

CAPITAL ONE LEVERAGE FINANCE CORP. (f/k/a/ 

North Fork Business Capital Corporation), as a Lender

 

By: /s/ Vik Dewanjee                                              

Title:  Vice President                                              

Name: Vik Dewanjee                                              

 

PNC BANK NATIONAL ASSOCIATION, as a Lender

 

By:   ________________________________                                                                        

Title:   _______________________________                                                                        

Name: _______________________________

	
CH\1125510.

  

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Agreed and Acknowledged by:

 

KEYSTONE ENERGY RESOURCES, LLC

 

By:    ______________________________                                                                      

Title:   _____________________________                                                                       

Name:   ____________________________                                             

 

AGENT AND LENDERS:

 

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), as Agent and a Lender

 

By:    _______________________________                                                                       

Title:  ______________________________                                                                        

Name: ______________________________

 

CAPITAL ONE LEVERAGE FINANCE CORP. (f/k/a/ North Fork Business Capital Corporation), as a Lender

 

By:     ______________________________                                                                      

Title:   ______________________________                                                                        

Name: ______________________________

 

PNC BANK NATION ASSOCIATION, as a Lender

 

By:   ________________________________                                                                        

Title:  _______________________________                                                                         

Name: _______________________________

	
CH\1125510.

  

2amendedca.htm

 

 

Exhibit 10.1

Execution Version

 

$310,000,000

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

Among

 

ABRAXAS PETROLEUM CORPORATION

as Borrower,

 

THE LENDERS PARTY HERETO FROM TIME TO TIME

as Lenders,

 

and

 

SOCIÉTÉ GÉNÉRALE

as Administrative Agent and as Issuing Lender

 

October 5, 2009

 

SG Americas Securities, LLC

as Sole Bookrunner

SG Americas Securities, LLC,

Royal Bank of Canada, ING Capital LLC, and The Royal Bank of Scotland plc

as Co-Lead Arrangers

Royal Bank of Canada and ING Capital LLC

as Co-Syndication Agents

The Royal Bank of Scotland plc

as Documentation Agent

HOUSTON\2319383

  

i

  

TABLE OF CONTENTS

 

	
ARTICLE I 
	
DEFINITIONS AND ACCOUNTING TERMS 
	
2

 

	
  
	
Section 1.01
	
Certain Defined Terms 
	
2

 

	
  
	
Section 1.02
	
Computation of Time Periods 
	
27

 

	
  
	
Section 1.03
	
Accounting Terms; Changes in GAAP 
	
27

 

	
  
	
Section 1.04
	
Types of Advances 
	
27

 

	
  
	
Section 1.05
	
Miscellaneous 
	
27

 

	
ARTICLE II
	
CREDIT FACILITIES 
	
28

 

	
  
	
Section 2.01
	
Commitment for Advances 
	
28

 

	
  
	
Section 2.02
	
Borrowing Base 
	
29

 

	
  
	
Section 2.03
	
Method of Borrowing 
	
33

 

	
  
	
Section 2.04
	
Reduction of the Commitments 
	
35

 

	
  
	
Section 2.05
	
Prepayment of Advances 
	
36

 

	
  
	
Section 2.06
	
Repayment of Advances 
	
39

 

	
  
	
Section 2.07
	
Letters of Credit 
	
39

 

	
  
	
Section 2.08
	
Fees 
	
44

 

	
  
	
Section 2.09
	
Interest 
	
45

 

	
  
	
Section 2.10
	
Payments and Computations 
	
46

 

	
  
	
Section 2.11
	
Sharing of Payments, Etc 
	
47

 

	
  
	
Section 2.12
	
Breakage Costs 
	
47

 

	
  
	
Section 2.13
	
Increased Costs 
	
48

 

	
  
	
Section 2.14
	
Taxes 
	
49

 

	
  
	
Section 2.15
	
Reallocation of Defaulting Lender Commitment, Etc 
	
51

 

	
  
	
Section 2.16
	
Right to Give Drawdown Notices 
	
52

 

	
ARTICLE III
	
CONDITIONS OF LENDING 
	
52

 

	
  
	
Section 3.01
	
Conditions Precedent to Initial Borrowings and the Initial Letter of Credit 
	
52

 

	
  
	
Section 3.02
	
Conditions Precedent to All Borrowings 
	
55

 

	
ARTICLE IV
	
REPRESENTATIONS AND WARRANTIES 
	
56

 

	
  
	
Section 4.01
	
Existence; Subsidiaries 
	
56

 

	
  
	
Section 4.02
	
Power 
	
56

 

  

 

  

	
  
	
Section 4.03
	
Authorization and Approvals 
	
57

 

	
  
	
Section 4.04
	
Enforceable Obligations 
	
57

 

	
  
	
Section 4.05
	
Financial Statements 
	
57

 

	
  
	
Section 4.06
	
True and Complete Disclosure 
	
58

 

	
  
	
Section 4.07
	
Litigation; Compliance with Laws 
	
58

 

	
  
	
Section 4.08
	
Use of Proceeds 
	
58

 

	
  
	
Section 4.09
	
Investment Company Act 
	
59

 

	
  
	
Section 4.10
	
Federal Power Act 
	
59

 

	
  
	
Section 4.11
	
Taxes 
	
59

 

	
  
	
Section 4.12
	
Pension Plans 
	
59

 

	
  
	
Section 4.13
	
Title; Condition of Property; Casualties 
	
60

 

	
  
	
Section 4.14
	
No Burdensome Restrictions; No Defaults 
	
60

 

	
  
	
Section 4.15
	
Environmental Condition 
	
60

 

	
  
	
Section 4.16
	
Permits, Licenses, Etc 
	
61

 

	
  
	
Section 4.17
	
Gas Contracts 
	
62

 

	
  
	
Section 4.18
	
Liens, Titles, Leases, Etc 
	
62

 

	
  
	
Section 4.19
	
Solvency and Insurance 
	
62

 

	
  
	
Section 4.20
	
Hedging Agreements 
	
62

 

	
  
	
Section 4.21
	
Material Agreements 
	
62

 

	
  
	
Section 4.22
	
Canadian Abraxas 
	
63

 

	
  
	
Section 4.23
	
Abraxas Properties 
	
63

 

	
ARTICLE V
	
AFFIRMATIVE COVENANTS 
	
63

 

	
  
	
Section 5.01
	
Compliance with Laws, Etc 
	
63

 

	
  
	
Section 5.02
	
Maintenance of Insurance 
	
64

 

	
  
	
Section 5.03
	
Preservation of Existence, Etc 
	
64

 

	
  
	
Section 5.04
	
Payment of Taxes, Etc 
	
65

 

	
  
	
Section 5.05
	
Visitation Rights 
	
65

 

	
  
	
Section 5.06
	
Reporting Requirements 
	
65

 

	
  
	
Section 5.07
	
Maintenance of Property 
	
70

 

	
  
	
Section 5.08
	
Agreement to Pledge 
	
70

 

	
  
	
Section 5.09
	
Use of Proceeds 
	
70

 

	
  
	
Section 5.10
	
Title Opinions 
	
70

 

ii

 

 

	
  
	
Section 5.11
	
Further Assurances; Cure of Title Defects 
	
70

 

	
  
	
Section 5.12
	
Deposit Accounts 
	
71

	
  
	
Section 5.13
	
Hedge Contracts 
	
71

 

	
ARTICLE VI
	
NEGATIVE COVENANTS 
	
72

 

	
  
	
Section 6.01
	
Liens, Etc 
	
72

 

	
  
	
Section 6.02
	
Debts, Guaranties, and Other Obligations 
	
74

 

	
  
	
Section 6.03
	
Agreements Restricting Liens and Distributions 
	
75

 

	
  
	
Section 6.04
	
Merger or Consolidation; Asset Sales 
	
75

 

	
  
	
Section 6.05
	
Restricted Payments 
	
76

 

	
  
	
Section 6.06
	
Investments 
	
76

 

	
  
	
Section 6.07
	
Affiliate Transactions 
	
77

 

	
  
	
Section 6.08
	
Compliance with ERISA 
	
77

 

	
  
	
Section 6.09
	
Sale-and-Leaseback 
	
78

 

	
  
	
Section 6.10
	
Change of Business 
	
78

 

	
  
	
Section 6.11
	
Organizational Documents, Name Change 
	
78

 

	
  
	
Section 6.12
	
Use of Proceeds; Letters of Credit 
	
79

 

	
  
	
Section 6.13
	
Gas Imbalances, Take-or-Pay or Other Prepayments 
	
79

 

	
  
	
Section 6.14
	
Limitation on Hedging 
	
79

 

	
  
	
Section 6.15
	
Additional Subsidiaries 
	
80

 

	
  
	
Section 6.16
	
Account Payables 
	
80

 

	
  
	
Section 6.17
	
Abraxas Properties 
	
80

 

	
  
	
Section 6.18
	
Current Ratio 
	
80

 

	
  
	
Section 6.19
	
Interest Coverage Ratio 
	
80

 

	
  
	
Section 6.20
	
Leverage Ratio 
	
80

 

	
ARTICLE VII
	
EVENTS OF DEFAULT; REMEDIES 
	
81

 

	
  
	
Section 7.01
	
Events of Default 
	
81

 

	
  
	
Section 7.02
	
Optional Acceleration of Maturity 
	
83

 

	
  
	
Section 7.03
	
Automatic Acceleration of Maturity 
	
83

 

	
  
	
Section 7.04
	
Right of Setoff 
	
84

 

	
  
	
Section 7.05
	
Non-exclusivity of Remedies 
	
84

 

	
  
	
Section 7.06
	
Application of Proceeds 
	
84

 

	
ARTICLE VIII
	
THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER85

 

iii

 

 

	
  
	
Section 8.01
	
Appointment and Authority 
	
85

 

	
  
	
Section 8.02
	
Rights as a Lender 
	
85

 

	
  
	
Section 8.03
	
Exculpatory Provisions 
	
86

 

	
  
	
Section 8.04
	
Reliance by Administrative Agent 
	
86

 

	
  
	
Section 8.05
	
Delegation of Duties 
	
87

 

	
  
	
Section 8.06
	
Successor Administrative Agent and Issuing Lender 
	
87

 

	
  
	
Section 8.07
	
Non-Reliance on Administrative Agent and Other Lenders 
	
88

 

	
  
	
Section 8.08
	
No Other Duties, Etc 
	
88

 

	
  
	
Section 8.09
	
Collateral Matters 
	
88

 

	
  
	
Section 8.10
	
Cure of Defaulting Lender 
	
89

 

	
ARTICLE IX
	
MISCELLANEOUS 
	
89

 

	
  
	
Section 9.01
	
Amendments, Etc 
	
89

 

	
  
	
Section 9.02
	
Notices, Etc 
	
91

 

	
  
	
Section 9.03
	
No Waiver; Cumulative Remedies 
	
93

 

	
  
	
Section 9.04
	
Costs and Expenses 
	
93

 

	
  
	
Section 9.05
	
Indemnification 
	
93

 

	
  
	
Section 9.06
	
Reimbursement by Lenders 
	
94

 

	
  
	
Section 9.07
	
Waiver of Damages 
	
95

 

	
  
	
Section 9.08
	
Successors and Assigns 
	
95

 

	
  
	
Section 9.09
	
Confidentiality 
	
98

 

	
  
	
Section 9.10
	
Counterparts; Effectiveness 
	
98

 

	
  
	
Section 9.11
	
Survival of Representations, etc 
	
99

 

	
  
	
Section 9.12
	
Severability 
	
99

 

	
  
	
Section 9.13
	
Interest Rate Limitation 
	
99

 

	
  
	
Section 9.14
	
Governing Law 
	
99

 

	
  
	
Section 9.15
	
Submission to Jurisdiction; Waiver of Venue; Service of Process 
	
99

 

	
  
	
Section 9.16
	
Waiver of Jury Trial 
	
100

 

	
  
	
Section 9.17
	
USA Patriot Act; OFAC 
	
101

 

	
  
	
Section 9.18
	
Amendment and Restatement 
	
101

 

	
  
	
Section 9.19
	
Integration 
	
101

 

EXHIBITS:

  

iv

  

Exhibit A                              -           Form of Assignment and Acceptance

Exhibit B                               -           Form of Compliance Certificate

Exhibit C                               -           Form of Guaranty

Exhibit D                               -           Form of Mortgage

Exhibit E                                -           Form of Revolving Note

Exhibit F                                -           Form of Term Note

Exhibit G                               -           Form of Notice of Borrowing

Exhibit H                               -           Form of Notice of Conversion or Continuation

Exhibit I                                 -           Form of Pledge Agreement

Exhibit J                                 -           Form of Security Agreement

Exhibit K                                -           Form of Transfer Letters

 

 

SCHEDULES:

Schedule I                                      -           Addresses and Commitments

Schedule 4.01                                -           Subsidiaries

Schedule 4.05                                -           Existing Debt

Schedule 4.07                                -           Litigation

Schedule 4.17                                -           Gas Imbalances

Schedule 4.20                                -           Hedging Agreements

Schedule 4.21                                -           Material Agreements

Schedule 6.07                                -           Affiliate Transactions

 

 
v

  

AMENDED AND RESTATED CREDIT AGREEMENT

 

This Amended and Restated Credit Agreement dated as of October 5, 2009 is among ABRAXAS PETROLEUM CORPORATION, a Nevada corporation ("Borrower"), the lenders party hereto from time to time as Lenders (as defined below), and SOCIÉTÉ
GÉNÉRALE, as Administrative Agent (as defined below) and as Issuing Lender (as defined below).

 

RECITALS:

 

A.           Reference is made to that certain Credit Agreement dated as of June 27, 2007 among Borrower, the lenders party thereto, including the Lenders (the "Existing APC Lenders") and Société Générale
as administrative agent (in such capacity, the "Existing APC Agent") and as issuing lender (in such capacity, the "Existing APC Issuing Lender"), as amended by that certain Amendment No. 1 dated as of February 4, 2009, as further amended by that certain Amendment No. 2 and Waiver dated as of May 13, 2009, and as further amended by that certain Amendment No. 3 and Waiver dated as of
August 7, 2009, in each case by and among Borrower, Existing APC Agent and Existing APC Issuing Lender (as so amended, the "Existing APC Credit Agreement").

 

B.           Reference is made to that certain Amended and Restated Credit Agreement dated as of January 31, 2008 among Abraxas MLP (as defined below), the lenders party thereto, including the Lenders (the "Existing Senior MLP
Lenders") and Société Générale as administrative agent (in such capacity, the "Existing Senior MLP Agent") and as issuing lender (in such capacity, the "Existing Senior MLP Issuing Lender" and, together with the Existing APC Issuing Lender, collectively, the "Existing Issuing Lenders")), as
amended by that certain Amendment No. 1 dated as of January 16, 2009, as further amended by that certain Amendment No. 2 dated as of April 30, 2009, as further amended by that certain Amendment No. 3 dated as of May 7, 2009, as further amended by that certain Amendment No. 4 dated as of June 30, 2009, and as further amended by that certain Amendment No. 5 dated as of July 22, 2009, in each case, by and among Abraxas MLP, Existing Senior MLP Agent, Existing Senior MLP Issuing Lender and the Existing Senior MLP
Lenders party thereto (as so amended, the "Existing Senior MLP Credit Agreement").

 

C.           Reference is made to that certain Subordinated Credit Agreement dated as of January 31, 2008 among Abraxas MLP, the lenders party thereto, including the Lenders (the "Existing Subordinated MLP Lenders" and,
together with the Existing APC Lenders and the Existing Senior MLP Lenders, collectively, the "Existing Lenders") and Société Générale as administrative agent (in such capacity, the "Existing Subordinated MLP Agent" and, together with the Existing APC Agent and the Existing Senior MLP Agent, collectively, the "Existing
Agent") as amended by that certain Amendment No. 1 dated as of January 16, 2009, as further amended by that certain Amendment No. 2 dated as of April 30, 2009, as further amended by that certain Amendment No. 3 dated as of May 7, 2009, as further amended by that certain Amendment No. 4 dated as of June 30, 2009, as further amended by that certain Amendment No. 5 dated as of July 22, 2009, as further amended by that certain Amendment No. 6 dated as of August 13, 2009, and as further amended by that certain
Amendment No. 7 dated as of August 31, 2009, in each case by and among Abraxas MLP, Existing Subordinated MLP Agent, and the Existing Subordinated MLP Lenders party thereto (as so amended, the "Existing Subordinated

 

 

  

1

  

MLP Credit Agreement" and, together with the Existing APC Credit Agreement and the Existing Senior MLP Credit Agreement, collectively, the "Existing Credit Agreements").

 

D.           Pursuant to the Merger Agreement (as defined below), Abraxas MLP will merge with and into Merger Sub (as defined below), a wholly owned direct subsidiary of Borrower substantially simultaneously with the effectiveness of this Agreement.

 

E.           The Borrower, Merger Sub (as successor to Abraxas MLP), the Existing Agents, the Existing Issuing Lenders and the Existing Lenders, together with the other Lenders have agreed to amend and restate (but not extinguish) each of the Existing Credit Agreements in their entirety
as hereinafter set forth through the execution of this Agreement.

 

F.           It is the intention of the parties hereto that (i) this Agreement is an amendment and restatement of the Existing Credit Agreements and not a new or substitute credit agreement, and (ii) the Borrower will assume the full obligations of itself and of Abraxas MLP under the
Existing Credit Agreements.

 

NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained, the parties hereto (i) do hereby agree that the Existing Credit Agreements are amended and restated (but not substituted or extinguished) in their entirety as set forth herein, and (ii) do hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.01                      Certain Defined Terms.  As used in this Agreement, the terms defined above shall have the meaning set forth therein and
the following terms shall have the following meanings:

 

"Abraxas MLP" means Abraxas Energy Partners, L.P., a Delaware limited partnership.

 

"Abraxas Properties" means Abraxas Properties Incorporated, a Texas corporation.

 

"Acceptable Security Interest" in any Property means a Lien which (a) exists in favor of the Administrative Agent for the benefit of the Secured Parties, (b) with respect to Property that is not Borrowing Base Assets, is the only Lien on such Property other than Permitted
Subject Liens and which is superior to all Liens or rights of any other Person in the Property encumbered thereby other than Permitted Subject Liens, (c) with respect to Borrowing Base Assets, is the only Lien on such Property other than Permitted Borrowing Base Liens, and which is superior to all Liens or rights of any other Person in the Property encumbered thereby other than Permitted Borrowing Base Liens, (d) secures the Obligations, and (e) is perfected and enforceable.

 

"Accession Agreement" means that certain Accession Agreement dated as of August 25, 2009 among Merger Sub, Borrower, and Abraxas MLP.

 

"Acquisition" means the purchase by the Borrower or any of its Subsidiaries of any business, including the purchase of associated assets or operations or of stock (or other ownership interests) of a Person.

 

-

  

2

  

"Act" is defined in Section 9.17.

 

"Adjusted Reference Rate" means, for any day, the fluctuating rate per annum of interest equal to the greater of (a) the Reference Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 1⁄2 of 1%, and (c) the Eurodollar Rate in effect
on such day for an Interest Period equal to one month.

 

"Administrative Agent" means Société Générale, in its capacity as agent pursuant to Article VIII, and any successor agent pursuant to Section 8.06.

 

"Administrative Questionnaire" means an administrative questionnaire in a form supplied by the Administrative Agent.

 

"Advance" means a Revolving Advance or a Term Advance.

 

"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.

 

"Agreement" means this Amended and Restated Credit Agreement, as the same may be amended, supplemented, and otherwise modified from time to time.

 

"Applicable Lending Office" means (a) with respect to any Lender, the office, branch, subsidiary, affiliate or correspondent bank of such Lender specified in its Administrative Questionnaire or such other office, branch, subsidiary, affiliate or correspondent bank as such
Lender may from time to time specify to the Borrower and the Administrative Agent from time to time and (b) with respect to the Administrative Agent, the address specified for such Person on Schedule I or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties.

 

"Applicable Margin" means, with respect to any Advance, (a) during such times as any Event of Default exists, 3% per annum plus the rate per annum set forth below for the relevant Type of such Advance based on the present Utilization applicable from time to time, and (b)
at all other times, the rate per annum set forth below for the relevant Type of such Advance based on the relevant Utilization applicable from time to time.  The Applicable Margin for any Advance shall change when and as the relevant Utilization changes and when and as any such Event of Default commences or terminates.

 

	
Utilization
	
Eurodollar Rate Advances
	
Reference Rate Advances

	
Less than or equal to 25%
	
2.50%
	
1.50%

	
Greater than 25% but less than 50%
	
2.75%
	
1.75%

	
Equal to or greater than 50% but less than 75%.
	
3.00%
	
2.00%

	
Equal to or greater than 75% but less than 90%
	
3.25%
	
2.25%

	
Equal to or greater than 90%.
	
3.75%
	
2.75%

 

  

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"Approved Fund" means any Fund 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.

"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of the attached Exhibit A or
any other form approved by the Administrative Agent.

 

"Borrower" shall have the meaning set forth in the preamble hereof.

 

"Borrowing" means a Revolving Borrowing or a Term Borrowing.

 

"Borrowing Base" means at any particular time, the Dollar amount determined in accordance with Section 2.02 (and adjusted from time to time pursuant to Section 2.02 or Section 6.04(b)) on account of Proven Reserves attributable to Oil and Gas Properties of the Borrower and
its Subsidiaries subject to an Acceptable Security Interest and described in the most recent Independent Engineering Report or Internal Engineering Report, as applicable, delivered to the Administrative Agent and the Lenders pursuant to Section 2.02.

 

"Borrowing Base Assets" means, at any time, any assets that are given value in the most recently determined Borrowing Base.

 

"Borrowing Base Deficiency" means the amount by which the aggregate outstanding amount of the Revolving Advances plus the Letter of Credit Exposure exceeds the lesser of (x) the Borrowing Base and (y) the aggregate
Revolving Commitments.

 

"Business Day" means a day of the year on which banks are not required or authorized to close in Houston, Texas and New York, New York, and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on by banks in the London interbank
market.

 

"Business Loan Agreement" means the Business Loan Agreement dated November 13, 2008 by and among Borrower, Abraxas Properties, and PlainsCapital Bank, as amended through the date of this Agreement.

 

"Canadian Abraxas" means Canadian Abraxas Petroleum Corporation, an Alberta, Canada corporation and wholly-owned subsidiary of Borrower.

 

"Capital Leases" means, as applied to any Person, any lease of any Property by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person.

 

"Cash Collateral Account" means a special interest bearing cash collateral account pledged by the Borrower to the Issuing Lender containing cash deposited pursuant to Sections 2.05(b), 2.07(d)(iii), 7.02(b), or 7.03(b) to be maintained with the Issuing Lender in accordance
with Section 2.07(g) and bear interest or be invested in the Issuing Lender's reasonable discretion.

 

 

  

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"CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, state and local analogs, and all rules and regulations and requirements thereunder in each case as now or hereafter in effect.

 

"Change in Control" shall mean the occurrence of any of the following events:

 

(a)           the occurrence of any transaction, the result of which is that the Borrower ceases to own, either directly or indirectly, 100% of the Equity Interest in any Subsidiary;

 

(b)           any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have "beneficial ownership" of
all securities that such person or group has the right to acquire (such right, an "option right"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 25% or more of the Equity Interest of the Borrower; or

 

(c)           during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such
period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or
equivalent governing body.

 

"Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation
or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

 

"Closing Date" means October 5, 2009.

 

"Code" means the Internal Revenue Code of 1986, as amended, and any successor statute.

 

"Collateral" means (a) all "Collateral", "Pledged Collateral" and "Mortgaged Properties" (as defined in each of the Mortgages, the Security Agreements, and the Pledge Agreement, as applicable) or similar terms used in the Security Instruments, and (b) all amounts contained
in the Borrower's and its Subsidiaries' bank accounts.

 

"Commitment" means, as to any Lender, the sum of its Revolving Commitment and its Term Commitment, if applicable.

 

"Commitment Fee Rate" means a 0.500% per annum commitment fee rate.

 

 

  

5

  

"Commitment Termination Date" means the earlier of (a) the Revolving Maturity Date and (b) the earlier termination in whole of the Commitments pursuant to Section 2.04 or Article VII.

 

"Company Group" shall mean Borrower and each Subsidiary.

 

"Compliance Certificate" means a compliance certificate in the form of the attached Exhibit B signed by a Responsible Officer of the Borrower.

 

"Consolidated EBITDAX" means, without duplication, for the Borrower, its consolidated Subsidiaries, and Canadian Abraxas for any period (a) consolidated Net Income for such period plus (b) to the extent
deducted in determining consolidated Net Income, Interest Expense, oil and gas exploration expenses, taxes, depreciation, amortization, depletion, and other non-cash charges for such period (including any provision for the reduction in the carrying value of assets recorded in accordance with GAAP and including non-cash charges resulting from the requirements of SFAS 133 or 143 and any non-cash expenses incurred pursuant to SFAS 123R) for such period plus (c)
all realized net cash proceeds arising from the settlement or monetization of any Hedge Contract (including any Hydrocarbon Hedge Agreement) or upon any Hedge Termination minus (d) all positive non-cash items of income which were included in determining such consolidated Net Income (including non-cash income resulting from the requirements of SFAS 133 or 143).

 

"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.  "Controls",
"Controlled by", "Controlling" and "Controlled" have meanings correlative thereto.  Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, the power to vote 10% or more of the securities having ordinary
voting power for the election of directors, managing general partners or the equivalent.

 

"Controlled Group" means all members of a controlled group of corporations and all businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code.

 

"Convert," "Conversion," and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.03(b).

 

"Credit Extensions" means (a) an Advance made by any Lender, and (b) the issuance, increase or extension of any Letter of Credit by the Issuing Lender.

 

"Debt," for any Person, means without duplication: (a) indebtedness of such Person for borrowed money; (b) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) obligations of such Person to pay the deferred purchase price of Property
or services (including obligations that are non-recourse to the credit of such Person but are secured by the assets of such Person, but excluding trade accounts payable); (d) obligations of such Person as lessee under Capital Leases; (e) the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments; (f) obligations of

 

 

  

6

  

such Person under any Hedge Contract; (g) obligations of such Person owing in respect of mandatorily redeemable preferred stock or other mandatorily redeemable preferred equity interest of such Person; (h) any obligations of such Person owing in connection with any volumetric or production payments; (i) obligations of such Person under
direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (h) above; (j) indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) secured by any Lien on or in respect of any Property of such Person; and (k) all liabilities of such Person
in respect of unfunded vested benefits under any Plan.

 

"Default" means (a) an Event of Default or (b) any event or condition which with notice or lapse of time or both would become an Event of Default.

 

"Defaulting Lender" means, at any time, a Lender as to which the Administrative Agent has notified the Borrower that (i) such Lender has failed for three or more Business Days to comply with its obligations under this Agreement to make an Advance or make a payment to the
Issuing Bank in respect of a Letter of Credit reimbursement obligation (each a “Lender Funding Obligation”), (ii) such Lender has notified the Administrative Agent, or has stated publicly, that it will not comply with any such Lender Funding Obligation hereunder, or has defaulted on its funding obligations generally under other loan agreements or credit agreements or similar
agreements, (iii) such Lender has, for five or more Business Days, failed to confirm in writing to the Administrative Agent, in response to a written request of the Administrative Agent, that it will comply with its funding obligations hereunder, or (iv) a Lender Insolvency Event has occurred and is continuing with respect to such Lender; provided that neither the reallocation of funding obligations provided for in Section 2.15 as a result of a
Lender's being a Defaulting Lender nor the performance by Non-Defaulting Lenders of such reallocated funding obligations will by themselves cause the relevant Defaulting Lender to become a Non-Defaulting Lender; and provided further that a Lender shall not be deemed a Defaulting Lender solely by virtue of the acquisition or maintenance of an ownership interest in such Lender or its Parent Company by a Governmental Authority or an instrumentality
thereof.  Any determination that a Lender is a Defaulting Lender under clauses (i) through (iv) above will be made by the Administrative Agent acting in good faith.  The Administrative Agent will promptly send to all parties hereto a copy of any notice to the Borrower provided for in this definition.

 

"Disposition" means a sale, lease, transfer, assignment, Farmout, conveyance, release, surrender, or other disposition of Property (including any working interest, overriding royalty interest, production payments, net profits interest, royalty interest, or mineral fee interest)
in any transaction or series of transactions.

 

"Dollars" and "$" means lawful money of the United States of America.

 

"Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, (d) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $250,000,000 and approved by the Administrative
Agent and the Issuing Lender in their sole discretion, (e) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and

 

 

  

7

  

Development or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States and such bank is approved by the Administrative Agent and the Issuing Lender in their sole discretion, (f) a finance company, insurance
company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans or securities in the ordinary course of its business and having (together with its Affiliates) total assets in excess of  $250,000,000 and approved by the Administrative Agent and the Issuing Lender in their sole discretion, (g) any other Person (other than a natural person) approved by (i) the Administrative Agent and the Issuing Lender in their sole discretion and
(ii) unless a Default has occurred and is continuing at the time any assignment is effected pursuant to this Agreement, the Borrower; provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any Affiliate or Subsidiary of any member of the Company Group.

 

"Engineering Report" means either an Independent Engineering Report or an Internal Engineering Report and includes the Initial Engineering Report where applicable.

 

"Environment" or "Environmental" shall have the meanings set forth in 42 U.S.C.  9601(8) (1988).

 

"Environmental Claim" means any third party (including governmental agencies and employees) action, lawsuit, claim, demand, regulatory action or proceeding, order, decree, consent agreement or notice of potential or actual responsibility or violation (including claims or
proceedings under the OSHA or similar laws or requirements relating to health or safety of employees) which seeks to impose liability under any Environmental Law.

 

"Environmental Law" means, as to the Borrower or its Subsidiaries, all Legal Requirements or common law theories applicable to the Borrower or its Subsidiaries arising from, relating to, or in connection with the Environment, health, or safety, including CERCLA, relating
to (a) pollution, contamination, injury, destruction, loss, protection, cleanup, reclamation or restoration of the air, surface water, groundwater, land surface or subsurface strata, or other natural resources; (b) solid, gaseous or liquid waste generation, treatment, processing, recycling, reclamation, cleanup, storage, disposal or transportation; (c) exposure to pollutants, contaminants, hazardous, medical and infectious, or toxic substances, materials or wastes; (d) the safety or health
of employees; or (e) the manufacture, processing, handling, transportation, distribution in commerce, use, storage or disposal of hazardous, medical and infectious, or toxic substances, materials or wastes.

 

"Environmental Liability" shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and remediation costs), whether contingent
or otherwise, arising out of or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

 

  

8

  

"Environmental Permit" means any permit, license, order, approval, registration or other authorization under Environmental Law.

 

"Equity Interest" means, with respect to any Person, any shares, interests, participation, or other equivalents (however designated) of corporate stock, membership interests or partnership interests (or any other ownership interests) of such Person.

 

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

"ERISA Affiliate" means each member of a controlled group of corporations and all businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code.

 

"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Federal Reserve Board (or any successor), as in effect from time to time.

 

"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate Advance comprising the same Borrowing, the greater of (a) 2% per annum and (b) the British Bankers Association LIBOR Rate (“BBA LIBOR”),
as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time), for deposits in Dollars at 11:00 a.m.  (London, England time) two Business Days before the first day of such Interest Period and for a period equal to such Interest Period; provided, that, if such rate is not available to the Administrative Agent for any reason, the Eurodollar
Rate shall be an interest rate per annum equal to the rate per annum at which deposits in Dollars are offered by the principal office of Société Générale in London, England to prime banks in the London interbank market at 11:00 a.m.  (London, England time) two Business Days before the first day of such Interest Period in an amount substantially equal to the Eurodollar Rate Advance to be maintained by the Lender that is the Administrative Agent in respect of such Borrowing and
for a period equal to such Interest Period.

 

"Eurodollar Rate Advance" means an Advance which bears interest as provided in Section 2.09(b).

 

"Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages
for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental, or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.

 

"Event of Default" has the meaning specified in Section 7.01.

 

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

 

  

9

  

"Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise or "margin" or similar taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) 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 any Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee request by the Borrower and any Lender party to this Agreement on the Closing Date), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 2.14(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 from any Borrower with respect to such withholding tax pursuant to Section 2.14(a).  Notwithstanding anything to the contrary contained in this definition, "Excluded Taxes" shall not include any withholding tax imposed at any time on payments made by or on behalf of a Borrower that is not a resident of the United States for tax purposes to any Lender, Administrative Agent or Issuing Lender
hereunder or under any other Credit Document, provided that such Lender, such Administrative Agent and such Issuing Lender shall have complied with Section 2.14(e).

 

"Existing Agent" has the meaning set forth in Recital C.

 

"Existing APC Agent" has the meaning set forth in Recital A.

 

"Existing APC Credit Agreement" has the meaning set forth in Recital A.

 

"Existing APC Issuing Lender" has the meaning set forth in Recital A.

 

"Existing APC Lenders" has the meaning set forth in Recital A.

 

"Existing Credit Agreements" has the meaning set forth in Recital C.

 

"Existing Credit Documents" has the meaning set forth in Section 9.18.

 

"Existing Issuing Lenders" has the meaning set forth in Recital B.

 

"Existing Lenders" has the meaning set forth in Recital C.

 

"Existing Letters of Credit" means the letters of credit issued and outstanding under (a) the Existing APC Credit Agreement and (b) the Existing Senior MLP Credit Agreement.

 

"Existing Mortgage" means that certain Deed of Trust, Security Agreement and Financing Statement dated as of November 13, 2008 by Borrower in favor of Les Eubank, as Trustee for the benefit of PlainsCapital Bank, securing the obligations under the Business Loan Agreement
with Liens on Borrower's headquarters located at 18803 Meisner Drive, San Antonio, TX  78258.

 

 

  

10

  

"Existing Senior MLP Agent" has the meaning set forth in Recital B.

 

"Existing Senior MLP Credit Agreement" has the meaning set forth in Recital B.

 

"Existing Senior MLP Issuing Lender" has the meaning set forth in Recital B.

 

"Existing Senior MLP Lenders" has the meaning set forth in Recital B.

 

"Existing Subordinated MLP Agent" has the meaning set forth in Recital C.

 

"Existing Subordinated MLP Credit Agreement" has the meaning set forth in Recital C.

 

"Existing Subordinated MLP Lenders" has the meaning set forth in Recital C.

 

"Expiration Date" means, with respect to any Letter of Credit, the date on which such Letter of Credit will expire or terminate in accordance with its terms.

 

"Farmout" means an arrangement pursuant to agreement whereby the owner(s) of one or more oil, gas and/or mineral lease or other oil and natural gas working interest with respect to a property from which production of Hydrocarbons is sought agrees to transfer or assign an
interest in such property to one or more Persons in exchange for (a) drilling, or participating in the cost of the drilling of (or agreeing to do so) one or more wells, or undertaking other exploration or development activity or participating in the cost of such activity, to attempt to obtain production of Hydrocarbons from such property, or (b) obtaining production of Hydrocarbons from such property, or participating in the costs of such production.

 

"Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for any such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

 

"Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any of its successors.

 

"Fee Letter" means that certain fee letter dated September 8, 2009 among the Borrower, Société Générale, and SG Americas Securities, LLC.

 

"Financial Statements" means (a) the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2008 and the related audited consolidated and consolidating statements of income, cash flow, and retained earnings of the Borrower
and its consolidated Subsidiaries for the fiscal year then ended, (b) the unaudited consolidated and consolidating balance sheet of the Borrower and its consolidated Subsidiaries dated June 30, 2009 and the related unaudited consolidated and consolidating statements of income, cash flow, and retained earnings of the Borrower and its consolidated Subsidiaries for the three month

 

 

  

11

  

period then ended, and (c) the pro forma unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of June 30, 2009 (after giving effect to the Hedge Termination which occurred on July 29, 2009, the Merger and the Credit Extensions occurring on the Initial Funding Date), and including the certification of
a Responsible Officer of the Borrower, all prepared in accordance with GAAP (except for the absence of footnotes and adjustments typically made at year-end), in each case, the copies of which have been delivered to the Administrative Agent and the Lenders.

 

"Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.  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.

 

"Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

 

"GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the requirements of Section 1.03.

 

"Gas Imbalance" means (a) a sale or utilization by Borrower or other members of the Company Group of volumes of natural gas in excess of its gross working interest, (b) receipt of volumes of natural gas into a gathering system and redelivery by Borrower or other members of
the Company Group of a larger or smaller volume of natural gas under the terms of the applicable Transportation Agreement, or (c) delivery to a gathering system of a volume of natural gas produced by Borrower or a member of the Company Group that is larger or smaller than the volume of natural gas such gathering system redelivers for the account of Borrower or such member of the Company Group, as applicable.

 

"Governmental Authority" means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

"Guarantor" means each entity, which may from time to time, execute a Guaranty or a supplement to a Guaranty, including each Subsidiary of the Borrower other than Canadian Abraxas.

 

"Guaranty" means a Guaranty in substantially the form of the attached Exhibit C and executed by a Guarantor.

 

"Hazardous Substance" means the substances identified as such pursuant to CERCLA and those regulated under any other Environmental Law, including pollutants, contaminants, petroleum, petroleum products, radionuclides, radioactive materials, and medical and infectious waste.

 

 

  

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"Hazardous Waste" means the substances regulated as such pursuant to any Environmental Law.

 

"Headquarters" means (a) the premises described as: LOTS 3 AND 4, BLOCK 7, NEW CITY BLOCK 17606, CREEKSIDE@CONCORD PARK (PLANNED UNIT DEVELOPMENT), IN THE CITY OF SAN ANTONIO, BEXAR COUNTY, TEXAS, ACCORDING TO PLAT THEREOF RECORDED
IN VOLUME 9562, PAGE(S) 156-157, DEED AND PLAT RECORDS OF BEXAR COUNTY, TEXAS, together with all of the easements, rights of way, privileges, liberties, hereditaments, strips and gores, streets, alleys, passages, ways, waters, watercourses, rights and appurtenances thereunto belonging
or appertaining, and all of the estate, right, title, interest, claim or demand whatsoever of Abraxas Properties therein and in the streets and ways adjacent thereto, either in law or in equity (collectively, the "Land"); (b) the structures or buildings, and all additions and improvements thereto, now or hereafter erected upon
the Land, including all building materials and Fixtures (hereinafter defined) now or hereafter forming a part of said structures or buildings, or delivered to the Land and intended to be installed in such structures or buildings (collectively, the "Improvements"); and (c) all fixtures owned by Abraxas Properties now or hereafter located on and used in connection with the Land or the Improvements, (collectively, the "Fixtures").

"Hedge Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate swaps or options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject
to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement.

 

"Hedge Termination" means any termination (other than a termination that occurs on the date scheduled for such termination and not as a result of an event of default or other early termination event), cancellation, novation or disposition of any Hedge Contract.

 

"Hedging Report" means the report described in Section 5.06(e).

 

"Hydrocarbon Hedge Agreement" means, as to any Person, a Hedge Contract between such Person and any financial institution or other counterparty which is intended to reduce or eliminate the risk of fluctuations in the price of Hydrocarbons.

 

"Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be

 

 

  

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produced in conjunction therewith from a well bore and all products, by-products, and other substances derived therefrom or the processing thereof, and all other minerals and substances produced in conjunction with such substances, including sulfur, geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores, or substances
of value and the products and proceeds therefrom.

 

"Indemnified Taxes" means Taxes other than Excluded Taxes.

 

"Independent Engineer" means DeGolyer and MacNaughton or any other third party engineering firm acceptable to the Administrative Agent in its sole discretion.

 

"Independent Engineering Report" means a report, in form and substance satisfactory to the Administrative Agent and each of the Lenders, prepared by an Independent Engineer, addressed to the Administrative Agent and the Lenders with respect to the Oil and Gas Properties owned
by the Borrower or any of its Subsidiaries (or to be acquired by the Borrower or any of its Subsidiaries, as applicable) which are, or are to be, included in the Borrowing Base, which report shall (a) specify the location, quantity, and type of the estimated Proven Reserves attributable to such Oil and Gas Properties, (b) contain a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of the net operating revenues to be derived from the production and sale of Hydrocarbons
from such Proven Reserves based on product price and cost escalation assumptions specified by the Administrative Agent and the Lenders which are consistent with the Administrative Agent's and the Lenders' customary internal standards and practices for valuing and redetermining the value of Oil and Gas Properties in connection with reserve based oil and gas loan transactions, and (d) contain such other information as is customarily obtained from and provided in such reports or is otherwise reasonably requested
by the Administrative Agent or any Lender.

 

"Information" is defined in Section 9.09.

 

"Initial Engineering Report" means an Internal Engineering Report dated as of June 1, 2009 and covering the Proven Reserves of the Loan Parties after giving pro forma effect to the Merger and otherwise in form acceptable to the Administrative Agent.

 

"Initial Funding Date" means the earlier of (a) the date on which the initial Advances are made, and (b) the date the initial Letter of Credit is issued.

 

"Intercompany Debt" means Debt incurred by one or more Loan Parties and owing to any other Loan Party or Loan Parties.

 

"Interest Expense" means, for the Borrower, its consolidated Subsidiaries, and Canadian Abraxas for any period, total interest, letter of credit fees, and other fees and expenses incurred in connection with any Debt for such period, whether paid or accrued, including, without
limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, imputed interest under Capital Leases and realized gains and losses under Interest Hedge Agreements, all as determined in conformity with GAAP.

 

"Interest Hedge Agreement" means, as to any Person, a Hedge Contract between such Person and one or more financial institutions providing for the exchange of nominal interest

 

 

  

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obligations between such Person and such financial institution or the cap of the interest rate on any Debt of such Person.

 

"Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Reference Rate Advance into a Eurodollar Rate Advance and ending on the
last day of the period selected by the Borrower pursuant to the provisions below and Section 2.03 and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.03.  The duration of each such Interest Period shall be one, two, three, or six months, in each case as the Borrower may, upon notice received by the Administrative Agent
not later than 11:00 a.m.  (New York time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that:

 

(a)           the Borrower may not select any Interest Period which ends after the Commitment Termination Date;

 

(b)           Interest Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration;

 

(c)           whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, that,
if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; and

 

(d)           any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month in which it
would have ended if there were a numerically corresponding day in such calendar month.

 

"Internal Engineering Report" means a report, in form and substance satisfactory to the Administrative Agent and each Lender, prepared by the Borrower and certified by a Responsible Officer of the Borrower, addressed to the Administrative Agent and the Lenders with respect
to the Oil and Gas Properties owned by the Borrower or any of its Subsidiaries (or to be acquired by the Borrower or any of its Subsidiaries, as applicable) which are, or are to be, included in the Borrowing Base, which report shall (a) specify the location, quantity, and type of the estimated Proven Reserves attributable to such Oil and Gas Properties, (b) contain a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of the net operating revenues to be derived from the
production and sale of Hydrocarbons from such Proven Reserves based on product price and cost escalation assumptions specified by the Administrative Agent and the Lenders which are consistent with the Administrative Agent's and the Lenders' customary internal standards and practices for valuing and redetermining the value of Oil and Gas Properties in connection with reserve based oil and gas loan transactions, and (d) contain such other information as is customarily obtained from and provided in such reports
or is otherwise reasonably requested by the Administrative Agent or any Lender.

 

 

  

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"Issuing Lender" means Société Générale in its capacity as issuer of Letters of Credit hereunder, and any successor Issuing Lender pursuant to Section 8.06.

 

"Leases" means all oil and gas leases, oil, gas and mineral leases, oil, gas and casinghead gas leases, wellbore assignments or any other instruments, agreements, or conveyances under and pursuant to which the owner thereof has or obtains the right to enter upon lands and
explore for, drill, and develop such lands for the production of Hydrocarbons.

 

"Legal Requirement" means, as to any Person, any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or official interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, including
Regulations D, T, U, and X, which is applicable to such Person.

 

"Lender Funding Obligation" has the meaning set forth in the definition of Defaulting Lender.

 

"Lender Hedging Obligations" means all obligations arising from time to time under Hedge Contracts entered into from time to time between any Loan Party and a counterparty that is a Lender or an Affiliate of a Lender; provided that if such counterparty ceases to be a Lender
hereunder or an Affiliate of a Lender hereunder, Lender Hedging Obligations shall only include such obligations to the extent arising from transactions entered into at the time such counterparty was a Lender hereunder or an Affiliate of a Lender hereunder.

 

"Lender Insolvency Event" means that (i) a Lender or its Parent Company is insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors,
or (ii) such Lender or its Parent Company is the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, intervenor or sequestrator or the like has been appointed for such Lender or its Parent Company, or such Lender or its Parent Company has taken any action in furtherance of or indicating its consent to or acquiescence in any such proceeding or appointment.

 

"Lenders" means the lenders listed on the signature pages of this Agreement and each Eligible Assignee that shall become a party to this Agreement pursuant to Section 9.08.

 

"Letter of Credit" means, individually, any standby letter of credit issued by the Issuing Lender for the account of the Borrower in connection with the Commitments and which is subject to this Agreement, and "Letters
of Credit" means all such letters of credit collectively.

 

"Letter of Credit Application" means the Issuing Lender's standard form letter of credit application for standby letters of credit that has been executed by the Borrower and accepted by the Issuing Lender in connection with the issuance of a Letter of Credit.

 

"Letter of Credit Documents" means all Letters of Credit, Letter of Credit Applications, and agreements, documents, and instruments entered into in connection with or relating thereto.

 

 

  

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"Letter of Credit Exposure" means, at any time, the sum of (a) the aggregate undrawn maximum face amount of each Letter of Credit at such time plus (b) the aggregate unpaid amount of all Reimbursement
Obligations at such time.

 

"Letter of Credit Obligations" means any obligations of the Borrower under this Agreement in connection with the Letters of Credit, including the Reimbursement Obligations.

 

"Lien" means any mortgage, lien, pledge, assignment, charge, deed of trust, security interest, hypothecation, preference, deposit arrangement or encumbrance (or other type of arrangement having the practical effect of the foregoing) to secure or provide for the payment of
any obligation of any Person, whether arising by contract, operation of law, or otherwise (including the interest of a vendor or lessor under any conditional sale agreement, synthetic lease, Capital Lease, or other title retention agreement).

 

"Liquid Investments" means:

 

(a)           direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States maturing within 270 days from the date of any acquisition thereof;

 

(b)           (i) negotiable or nonnegotiable certificates of deposit, time deposits, or other similar banking arrangements maturing within 270 days from the date of acquisition thereof or which may be liquidated for the full amount
thereof without penalty or premium ("bank debt securities"), issued by (A) any Lender (or any Affiliate of any Lender), or (B) any other bank or trust company so long as either (x) such certificate of deposit is not pledged to secure the Borrower’s or any Subsidiaries’ ordinary course of business bonding requirements, and (y) the amount thereof is less than or equal to $100,000, or any other bank or trust company, if at the time of deposit or purchase, such bank debt securities are rated
A or A2 or better by either S&P or Moody's, and (ii) commercial paper issued by (A) any Lender (or any Affiliate of any Lender) or (B) any other Person if at the time of purchase such commercial paper is rated at the highest or the second highest credit rating given by either S&P or Moody's, or upon the discontinuance of both of such services, such other nationally recognized rating service or services, as the case may be, as shall be selected by the Borrower with the consent of the Required Lenders;

 

(c)           deposits in money market funds investing exclusively in investments described in clauses (a) and (b) above;

 

(d)           repurchase agreements relating to investments described in clauses (a) and (b) above with a market value at least equal to the consideration paid in connection therewith, with any Person who regularly engages in the business
of entering into repurchase agreements and has a combined capital and surplus and undivided profit of not less than $500,000,000.00, if at the time of entering into such agreement the debt securities of such Person are rated at the highest or the second highest credit rating given by either S&P or Moody's; and

 

(e)           such other instruments (within the meaning of Article 9 of the Uniform Commercial Code in effect in New York) or investment property as the Borrower may request and the Administrative Agent may approve in writing.

 

 

  

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"Liquidity" means an amount equal to (i) the Loan Parties' unrestricted cash plus (ii) Liquid Investments plus (iii) (A) the lesser of the Borrowing Base and the Revolving Commitments minus (B) the aggregate Revolving Credit Extensions.

 

"Loan Documents" means this Agreement, the Notes, the Letter of Credit Documents, the Guaranties, the Security Instruments, any Hedge Contract with a Swap Counterparty, and each other agreement, instrument, or document executed by the Borrower, any Guarantor, or any of the
Borrower’s or a Guarantor’s Subsidiaries or any of their officers at any time in connection with this Agreement.

 

"Loan Party" means the Borrower or any Guarantor.

 

"Material Adverse Change" means (a) a material adverse change in the business, assets (including the Oil and Gas Properties), condition (financial or otherwise), results of operations or prospects of the Borrower individually, or the Company Group, taken as a whole or (b)
a material adverse effect on the Borrower's, individually, or the Company Group's, taken as a whole, ability to perform its obligations under this Agreement, any Note, any Guaranty, or any other Loan Document.

 

"Maximum Exposure Amount" means, at any time for each Lender, the sum of (a) the unfunded Revolving Commitment held by such Lender at such time; plus (b) the aggregate unpaid principal amount of the Revolving Advances held by such Lender at such time, plus (c) such Lender's
Revolving Pro Rata Share of the Letter of Credit Exposure; plus (d) the aggregate unpaid principal amount of the Term Advances held by such Lender at such time.

 

"Maximum Rate" means the maximum nonusurious interest rate under applicable law (determined under such laws after giving effect to any items which are required by such laws to be construed as interest in making such determination, including if required by such laws, certain
fees and other costs).

 

"Merger" means the merger of Abraxas MLP into Merger Sub, as more fully described in the Merger Agreement.

 

"Merger Agreement" means that certain Amended and Restated Agreement and Plan of Merger by and among Borrower, Abraxas MLP, and Merger Sub as defined therein, dated as of July 17, 2009, as modified by the Accession Agreement.

 

"Merger Sub" means Abraxas Merger Sub, LLC, a Delaware limited liability company.

 

"Moody's" means Moody's Investors Service, Inc. and any successor thereto.

 

"Mortgage" means the mortgage or deed of trust executed by any one or more of the Loan Parties in favor of the Administrative Agent for the ratable benefit of the Secured Parties in substantially the form of the attached Exhibit D or
such other form as may be requested by the Administrative Agent, together with any assumptions or assignments of the obligations thereunder by the Borrower, any Guarantor or any of their respective Subsidiaries, as may be amended, amended and restated, or otherwise modified from time to time.

 

 

  

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"Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.

 

"Net Income" means, with respect to the Borrower, its consolidated Subsidiaries, and Canadian Abraxas for any period, the net income for such period after taxes, as determined in accordance with GAAP, excluding, however, (a) extraordinary items, including (i) any
net non-cash gain or loss during such period arising from the sale, exchange, retirement or other disposition of capital assets (such term to include all fixed assets and all securities) other than in the ordinary course of business and (ii) any write-up or write-down of assets (including ceiling test write-downs) and (b) the cumulative effect of any change in GAAP.

 

"Non-Defaulting Lender" means, at any time, a Lender that is not a Defaulting Lender or a Potential Defaulting Lender.

 

"Note" means a Revolving Note or a Term Note.

 

"Notice of Borrowing" means a notice of borrowing in the form of the attached Exhibit G signed by a Responsible Officer of the Borrower.

 

"Notice of Conversion or Continuation" means a notice of conversion or continuation in the form of the attached Exhibit H signed by a Responsible Officer of the Borrower.

 

"Obligations" means (a) all principal, interest, fees, reimbursements, indemnifications, and other amounts payable by the Borrower, any Guarantor or any of their respective Subsidiaries to the Administrative Agent, the Issuing Lender or the Lenders under the Loan Documents
(other than the Hedge Contracts with a Swap Counterparty), including the Letter of Credit Obligations, and (b) all Lender Hedging Obligations.

 

"Oil and Gas Business" means (a) the acquisition, exploration, exploitation, development, operation and disposition of interests in Oil and Gas Properties and Hydrocarbons, (b) the gathering, marketing, treating, processing, storage, selling and transporting of any production
from such interests or properties, including the marketing of Hydrocarbons obtained from unrelated Persons, (c) any business relating to or arising from exploration for or development, production, treatment, processing, storage, transportation or marketing of oil, gas and other minerals and products produced in association therewith, (d) any business relating to oilfield sales and service, and (e) any activity that is ancillary or necessary or desirable to facilitate the activities described in clauses (a) through
(d) of this definition.

 

"Oil and Gas Properties" means fee mineral interests, term mineral interests, Leases, subleases, Farmouts, royalties, overriding royalties, net profit interests, carried interests, production payments, back-in interests and reversionary interests and similar mineral interests,
and all unsevered and unextracted Hydrocarbons in, under, or attributable to such oil and gas Properties and interests.

 

"OFAC" means the Office of Foreign Assets Control.

 

"OSHA" means the Occupational Safety and Health Act 29 U.S.C. § 651 et seq. and its implementing regulations.

 

 

  

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"Other Taxes" means 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 under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.

 

"Parent Company" means, with respect to a Lender, the bank holding company (as defined in Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Lender.

 

"Participant" has the meaning assigned to such term in paragraph (d) of Section 9.08.

 

"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

 

"Permit" means any approval, certificate of occupancy, consent, waiver, exemption, variance, franchise, order, permit, authorization, right or license of or from any Governmental Authority, including an Environmental Permit.

 

"Permitted Borrowing Base Liens" means the Liens permitted under paragraphs (a), (c), (d), (e), (f), (h), (i), and (o) of Section 6.01.

 

"Permitted Holder" means any holder of Equity Interest in the Borrower on the Closing Date.

 

"Permitted Liens" is defined in Section 6.01.

 

"Permitted Subject Liens" means the Liens permitted under paragraphs (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o), and (p) of Section 6.01.

 

"Person" (whether or not capitalized) means an individual, partnership, corporation (including a business trust), joint stock company, limited liability company, limited liability partnership, trust, unincorporated association, joint venture or other entity, Governmental
Authority or other entity.

 

"Plan" means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any member of the Controlled Group and covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code.

 

"Pledge Agreement" means a Pledge Agreement in substantially the form of the attached Exhibit I, executed by the Borrower or any of its Subsidiaries or any of the Guarantors, if applicable,
covering 100% of the Equity Interests owned in each direct or indirect Subsidiary of Borrower.

 

"Potential Defaulting Lender" means, at any time, a Lender (i) as to which the Administrative Agent has notified the Borrower that an event of the kind referred to in the definition of “Lender Insolvency Event” has occurred and is continuing in respect of any
financial institution affiliate of such Lender, (ii) as to which the Administrative Agent or the Issuing Bank has in good faith determined and notified the Borrower and (in the case of the

 

 

  

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Issuing Bank) the Administrative Agent that such Lender or its Parent Company or a financial institution affiliate thereof has notified the Administrative Agent, or has stated publicly, that it will not comply with its funding obligations generally under other loan agreements or credit agreements or other similar financing agreements or
(iii) that has, or whose Parent Company has, a non-investment grade rating from Moody’s or S&P or another nationally recognized rating agency; provided that a Lender shall not be deemed a Potential Defaulting Lender solely by virtue of the acquisition or maintenance of an ownership interest in such Lender or its Parent Company by a Governmental Authority or an instrumentality thereof.  Any determination that a Lender is a Potential
Defaulting Lender under any of clauses (i) through (iii) above will be made by the Administrative Agent or, in the case of clause (ii), the Issuing Bank acting in good faith.  The Administrative Agent will promptly send to all parties hereto a copy of any notice to the Borrower provided for in this definition.

 

"Pro Rata Share" means, with respect to any Lender, the ratio (expressed as a percentage) of aggregate outstanding Term Advances plus aggregate Commitments of such Lender to the aggregate outstanding Term Advances plus aggregate Commitments of all the Lenders, or if all such
Commitments have been terminated, the ratio (expressed as a percentage) of Credit Extensions owing to such Lender to the aggregate Credit Extensions owing to all such Lenders.

 

"Production Report" means the report described in Section 5.06(d).

 

"Projected Oil and Gas Production" means the projected production of oil or gas (measured by volume unit or BTU equivalent, not sales price) for the term of the contracts or a particular month, as applicable, from the Loan Parties' Oil and Gas Properties which are located
in or offshore of the United States to the extent such Oil and Gas Properties have attributable to them proved developed producing oil or gas reserves, as such proved developed producing production is projected in the Initial Engineering Report or most recent Independent Engineering Report or Internal Engineering Report delivered pursuant to Section 5.06(g) below, as applicable, after deducting projected production from any properties or interests sold or under contract for sale that had been included in such
report and, other than as to the Initial Engineering Report, after adding projected production from any properties or interests that had not been reflected in such report but that are reflected in separate or supplemental Independent Engineering Reports or Internal Engineering Reports  meeting the requirements of such Section 5.06(g) and that are otherwise satisfactory to Administrative Agent.

 

"Projections" means, for each of the fiscal years 2009, 2010 and 2011, Borrower’s and the Company Group’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, based on good faith estimates and assumptions made by the management
of the Borrower.

 

"Property" of any Person means any property or assets (whether real, personal, or mixed, tangible or intangible) of such Person.

 

"Proven Reserves" means, at any particular time, the estimated quantities of Hydrocarbons which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs attributable to Oil and Gas Properties

 

 

  

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included or to be included in the Borrowing Base under then existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made).

 

"PV-10" means estimated future net revenue, discounted at a rate of 10% per annum, after income Taxes and with no price or cost escalation or de-escalation in accordance with guidelines promulgated by the SEC, using the Administrative Agent's price deck.

 

"Reference Rate" means a fluctuating interest rate per annum as shall be in effect from time to time equal to the rate of interest publicly announced by Société Générale as its reference rate, whether or not the Borrower has notice thereof.

 

"Reference Rate Advance" means an Advance which bears interest as provided in Section 2.09(a).

 

"Register" has the meaning set forth in of Section 9.08(c).

 

"Regulations D, T, U, and X" mean Regulations D, T, U, and X of the Federal Reserve Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.

 

"Reimbursement Obligations" means all of the obligations of the Borrower to reimburse the Issuing Lender for amounts paid by the Issuing Lender under Letters of Credit as established by the Letter of Credit Applications and Section 2.07(d).

 

"Related Parties" means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

 

"Release" shall have the meaning set forth in CERCLA or under any other Environmental Law.

 

"Reportable Event" means a "reportable event" described in Section 4043 of ERISA and the regulations issued thereunder.

 

"Required Lenders" means (a) other than as provided in clause (b) below, two or more Lenders holding at least 66 2/3% of the aggregate Maximum Exposure Amounts of all Lenders, and (b) at any time when there is only one Lender, such Lender.

 

"Required Revolving Lenders" means, at any time, Revolving Lenders holding at least 66 2/3% of the Revolving Commitments or, if the Revolving Commitments have been terminated or expired, the outstanding amount of the Revolving Credit Extensions with the aggregate amount of
each Revolving Lender's risk participation and funded participation in Letter of Credit Obligations being deemed to be "held" by such Revolving Lender for purposes of this definition).

 

"Required Term Lenders" means, at any time, Term Lenders holding at least 66 2/3% of the unpaid principal amount of the Term Advances.

 

 

  

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"Response" shall have the meaning set forth in CERCLA or under any other Environmental Law.

 

"Responsible Officer" means (a) with respect to any Person that is a corporation, such Person's Chief Executive Officer, President, Chief Financial Officer, or Vice President, (b) with respect to any Person that is a limited liability company, if such Person has officers,
then such Person's Chief Executive Officer, President, Chief Financial Officer, or Vice President, and if such Person is managed by members, then a Responsible Officer of such Person’s managing member, and if such Person is managed by managers, then a manager (if such manager is an individual) or a Responsible Officer of such manager (if such manager is an entity), and (c) with respect to any Person that is a general partnership or a limited liability partnership, the Responsible Officer of such Person’s
general partner or partners.

 

"Restricted Payment" means, with respect to any Person, (a) any direct or indirect dividend or distribution (whether in cash, securities or other Property) with respect to any Equity Interests, including any payment of any kind or character (whether in cash, securities or
other Property) in consideration for or otherwise in connection with any retirement, purchase, redemption or other acquisition of any Equity Interest of such Person, or any options, warrants or rights to purchase or acquire any such Equity Interest of such Person or (b) principal or interest payments (in cash, Property or otherwise) on, or redemptions of, subordinated debt of such Person; provided, that, the term "Restricted Payment" shall not include
any dividend or distribution payable solely in Equity Interests of such Person or warrants, options or other rights to purchase such Equity Interests or to exchange such warrants, options or other rights for such Equity Interests.

 

"Revolving Advance" means any advance by a Revolving Lender to the Borrower as part of a Revolving Borrowing and refers to a Reference Rate Advance or a Eurodollar Rate Advance.

 

"Revolving Borrowing" means, subject to Section 2.03(c)(ii), a borrowing consisting of simultaneous Revolving Advances of the same Type made by each Revolving Lender pursuant to Section 2.03(a), continued by each Lender pursuant to Section 2.03(b), or Converted by each
Lender to Advances of a different Type pursuant to Section 2.03(b).

 

"Revolving Commitment" means, for any Revolving Lender, the amount set opposite such Revolving Lender's name on Schedule I as its Revolving Commitment, or if such Revolving Lender has entered
into any Assignment and Acceptance, as set forth for such Revolving Lender as its Revolving Commitment in the Register maintained by the Administrative Agent pursuant to Section 9.08(c), as such amount may be reduced or terminated pursuant to Section 2.04 or Article VII or otherwise under this Agreement.  The initial amount of the aggregate Revolving Commitments is $300,000,000, subject to the Borrowing Base.

 

"Revolving Credit Extension" means (a) a Revolving Advance made by any Revolving Lender, and (b) the issuance, increase or extension of any Letter of Credit by the Issuing Lender.

 

 

  

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"Revolving Lenders" means Lenders having a Revolving Commitment, or if such Revolving Commitments have been terminated, Lenders that are owed repayments of Revolving Advances.

 

"Revolving Maturity Date" means October 5, 2012.

 

"Revolving Note" means a promissory note of the Borrower payable to the order of any Revolving Lender in an amount not to exceed the Revolving Commitment of such Revolving Lender, in substantially the form of the attached Exhibit
E, evidencing indebtedness of the Borrower to such Revolving Lender resulting from Revolving Advances owing to such Revolving Lender.

 

"Revolving Pro Rata Share" means, with respect to any Lender, (a) with respect to amounts owing under the Revolving Commitments, (i) if such Revolving Commitments have not been canceled, the ratio (expressed as a percentage) of such Lender's uncancelled Revolving Commitment
at such time to the aggregate uncancelled Revolving Commitments at such time, or (ii) if the aggregate Revolving Commitments have been terminated, the ratio as determined pursuant to the preceding clause (i) immediately prior to such termination or (b) with respect to amounts owing generally under this Agreement and the other Loan Documents, the ratio (expressed as a percentage) of aggregate Revolving Commitments of such Lender to the aggregate Revolving Commitments of all the Lenders (or if such Revolving Commitments
have been terminated, the ratio (expressed as a percentage) of Revolving Credit Extensions owing to such Lender to the aggregate Revolving Credit Extensions owing to all such Lenders.

 

"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

 

"Sandia" means Sandia Operating Corp., a Texas corporation.

 

"SEC" means the United States Securities and Exchange Commission.

 

"Secured Parties" means the Administrative Agent, the Issuing Lender, the Lenders, and the Persons that are owed Lender Hedging Obligations.

 

"Security Agreements" means the Security Agreements, each in substantially the form of the attached Exhibit J, executed by the Borrower, any of its Subsidiaries, or any of the Guarantors.

 

"Security Instruments" means, collectively: (a) the Mortgages, (b) the Transfer Letters, (c) the Pledge Agreement, (d) the Security Agreements, (e) each other agreement, instrument or document executed at any time in connection with the Pledge Agreement, the Security
Agreements, or the Mortgages, (f) each agreement, instrument or document executed in connection with the Cash Collateral Account, and (g) each other agreement, instrument or document executed at any time in connection with securing the Obligations.

 

"Solvent" means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including contingent liabilities,
of such

 

 

  

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Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations, and
other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to current and anticipated future capital requirements
and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is engaged.  In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount which, in light of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

"Subsidiary" means, with respect to any Person (the "parent") at any date, any other Person the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements
if such financial statements were prepared in accordance with GAAP as of such date, as well as any Person, a majority of whose outstanding Voting Securities (other than directors' qualifying shares) shall at any time be owned by such parent or one or more Subsidiaries of such parent.  Unless otherwise specified (a) all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower and (b) Canadian Abraxas shall not be considered a Subsidiary of the
Borrower for purposes of this Agreement or any other Loan Document.

 

"Swap Counterparty" means any Lender (or Affiliate of a Lender) that is party to any Hedge Contract with the Borrower or any of its Subsidiaries.

 

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

 

"Term Advance" means a one-time advance by a Term Lender to the Borrower as a part of a Term Borrowing and refers to a Reference Rate Advance or a Eurodollar Rate Advance.

 

"Term Borrowing" means the Borrowing consisting of simultaneous Term Advances made pursuant to Section 2.01(a), continued by each Term Lender pursuant to Section 2.03(b), or Converted by each Term Lender to Term Advances of a different Type pursuant to Section 2.03(b).

 

"Term Commitment" means for any Term Lender, the amount set opposite such Term Lender's name on Schedule I as its Term Commitment or if such Term Lender has entered into any Assignment and
Acceptance, as set forth for such Term Lender as its Term Commitment in the Register maintained by the Administrative Agent pursuant to Section 9.08(c); provided that, after the Closing Date, the Term Commitment of each Term Lender shall be zero. The aggregate Term Commitments on the date hereof are equal to $10,000,000.

 

 

  

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"Term Lenders" means Lenders having a Term Commitment or after such Term Commitments have been terminated, Lenders that are owed Term Advances.

 

"Term Loan" means the loans evidenced by Term Notes to be made by the Term Lenders to the Borrower hereunder.

 

"Term Maturity Date" means December 31, 2010.

 

"Term Note" means a promissory note of the Borrower payable to the order of a Term Lender in the amount of such Term Lender's initial Term Commitment (or if such Term Lender has entered into any Assignment and Acceptance, as set forth for such Term Lender as its outstanding
Term Advances in the Register maintained by the Administrative Agent pursuant to Section 9.08(c)), in substantially the same form as Exhibit F, evidencing indebtedness of the Borrower to such Term Lender resulting from any Term Advances owing to such Term Lender.

 

"Termination Event" means (a) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), (b) the withdrawal of the
Borrower or any of its Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan.

 

"Total Debt" means, as of any date of determination, the outstanding principal amount of the Debt of the Borrower, its Subsidiaries, and Canadian Abraxas on a consolidated basis, excluding (a) Debt under the Business
Loan Agreement that is permitted under Section 6.02, (b) obligations in respect of surety bonds, and (c) the net obligations of the Borrower and its Subsidiaries under Hedge Contracts, in each case to the extent included in Debt.

 

"Total Debt to Consolidated EBITDAX Ratio" means, as of any date of determination, the ratio of (a) Total Debt as of such date to (b) Consolidated EBITDAX for the period of the four fiscal quarters most recently ended.

 

"Transfer Letters" means, collectively, the letters in lieu of transfer orders in substantially the form of the attached Exhibit K and executed by the Borrower, any Guarantor or any of their
respective Subsidiaries executing a Mortgage.

 

"Type" has the meaning set forth in Section 1.04.

 

"Unreallocated Portion" has the meaning set forth in Section 2.15(b).

 

"Unused Revolving Commitment Amount" means, with respect to a Lender at any time, the lesser of (a) such Lender’s Revolving Commitment at such time and (b) such Lender’s Revolving Pro Rata Share of the Borrowing Base then in effect at such time minus,
in each case, the sum of (i) the aggregate outstanding principal amount of all Revolving Advances owed

 

 

  

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to such Lender at such time plus (ii) such Lender’s Revolving Pro Rata Share of the aggregate Letter of Credit Exposure at such time.

 

"Utilization" means the percentage obtained by dividing (a) the outstanding principal amount of the Advances and the Letter of Credit Exposure at such time by (b) the lesser of (i) the Commitments and (ii) the Borrowing Base in effect at such time.

 

"Voting Securities" means (a) with respect to any corporation (including any unlimited liability company), capital stock of such corporation having general voting power under ordinary circumstances to elect directors of such corporation (irrespective of whether at the time
stock of any other class or classes shall have or might have special voting power or rights by reason of the happening of any contingency), (b) with respect to any partnership, any partnership interest or other ownership interest having general voting power to elect the general partner or other management of the partnership or other Person, and (c) with respect to any limited liability company, membership certificates or interests having general voting power under ordinary circumstances to elect managers
of such limited liability company.

 

Section 1.02                      Computation of Time Periods.  In this Agreement, with respect to the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding".

 

Section 1.03                      Accounting Terms; Changes in GAAP.  Except as otherwise expressly provided herein, all accounting terms used herein shall
be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at the time of delivery thereof) be prepared, in accordance with GAAP applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Lenders hereunder (which prior to the delivery of the first financial statements under Section 5.06, shall mean the Financial
Statements).  All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with that used in the preparation of the annual or quarterly financial statements furnished to the Lenders pursuant to Section 5.06 most recently delivered prior to or concurrently with such calculations (or, prior to the delivery of the first financial statements under Section 5.06, used
in the preparation of the Financial Statements).  In addition, all calculations and defined accounting terms used herein shall, unless expressly provided otherwise, when referring to any Person, where applicable, refer to such Person on a consolidated basis and mean such Person and its consolidated Subsidiaries.

 

Section 1.04                      Types of Advances.  Advances are distinguished by "Type."  The
"Type" of an Advance refers to the determination whether such Advance is a Eurodollar Rate Advance or Reference Rate Advance.

 

Section 1.05                      Miscellaneous.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever
the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation."  The word "will" shall be construed to have the same meaning and effect as the word "shall."

 

 

  

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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 herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) 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, (d) all references herein to Articles, Sections, paragraphs, Exhibits and Schedules shall be construed to refer to Articles, Sections and paragraphs, of, and Exhibits
and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time and (f) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

ARTICLE II

 

CREDIT FACILITIES

 

Section 2.01                      Commitment for Advances.

 

(a)           Term Advances. Each Term Lender severally agrees, on the terms and conditions set forth in this Agreement (including without limitation, the terms set forth in Section 3.01), to make to the Borrower on the
Initial Funding Date a Term Advance in an amount not to exceed such Lender's Term Commitment. The Borrower may not reborrow any Term Advances that have been repaid.

 

(b)           Revolving Advances.  Each Revolving Lender severally agrees, on the terms and conditions set forth in this Agreement (including without limitation, the terms set forth in Section 3.01), to make
Revolving Advances to the Borrower from time to time on any Business Day during the period from the date of this Agreement until the Revolving Commitment Termination Date in an amount for each Revolving Lender not to exceed such Revolving Lender’s Unused Revolving Commitment Amount.  Each Revolving Borrowing shall, in the case of Revolving Borrowings consisting of Reference Rate Advances, be in an aggregate amount not less than $250,000 and in integral multiples of $100,000 in excess thereof,
and in the case of Revolving Borrowings consisting of Eurodollar Rate Advances, be in an aggregate amount not less than $500,000 and in integral multiples of $100,000 in excess thereof, and in each case shall consist of Revolving Advances of the same Type made on the same day by the Revolving Lenders ratably according to their respective Revolving Commitments.  Within the limits of each Revolving Lender's Revolving Commitment, and subject to the terms of this Agreement, the Borrower may from time to
time borrow, prepay, and reborrow Revolving Advances.

 

(c)           Evidence of Debt.

 

(i)           The Advances made by each Lender shall be evidenced by the records maintained by the Administrative Agent in the ordinary course of business.  The records maintained by the Administrative Agent shall be conclusive absent manifest error of the amount of the Advances
made by the Lenders to the Borrower and the interest and payments thereon.

 

 

  

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Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative
Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender to Borrower made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence the obligation of the Borrower to repay to such Lender’s Advances to such Borrower in addition to such records maintained by the Administrative Agent.  Each
Lender may attach schedules to a Note and endorse thereon the date, Type (if applicable), amount, currency and maturity of its Loans and payments with respect thereto, but such action or the failure to do so shall not control over the records thereof maintained by the Administrative Agent.

 

(ii)           In addition to the accounts and records referred to in subsection (i), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of
Credit.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

 

Section 2.02                      Borrowing Base.

 

(a)           Borrowing Base.  The initial Borrowing Base with respect to the Revolving Commitment in effect as of the date of this Agreement has been set by the Administrative Agent and the Revolving Lenders
and acknowledged by the Borrower as $145,000,000.  Such initial Borrowing Base shall remain in effect until the next redetermination made pursuant to this Section 2.02 or Section 6.04(b).  The Borrowing Base shall be determined in accordance with the standards set forth in Section 2.02(d) and is subject to periodic redetermination pursuant to Sections 2.02(b), 2.02(c) and 6.04(b).

 

(b)           Calculation of Borrowing Base.

 

(i)           The Borrower shall deliver to the Administrative Agent and each of the Lenders on or before each February 28 or February 29, as applicable (beginning February 28, 2010) an Independent Engineering Report dated effective as of the immediately preceding December 31, and
such other information as may be reasonably requested by any Revolving Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base.  Within thirty (30) days after receipt of the Independent Engineering Report and such other information, the Administrative Agent shall make an initial determination of the new Borrowing Base and upon such initial determination shall promptly notify the Revolving Lenders in writing of its initial determination of the proposed Borrowing
Base.  Subject to the last sentence of this Section 2.02(b)(i), the Required Revolving Lenders shall approve or reject the Administrative Agent’s initial determinations of the proposed Borrowing Base by written notice to the Administrative Agent within fifteen (15) days of the Administrative Agent’s notification of its initial determinations; provided, however that, the failure by any Revolving Lender to confirm in writing the Administrative Agent’s determination of the proposed Borrowing
Base within such

 

 

  

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fifteen (15) day period shall be deemed an approval of such proposed Borrowing Base by such Revolving Lender.  If the Required Revolving Lenders fail to approve any such proposed Borrowing Base determined by the Administrative Agent hereunder in such fifteen (15) day period, then the Administrative Agent shall poll the Revolving
Lenders to ascertain the highest proposed Borrowing Base then acceptable to the Required Revolving Lenders for purposes of this Section 2.02(b)(i) and, subject to the last sentence of this Section 2.02(b)(i), such amounts shall become the new Borrowing Base, effective on the date specified in this Section 2.02(b)(i).  Until such approval or deemed approval, the Borrowing Base in effect before the proposed Borrowing Base shall remain in effect.  Upon agreement by the Administrative Agent and
the Required Revolving Lenders of the new Borrowing Base, the Administrative Agent shall, by written notice to the Borrower and the Revolving Lenders, designate the new Borrowing Base available to the Borrower.  Such designation shall be effective as of the Business Day specified in such written notice (or, if no effective date is specified in such written notice, the next Business Day following delivery of such written notice) and such new Borrowing Base shall remain in effect until the next determination
or redetermination of the Borrowing Base in accordance with this Agreement.  Notwithstanding anything contained herein to the contrary, (A) any determination or redetermination of the Borrowing Base resulting in any increase of the Borrowing Base in effect immediately prior to such determination or redetermination shall require the written approval (and not deemed approval) of all the Revolving Lenders in their sole discretion but subject to paragraph (d) of this Section 2.02, (B) in no event shall
the determined or redetermined Borrowing Base exceed the aggregate Commitments of the Revolving Lenders, and (C) any determination or redetermination of the Borrowing Base resulting in any decrease of the Borrowing Base in effect immediately prior to such determination or redetermination shall not require the approval of any Defaulting Lender (and the definition of "Required Revolving Lenders" will automatically be deemed modified accordingly with respect to any such determination or redetermination).

 

(ii)           The Borrower shall deliver to the Administrative Agent and each Lender on or before each August 31, beginning August 31, 2010, an Internal Engineering Report dated effective as of the immediately preceding June 30, and such other information as may be reasonably requested
by the Administrative Agent or any Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base.  Within thirty (30) days after receipt of the Internal Engineering Report and such other information, the Administrative Agent shall make an initial determination of the new Borrowing Base and upon such initial determination shall promptly notify the Revolving Lenders in writing of its initial determination of the proposed Borrowing Base.  Subject to the last
sentence of this Section 2.02(b)(ii), the Required Revolving Lenders shall approve or reject the Administrative Agent’s initial determinations of the proposed Borrowing Base by written notice to the Administrative Agent within fifteen (15) days of the Administrative Agent’s notification of its initial determinations; provided, however that, the failure by any Revolving Lender to confirm in writing the Administrative Agent’s determination of the proposed Borrowing Base within such fifteen (15)
day period shall be deemed an approval of the such proposed Borrowing Base by such Revolving Lender.  If the Required Revolving Lenders fail to approve any such proposed Borrowing Base determined by the Administrative Agent hereunder in such fifteen (15) day period, then the Administrative Agent shall poll the Revolving Lenders to ascertain the highest proposed Borrowing Base then acceptable to the Required Revolving Lenders for purposes of this Section 2.02(b)(ii) and, subject to the last sentence
of this Section 2.02(b)(ii), such amounts shall become

 

 

  

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the new Borrowing Base, effective on the date specified in this Section 2.02(b)(ii).  Until such approval or deemed approval, the Borrowing Base in effect before the proposed Borrowing Base shall remain in effect.  Upon agreement by the Administrative Agent and the Required Revolving Lenders of the new Borrowing Base,
the Administrative Agent shall, by written notice to the Borrower and the Revolving Lenders, designate the new Borrowing Base available to the Borrower.  Such designation shall be effective as of the Business Day specified in such written notice (or, if no effective date is specified in such written notice, the next Business Day following delivery of such written notice) and such new Borrowing Base shall remain in effect until the next determination or redetermination of the Borrowing Base in accordance
with this Agreement.  Notwithstanding anything contained herein to the contrary, (A) any determination or redetermination of the Borrowing Base resulting in any increase of the Borrowing Base in effect immediately prior to such determination or redetermination shall require the written approval (and not deemed approval) of all the Revolving Lenders in their sole discretion but subject to paragraph (d) of this Section 2.02, (B) in no event shall the determined or redetermined Borrowing Base exceed the
aggregate Commitments of the Revolving Lenders, and (C) any determination or redetermination of the Borrowing Base resulting in any decrease of the Borrowing Base in effect immediately prior to such determination or redetermination shall not require the approval of any Defaulting Lender (and the definition of "Required Revolving Lenders" will automatically be deemed modified accordingly with respect to any such determination or redetermination).

 

(iii)           In the event that the Borrower does not furnish to the Administrative Agent and the Revolving Lenders the Independent Engineering Report, Internal Engineering Report or other information specified in clauses (i) and (ii) above by the date specified therein, the Administrative
Agent and the Revolving Lenders may nonetheless redetermine the Borrowing Base and redesignate the Borrowing Base from time to time thereafter in their sole discretion until the Administrative Agent and the Revolving Lenders receive the relevant Independent Engineering Report, Internal Engineering Report, or other information, as applicable, whereupon the Administrative Agent and the Revolving Lenders shall redetermine the Borrowing Base as otherwise specified in this Section 2.02.

 

(iv)           Each delivery of an Engineering Report by the Borrower to the Administrative Agent and the Revolving Lenders shall constitute a representation and warranty by the Borrower to the Administrative Agent and the Revolving Lenders that (A) the Borrower and its Subsidiaries,
as applicable, own the Oil and Gas Properties specified therein subject to an Acceptable Security Interest and free and clear of any Liens (except Permitted Liens), and (B) on and as of the date of such Engineering Report each Oil and Gas Property described as "proved developed" therein was developed for oil and/or gas, and the wells pertaining to such Oil and Gas Properties that are described therein as producing wells ("Wells"), were each producing oil and/or gas in paying quantities, except for Wells that
were utilized as water or gas injection wells or as water disposal wells.  Additionally, the Borrower shall deliver with each such Engineering Report a list of any Proven Reserves that have been sold or acquired by the Borrower and its Subsidiaries since the date of the last Engineering Report delivered to the Administrative Agent; provided that, such requirement shall not constitute nor be construed as a consent to any sale or proposed sale that would not be permitted under the terms of this Agreement.

 

 

  

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(c)           Interim Redetermination.  In addition to the Borrowing Base redeterminations provided for in Section 2.02(b), the Administrative Agent and the Revolving Lenders may (i) in their sole discretion
make one additional redetermination of the Borrowing Base during any six-month period between scheduled redeterminations and (ii) at the request of the Borrower make one additional redetermination of the Borrowing Base during any six-month period between scheduled redeterminations, and in any case, based on such information as the Administrative Agent and the Revolving Lenders deem relevant (but in accordance with Section 2.02(d)).  Additionally, the Administrative Agent and the Revolving Lenders may
request (A) an additional redetermination in connection with any sale or proposed sale of Oil and Gas Properties of the Borrower or any of its Subsidiaries having a market value that would, when aggregated with all other such sales that have been consummated since the date of the last redetermination, equal or exceed an amount equal to 5% of the Borrowing Base then in effect; provided that, such request shall not constitute nor be construed as a consent to any sale or proposed sale that would not be permitted
under the terms of this Agreement, (B) an additional redetermination in connection with any Hedge Termination if such Hedge Termination, when aggregated with all other such Hedge Terminations that have been consummated since the date of the last redetermination, could reasonably be expected to result in a decrease of 5% or more to the collateral value of the Oil and Gas Properties which are given value in the Borrowing Base most recently in effect, as determined by the Administrative Agent in its sole discretion;
provided that, such request shall not constitute nor be construed as a consent to any Hedge Termination that would not be permitted under the terms of this Agreement, and (C) an additional redetermination if the net aggregate amount of Gas Imbalances with respect to the Oil and Gas Properties of the Borrower and its Subsidiaries exceeds at any time an amount equal to 1% of the Proven Reserves that are categorized as "proved, developed and producing" on the most recently delivered Engineering Report; provided
that, such request shall not constitute nor be construed as a consent to or a waiver of any Default or Event of Default occurring as a result of any such Gas Imbalance.  The party requesting the redetermination shall give the other parties at least 10 days' prior written notice that a redetermination of the Borrowing Base pursuant to this paragraph (c) is to be performed.  In connection with any redetermination of the Borrowing Base under this Section 2.02(c), the Borrower shall provide the
Administrative Agent and the Revolving Lenders with such information regarding the Borrower and its Subsidiaries' business (including its Oil and Gas Properties, the Proven Reserves, and production relating thereto) as the Administrative Agent or any Revolving Lender may request, including, without limitation, an updated Independent Engineering Report.  The Administrative Agent shall promptly notify the Borrower in writing of each redetermination of the Borrowing Base pursuant to this Section 2.02(c)
and the amount of the Borrowing Base as so redetermined.

 

(d)           Standards for Redetermination.  Each redetermination of the Borrowing Base by the Administrative Agent and the Revolving Lenders pursuant to this Section 2.02 shall be made (i) in the sole discretion
of the Administrative Agent and the Revolving Lenders (but in accordance with the other provisions of this Section 2.02(d)), (ii) in accordance with the Administrative Agent's and the Revolving Lenders' customary internal standards and practices for valuing and redetermining the value of Oil and Gas Properties in connection with reserve based oil and gas loan transactions, (iii) in conjunction with the most recent Independent Engineering Report or Internal Engineering Report, as applicable, or other information
received by the Administrative Agent and the Revolving Lenders relating to the Proven Reserves of the Borrower and its Subsidiaries, and (iv) based upon the estimated value of the Proven Reserves

 

 

  

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owned by the Borrower and its Subsidiaries as determined by the Administrative Agent and the Revolving Lenders.  In valuing and redetermining the Borrowing Base, the Administrative Agent and the Revolving Lenders may also consider the business, financial condition, and Debt obligations of the Borrower and its Subsidiaries and
such other factors as the Administrative Agent and the Revolving Lenders customarily deem appropriate.  In that regard, the Borrower acknowledges that the determination of the Borrowing Base reflects a loan amount to market value percentage differential which is essential for the adequate protection of the Administrative Agent and the Revolving Lenders.  No Proven Reserves shall be included or considered for inclusion in the Borrowing Base unless the Administrative Agent and the Revolving
Lenders shall have received, at the Borrower's expense, evidence of title satisfactory in form and substance to the Administrative Agent that the Administrative Agent has an Acceptable Security Interest in the Oil and Gas Properties relating thereto pursuant to the Security Instruments.  At all times after the Administrative Agent has given the Borrower notification of a redetermination of the Borrowing Base under this Section 2.02, the Borrowing Base shall be equal to the redetermined amount or such
lesser amount designated by the Borrower and disclosed in writing to the Administrative Agent and the Revolving Lenders until the Borrowing Base is subsequently redetermined in accordance with this Section 2.02.

 

Section 2.03                      Method of Borrowing.

 

(a)           Notice.  Each Revolving Borrowing shall be made pursuant to a Notice of Borrowing (or by telephone notice promptly confirmed in writing by a Notice of Borrowing), given not later than 11:00 a.m.  (New
York time) (i) on the third Business Day before the date of the proposed Revolving Borrowing, in the case of a Revolving Borrowing comprised of Eurodollar Rate Advances or (ii) on the Business Day of the proposed Revolving Borrowing, in the case of a Revolving Borrowing comprised of Reference Rate Advances, by the Borrower to the Administrative Agent, which shall in turn give to each Revolving Lender prompt notice of such proposed Revolving Borrowing by facsimile.  Each Notice of Borrowing
shall be in writing (by facsimile or otherwise) specifying the information required therein.  In the case of a proposed Revolving Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly notify each Revolving Lender of the applicable interest rate under Section 2.09(b).  Each Revolving Lender shall, before 12:00 noon (New York time) on the date of such Revolving Borrowing, make available for the account of its Applicable Lending Office to the Administrative
Agent at its address referred to in Section 9.02, or such other location as the Administrative Agent may specify by notice to the Revolving Lenders, in same day funds, in the case of a Revolving Borrowing, such Revolving Lender's Revolving Pro Rata Share of such Revolving Borrowing.  After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent shall make such funds available to the Borrower at its
account with the Administrative Agent.

 

(b)           Conversions and Continuations.  The Borrower may elect to Convert or continue any Revolving Borrowing or Term Borrowing under this Section 2.03 by delivering an irrevocable Notice of Conversion
or Continuation to the Administrative Agent at the Administrative Agent's office no later than 11:00 a.m.  (New York time) (i) on the date which is at least three Business Days in advance of the proposed Conversion or continuation date in the case of a Conversion to or a continuation of a Borrowing comprised of Eurodollar Rate Advances and (ii) on the Business Day of the proposed Conversion, in the case of a Conversion

 

 

  

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to a Borrowing comprised of Reference Rate Advances.  Each such Notice of Conversion or Continuation shall be in writing (by facsimile or otherwise) specifying the information required therein.  Promptly after receipt of a Notice of Conversion or Continuation under this Section, the Administrative Agent shall provide
each Lender with a copy thereof and, in the case of a Conversion to or a continuation of a Borrowing comprised of Eurodollar Rate Advances, notify each Lender of the applicable interest rate under Section 2.09(b).

 

(c)           Certain Limitations.  Notwithstanding anything to the contrary contained in paragraphs (a) and (b) above:

 

(i)           at no time shall there be more than six Interest Periods applicable to outstanding Eurodollar Rate Advances and the Borrower may not select Eurodollar Rate Advances for any Borrowing at any time that a Default has occurred and is continuing;

 

(ii)           if any Lender shall, at least one Business Day before the date of any requested Borrowing, Conversion, or continuation, notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or that
any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its Applicable Lending Office to perform its obligations under this Agreement to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances, the right of the Borrower to select Eurodollar Rate Advances from such Lender shall be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and the Advance made by such Lender in respect
of such Borrowing, Conversion, or continuation shall be a Reference Rate Advance;

 

(iii)           if the Administrative Agent is unable to determine the Eurodollar Rate for Eurodollar Rate Advances comprising any requested Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing shall be suspended
until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Reference Rate Advance;

 

(iv)           if the Required Revolving Lenders shall, at least one Business Day before the date of any requested Revolving Borrowing, notify the Administrative Agent that the Eurodollar Rate for Eurodollar Rate Advances comprising such Revolving Borrowing will not adequately reflect
the cost to such Revolving Lenders of making or funding their respective Eurodollar Rate Advances, as the case may be, for such Revolving Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such Revolving Borrowing or for any subsequent Revolving Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Revolving Lenders that the circumstances causing such suspension no longer exist, and each Revolving Advance comprising such Revolving Borrowing shall
be a Reference Rate Advance; and

 

(v)           if the Borrower shall fail to select the duration or continuation of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01 and paragraph (b) of this Section 2.03,
the Administrative Agent shall forthwith so notify the Borrower and the Lenders and such Advances

 

 

  

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shall be made available to the Borrower on the date of such Borrowing as Reference Rate Advances or, if an existing Advance, Convert into Reference Rate Advances.

 

(d)           Notices Irrevocable.  Each Notice of Borrowing and Notice of Conversion or Continuation shall be irrevocable and binding on the Borrower.  In the case of any Borrowing for which the related
Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, out-of-pocket cost, or expense incurred by such Lender as a result of any failure by the Borrower to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III including any loss (including any loss of anticipated profits), cost, or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.

 

(e)           Funding by Lenders; Presumption by Administrative Agent.  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 paragraph (a) of this Section 2.03 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 a payment to be made by such Lender, the greater of the Federal Funds Rate
and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to Reference Rate Advances.  If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.  If
such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Advance included in such Borrowing.  Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

(f)           Lender Obligations Several.  The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, to make its Advance
on the date of such Borrowing.  No Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.

 

Section 2.04                      Reduction of the Commitments.

 

(a)           Revolving Commitments. The Borrower shall have the right, upon at least three Business Days' irrevocable notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portion
of the Revolving Commitments; provided, that, each partial

 

 

  

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reduction shall be in the aggregate amount of $5,000,000 or in integral multiples of $1,000,000 in excess thereof. Any reduction and termination of the Revolving Commitments pursuant to this Section 2.04 shall be applied ratably to each Revolving Lender's Revolving Commitment and shall be permanent, with no obligation of the Lenders
to reinstate such Revolving Commitments.

 

(b)           Term Commitments. On the making of the Term Advances on the Closing Date, each Lender's Term Commitment shall be reduced to zero. Any reduction or termination of the Term Commitments pursuant to this Section
2.04(b) shall be permanent, with no obligation of the Lenders to reinstate such Term Commitments.

 

(c)           Defaulting Lender. The Borrower may terminate the unused amount of the Revolving Commitment of a Defaulting Lender upon not less than three Business Days’ prior notice to the Administrative Agent (which
will promptly notify the Lenders thereof), and in such event the provisions of Section 2.15(c) will apply to all amounts thereafter paid by the Borrower for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity or other amounts), provided that such termination will not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, the Issuing Bank, or any
Lender may have against such Defaulting Lender.

 

Section 2.05                      Prepayment of Advances.

 

(a)           Optional.  The Borrower may prepay the Revolving Advances and the Term Advances, after giving by 11:00 a.m.  (New York time): (i) in the case of Eurodollar Rate Advances, at
least three Business Days' or (ii) in the case of Reference Rate Advances, same Business Day's, irrevocable prior written notice to the Administrative Agent stating the proposed date and aggregate principal amount of such prepayment.  If any such notice is given, the Borrower shall prepay the Advances in accordance with Borrower's notice in whole or ratably in part in an aggregate principal amount equal to the amount specified in such notice, together with accrued interest to the date of such prepayment
on the principal amount prepaid and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date; provided, however, that each partial prepayment with respect to:  (A) any amounts prepaid in respect of Eurodollar Rate Advances shall be applied to Eurodollar Rate Advances comprising part of the same Borrowing; (B) any prepayments made in respect of Reference Rate Advances
shall be made in minimum amounts of $250,000 and in integral multiples of $100,000 in excess thereof, and (C) any prepayments made in respect of any Borrowing comprised of Eurodollar Rate Advances shall be made in an aggregate principal amount of at least $500,000 and in integral multiples of $100,000 in excess thereof and in an aggregate principal amount such that after giving effect thereto such Borrowing shall have a remaining principal amount outstanding with respect to such Borrowing of at least $100,000.  Full
prepayments of any Borrowing are permitted without restriction of amounts.

 

(b)           Mandatory.

 

(i)           Borrowing Base Deficiency.  Subject to Section 2.05(b)(ii), if a Borrowing Base Deficiency exists, then after receipt of written notice from the Administrative Agent regarding such deficiency,
the Borrower shall,

 

 

  

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(A) (1) within 3 Business Days after the date such deficiency notice is received by the Borrower, deliver a written notice to the Administrative Agent indicating its intent to prepay Revolving Advances or, if the Revolving Advances have been repaid in full, make deposits into the Cash Collateral Account to provide cash collateral for the
Letter of Credit Exposure, such that the Borrowing Base Deficiency is cured, and (2) make such payments and deposits within 10 days after the date such deficiency notice is received by the Borrower;

 

(B) (1) within 3 Business Days after the date such deficiency notice is received by the Borrower, deliver a written notice to the Administrative Agent indicating its intent to pledge as Collateral for the Obligations additional Oil and Gas Properties acceptable to the Required Revolving Lenders in their sole discretion such that the Borrowing
Base Deficiency is cured, and (2) deliver such additional Collateral within 30 days after the date such deficiency notice is received by the Borrower;

 

(C) (1) within 3 Business Days after the date such deficiency notice is received by the Borrower, deliver a written notice to the Administrative Agent indicating the Borrower's election to repay the Revolving Advances and make deposits into the Cash Collateral Account to provide cash collateral for the Letters of Credit, each in three
equal consecutive monthly installments equal to one-third of such Borrowing Base Deficiency with the first such installment due 30 days after the date such deficiency notice is received by the Borrower from the Administrative Agent and each following installment due 30 days after the preceding installment due date, and (2) make such payments and deposits within such time periods; or

 

(D) (1) within 3 Business Days after the date such deficiency notice is received by the Borrower to the Administrative Agent, deliver a written notice to the Administrative Agent indicating the Borrower's election to combine the options provided in clause (B) and clause (C) above, and also indicating the amount to be prepaid in installments
and the amount to be provided as additional Collateral, and (2) make such three equal consecutive monthly installments and deliver such additional Collateral within the time required under clause (B) and clause (C) above.

 

The failure of the Borrower to deliver any such election notice or to perform the actions chosen to remedy a Borrowing Base Deficiency under this Section 2.05(b)(i) shall constitute an Event of Default.

 

(ii)           Asset Disposition or Hedge Termination.  Upon any adjustments to the Borrowing Base pursuant to Section 2.02(c) in connection with a Disposition or Hedge Termination, if a Borrowing Base Deficiency
exists, then the Borrower shall prepay Revolving Advances or, if the Revolving Advances have been repaid in full, make deposits into the Cash Collateral Account to provide cash collateral for the Letter of Credit Exposure, such that the Borrowing Base Deficiency is cured.  The Borrower shall be obligated to make such prepayment and/or deposit of cash collateral on the date it or any Subsidiary receives cash proceeds as a result of such Disposition or Hedge Termination; provided that all payments required
to be made

 

 

  

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pursuant to this Section 2.05(b)(ii) must be made on or prior to the Commitment Termination Date.

 

(iii)           Reduction of Commitments.  On the date of each reduction of the aggregate Revolving Commitments pursuant to Section 2.04, the Borrower agrees to make a prepayment in respect of the outstanding
amount of the Revolving Advances to the extent, if any, that the aggregate unpaid principal amount of all Revolving Advances plus the Letter of Credit Exposure exceeds the lesser of (A) the aggregate Revolving Commitments, as so reduced, and (B) the Borrowing Base.  Each prepayment pursuant to this Section 2.05(b)(iii) shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any,
required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date.  Each prepayment under this Section 2.05(b)(iii) shall be applied to the Revolving Advances as determined by the Administrative Agent and agreed to by the Lenders in their sole discretion, subject to Section 2.15(c).

 

(iv)           Illegality.  If any Lender shall notify the Administrative Agent and the Borrower that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful,
or that any central bank or other Governmental Authority asserts that it is unlawful for such Lender or its Applicable Lending Office to perform its obligations under this Agreement to maintain any Eurodollar Rate Advances of such Lender then outstanding hereunder, (i) the Borrower shall, no later than 11:00 a.m.  (New York time) (A) if not prohibited by law, on the last day of the Interest Period for each outstanding Eurodollar Rate Advance made by such Lender or (B) if required
by such notice, on the second Business Day following its receipt of such notice, prepay all of the Eurodollar Rate Advances made by such Lender then outstanding (or, in the case of the principal of the Term Advance, be deemed to have prepaid), together with accrued interest on the principal amount prepaid (or deemed prepaid) to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date, (ii) such Lender shall simultaneously
make (or, in the case of the Term Advance, be deemed to have made) a Reference Rate Advance to the Borrower on such date in an amount equal to the aggregate principal amount of the Eurodollar Rate Advances prepaid (or deemed prepaid) to such Lender, and (iii) the right of the Borrower to select Eurodollar Rate Advances from such Lender for any subsequent Borrowing shall be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist.

 

(c)           Interests, Costs and Application of Payments.  Each prepayment pursuant to any provision of this Section 2.05 shall be accompanied by accrued interest on the amount prepaid to the date of
such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date.  Except for prepayments under Section 2.05(a), which shall be applied in accordance with Borrower's notice of prepayment, each prepayment under this Section 2.05 (other than paragraph (iv) above) shall be applied to the Advances as determined by the Administrative Agent and agreed to by the Lenders in their sole discretion, subject to Section 2.15(c).

 

(d)           No Additional Right; Ratable Prepayment.  The Borrower shall have no right to prepay any principal amount of any Advance except as provided in this Section 2.05, and all notices given pursuant
to this Section 2.05 shall be irrevocable and binding upon the Borrower.

 

 

  

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Each payment of any Advance pursuant to this Section 2.05 shall be made in a manner such that all Advances comprising part of the same Borrowing are paid in whole or ratably in part, subject to Section 2.15(c).

 

Section 2.06                      Repayment of Advances.

 

(a)           Revolving Advances. The Borrower shall repay to the Administrative Agent for the ratable benefit of the Revolving Lenders the outstanding principal amount of each Revolving Advance, together with any accrued
interest thereon, on the Revolving Maturity Date or such earlier date as is required pursuant to Section 7.02 or Section 7.03.

 

(b)           Term Advances. The Borrower shall repay to the Administrative Agent for the ratable benefit of the Term Lenders the aggregate outstanding principal amount of the Term Advances in installments equal to $1,000,000
on January 31, 2010, $3,000,000 on March 31, 2010, $2,000,000 on June 30, 2010, $2,000,000 on September 30, 2010, and a final installment of the remaining, unpaid principal balance of the Term Advance payable on the Term Maturity Date or such earlier date as is required pursuant to Section 7.02 or Section 7.03. The amounts and dates set forth in the foregoing sentence may be modified by the Administrative Agent in its sole discretion after receipt of the approval of each Term Lender and the Borrower.

 

Section 2.07                      Letters of Credit.

 

(a)           Commitment.  From time to time from the date of this Agreement until 30 days prior to the Revolving Maturity Date, at the request of the Borrower, the Issuing Lender shall, on the terms and conditions
set forth in this Agreement (including without limitation, the terms of Section 3.01), issue, increase, or extend the Expiration Date of, Letters of Credit for the account of the Borrower on any Business Day.  No Letter of Credit will be issued, increased, or extended:

 

(i)           if such issuance, increase, or extension would cause the Letter of Credit Exposure to exceed the lesser of (A) $5,000,000 and (B) the lesser of (1) the aggregate Revolving Commitments minus the aggregate outstanding principal amount of all Revolving Advances at such time
and (2) the Borrowing Base in effect at such time minus the aggregate outstanding principal amount of all Revolving Advances at such time;

 

(ii)           if such Letter of Credit has an Expiration Date later than the earlier of (A) one year after the date of issuance thereof and (B) 30 days prior to the Revolving Maturity Date;

 

(iii)           unless such Letter of Credit Documents are in form and substance acceptable to the Issuing Lender in its sole discretion;

 

(iv)           unless such Letter of Credit is a standby letter of credit not supporting the repayment of indebtedness for borrowed money of any Person;

 

(v)           unless the Borrower has delivered to the Issuing Lender a completed and executed Letter of Credit Application;

 

 

  

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(vi)           unless such Letter of Credit is governed by (1) the ICC Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (2) the International Standby Practices (ISP98), International Chamber
of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender; and

 

(vii)           if any Lender becomes, and during the period it remains a Defaulting Lender or Potential Defaulting Lender, unless the Issuing Bank is satisfied that any exposure that would result therefrom is eliminated or fully covered by the Revolving Commitments of the Non-Defaulting
Lenders or by deposits in the Cash Collateral Account or a combination thereof satisfactory to the Issuing Bank.

 

If the terms of any Letter of Credit Application referred to in the foregoing clause (v) conflicts with the terms of this Agreement, the terms of this Agreement shall control.

 

(b)           Participations.  Upon the date of the issuance or increase of a Letter of Credit, the Issuing Lender shall be deemed to have sold to each other Revolving Lender having a Revolving Commitment and
each other Revolving Lender having a Revolving Commitment shall have been deemed to have purchased from the Issuing Lender a participation in the related Letter of Credit Obligations equal to such Revolving Lender's Revolving Pro Rata Share at such date and such sale and purchase shall otherwise be in accordance with the terms of this Agreement.  The Issuing Lender shall promptly notify each such participant Revolving Lender having a Revolving Commitment by telephone, or telecopy of each Letter of Credit
issued, increased, or extended or converted and the actual dollar amount of such Revolving Lender's participation in such Letter of Credit.

 

(c)           Issuing.  Each Letter of Credit shall be issued, increased, or extended pursuant to a Letter of Credit Application (or by telephone notice promptly confirmed in writing by a Letter of Credit Application),
given not later than 11:00 a.m.  (New York time) on the third Business Day before the date of the proposed issuance, increase, or extension of the Letter of Credit, and the Issuing Lender shall give to each other Revolving Lender prompt notice thereof by telephone, or telecopy.  Each Letter of Credit Application shall be delivered by facsimile or by mail specifying the information required therein; provided, that, if such
Letter of Credit Application is delivered by facsimile, the Borrower shall follow such facsimile with an original by mail.  After the Issuing Lender’s receipt of such Letter of Credit Application (by facsimile or by mail) and upon fulfillment of the applicable conditions set forth in Article III, the Issuing Lender shall issue, increase, or extend such Letter of Credit for the account of the Borrower.  Each Letter of Credit Application shall be irrevocable and binding on the Borrower.

 

(d)           Reimbursement.

 

(i)           Obligation.  The Borrower hereby agrees to pay on demand to the Issuing Lender an amount equal to any amount paid by the Issuing Lender under any Letter of Credit.  In the event the Issuing
Lender makes a payment pursuant to a request for draw presented under a Letter of Credit and such payment is not promptly reimbursed by the Borrower upon demand, the Issuing Lender shall give the Administrative Agent notice of the Borrower's failure to make such reimbursement and the Administrative Agent shall promptly notify each Revolving Lender

 

 

  

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having a Revolving Commitment of the amount necessary to reimburse the Issuing Lender.  Upon such notice from the Administrative Agent, each Revolving Lender shall promptly reimburse the Issuing Lender for such Revolving Lender's Revolving Pro Rata Share of such amount, and such reimbursement shall be deemed for all purposes of
this Agreement to be a Revolving Advance to the Borrower transferred at the Borrower's request to the Issuing Lender.  If such reimbursement is not made by any Revolving Lender to the Issuing Lender on the same day on which the Administrative Agent notifies such Revolving Lender to make reimbursement to the Issuing Lender hereunder, such Revolving Lender shall pay interest on its Revolving Pro Rata Share thereof to the Issuing Lender at a rate per annum equal to the Federal Funds Rate.  The
Borrower hereby unconditionally and irrevocably authorizes, empowers, and directs the Administrative Agent and the Revolving Lenders to record and otherwise treat such reimbursements to the Issuing Lender as Reference Rate Advances under a Revolving Borrowing requested by the Borrower to reimburse the Issuing Lender which have been transferred to the Issuing Lender at the Borrower's request.

 

(ii)           Lenders' Obligations.  Each Revolving Lender's obligation to make Revolving Advances or to purchase and fund risk participations in Letters of Credit pursuant to this Section 2.07(d) shall
be absolute and unconditional and shall not be affected by any circumstance, including (a) any setoff, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the Issuing Lender, any Loan Party, or any other Person for any reason whatsoever, (b) the occurrence or continuance of a Default, or (c) any other occurrence, event or condition, whether or not similar to any of the foregoing.  No such funding of risk participations shall relieve or otherwise
impair the obligation of the Borrower to pay the Reimbursement Obligations together with interest as provided herein.  Nothing herein is intended to release the Borrower's obligations under any Letter of Credit Application, but only to provide an additional method of payment therefor.  The making of any Borrowing under Section 2.07(d)(i) shall not constitute a cure or waiver of any Default or Event of Default, other than the payment Default or Event of Default which is satisfied by the
application of the amounts deemed advanced hereunder, caused by a Borrower's failure to comply with the provisions of this Agreement or the Letter of Credit Application.

 

(iii)           Cash Collateral Call. If any Lender becomes, and during the period it remains, a Defaulting Lender or a Potential Defaulting Lender, if any Letter of Credit is at the time outstanding, the Issuing Bank
may (except, in the case of a Defaulting Lender, to the extent the Commitments have been fully reallocated pursuant to Section 2.15), by notice to the Borrower and such Defaulting Lender or Potential Defaulting Lender through the Administrative Agent, require the Borrower to deposit into the Cash Collateral Account the obligations of the Borrower to the Issuing Bank in respect of such Letter of Credit in amount at least equal to the aggregate amount of the unreallocated obligations (contingent or otherwise) of
such Defaulting Lender or such Potential Defaulting Lender in respect thereof, or to make other arrangements satisfactory to the Administrative Agent and to the Issuing Bank, in their sole discretion to protect them against the risk of non-payment by such Defaulting Lender or Potential Defaulting Lender.

 

(e)           Obligations Unconditional.  The obligations of the Borrower under this Agreement in respect of each Letter of Credit shall be unconditional and irrevocable, and shall be

 

 

  

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paid strictly in accordance with the terms of this Agreement under all circumstances, including the following circumstances:

 

(i)           any lack of validity or enforceability of any Letter of Credit Documents;

 

(ii)           any amendment or waiver of, or any consent to or departure from, any Letter of Credit Documents;

 

(iii)           the existence of any claim, set-off, defense, or other right which the Borrower may have at any time against any beneficiary or transferee of such Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Lender,
or any other Person, whether in connection with this Agreement, the transactions contemplated in this Agreement or in any Letter of Credit Documents, or any unrelated transaction;

 

(iv)           any statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

(v)           payment by the Issuing Lender under such Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or

 

(vi)           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing;

 

provided, however, that nothing contained in this paragraph (e) shall be deemed to constitute a waiver of any remedies of the Borrower in connection with the Letters of Credit or the Borrower's rights under
Section 2.07(f).

 

(f)           Liability of Issuing Lender.  The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit.  Neither
the Issuing Lender nor any of its officers or directors shall be liable or responsible for:

 

(i)           the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith;

 

(ii)           the validity, sufficiency, or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent, or forged;

 

(iii)           payment by the Issuing Lender against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the relevant Letter of Credit; or

 

 

  

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(iv)           any other circumstances whatsoever in making or failing to make payment under any Letter of Credit (INCLUDING THE ISSUING LENDER'S OWN NEGLIGENCE),

 

except that, notwithstanding the provisions in paragraphs (e) or (f) of this Section 2.07, the Borrower shall have a claim against the Issuing Lender, and the Issuing Lender shall be liable to the Borrower, to the extent of any direct, as opposed to consequential, damages
suffered by the Borrower which the Borrower proves were caused by the Issuing Lender's willful misconduct or gross negligence.  In furtherance and not in limitation of the foregoing, the Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

 

(g)           Cash Collateral Account.

 

(i)           If the Borrower is required to deposit funds in the Cash Collateral Account pursuant to Section 2.05(b), 2.07(d)(iii), 7.02(b), or 7.03(b), then the Borrower and the Issuing Lender shall establish the Cash Collateral Account and the Borrower shall execute any documents
and agreements, including the Administrative Agent's standard form assignment of deposit accounts, that the Administrative Agent requests in connection therewith to establish the Cash Collateral Account and grant the Administrative Agent a first priority security interest in such account and the funds therein.  The Borrower hereby pledges to the Administrative Agent and grants the Administrative Agent a security interest in the Cash Collateral Account, whenever established, all funds held in the Cash
Collateral Account from time to time, and all proceeds thereof as security for the payment of the Obligations.

 

(ii)           So long as no Default or Event of Default exists, (A) the Administrative Agent may apply the funds held in the Cash Collateral Account only to the reimbursement of any Letter of Credit Obligations, and (B) the Administrative Agent shall release to the Borrower at the
Borrower's written request any funds held in the Cash Collateral Account in an amount up to but not exceeding the excess, if any (immediately prior to the release of any such funds), of the total amount of funds held in the Cash Collateral Account over the Letter of Credit Exposure.  During the existence of any Event of Default, the Administrative Agent may apply any funds held in the Cash Collateral Account to the Obligations in any order determined by the Administrative Agent, regardless of any Letter
of Credit Exposure that may remain outstanding.  The Administrative Agent may in its sole discretion at any time release to the Borrower any funds held in the Cash Collateral Account.

 

(iii)           The Administrative Agent shall exercise reasonable care in the custody and preservation of any funds held in the Cash Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Administrative
Agent accords its own Property, it being understood that the Administrative Agent shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any such funds.

 

(h)           Letters of Credit Issued for Subsidiaries.  Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary of
a Loan Party, the Borrower shall be obligated to reimburse the Issuing Lender hereunder for any and all drawings under such Letter of Credit issued hereunder by the Issuing

 

 

  

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Lender.  Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any Subsidiary of a Loan Party inures to the benefit of the Borrower, and that the Borrower's business derives substantial benefits from the businesses of such Subsidiaries of a Loan Party.

 

(i)           Existing Letters of Credit. The Issuing Lender, the Lenders and the Borrower agree that effective as of the Closing Date, the Existing Letters of Credit shall be deemed to have been issued and maintained
under, and to be governed by the terms and conditions of, this Agreement.

 

Section 2.08                      Fees.

 

(a)           Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender having a Revolving Commitment a commitment fee at a per annum rate equal to the Commitment
Fee Rate on the average daily Unused Revolving Commitment Amount of such Revolving Lender, from the date of this Agreement until the Commitment Termination Date.  The commitment fees shall be due and payable quarterly in arrears on the last day of each March, June, September, and December commencing on December 31, 2009, and continuing thereafter through and including the Commitment Termination Date.

 

(b)           Letter of Credit Fees.

 

(i)           The Borrower agrees to pay (A) to the Administrative Agent for the pro rata benefit of the Revolving Lenders having a Revolving Commitment a per annum letter of credit fee for each Letter of Credit issued hereunder in an amount equal to the greater of (y) a per annum
rate equal to the Applicable Margin then in effect for Eurodollar Rate Advances on the average daily face amount of such Letter of Credit for the period such Letter of Credit is to be outstanding and (z) $500.00, and (B) to the Issuing Lender, a fronting fee for each Letter of Credit equal to .125% per annum on the face amount of such Letter of Credit.  Each such fee shall be payable annually in advance on the date of the issuance of the Letter of Credit, and, in the case of an increase or extension
only, on the date of such increase or such extension.

 

(ii)           The Borrower also agrees to pay to the Issuing Lender such other usual and customary fees associated with any transfers, amendments, drawings, negotiations or reissuances of any Letters of Credit.

 

(c)           Other Fees.  The Borrower agrees to pay the fees described in the Fee Letter to the Administrative Agent for the benefit of the parties specified in the Fee Letter.

 

(d)           Defaulting Lender's Fees. Anything herein to the contrary notwithstanding, during such period as a Lender is a Defaulting Lender, such Defaulting Lender will not be entitled to any fees accruing during such
period pursuant to this Section 2.08 (without prejudice to the rights of the Lenders other than Defaulting Lenders in respect of such fees), provided that (a) to the extent that a portion of the Letter of Credit Exposure of such Defaulting Lender is reallocated to the Non-Defaulting Lenders pursuant to Section 2.15, such fees that would have accrued for the benefit of such Defaulting Lender will instead accrue for the benefit of and be payable to
such Non-Defaulting Lenders, pro rata in accordance with their respective Revolving Commitments, and (b) to the extent any portion of such Letter of Credit Exposure cannot be so

 

 

  

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reallocated, such fees will instead accrue for the benefit of and be payable to the Issuing Bank as its interest appears (and the pro rata payment provisions of Section 2.10 will automatically be deemed adjusted
to reflect the provisions of this Section).

 

Section 2.09                      Interest.  The Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the
date of such Advance until such principal amount shall be paid in full, at the following rates per annum:

 

(a)           Reference Rate Advances.  If such Advance is a Reference Rate Advance, a rate per annum equal at all times to the Adjusted Reference Rate in effect from time to time plus (i)
in the case of a Revolving Advance, the Applicable Margin in effect from time to time, and (ii) in the case of a Term Advance, 4.75%, in each case payable quarterly in arrears on the last day of each March, June, September, and December and on the date such Reference Rate Advance shall be paid in full.

 

(b)           Eurodollar Rate Advances.  If such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such Advance to the Eurodollar Rate for such Interest
Period plus (i) in the case of a Revolving Advance, the Applicable Margin in effect from time to time and (ii) in the case of a Term Advance, 5.75%, in each case payable on the last day of such Interest Period and, in the case of any Interest Period longer than three months in duration, on the third monthly anniversary of the beginning of such Interest Period as well as the last day of such Interest Period.

 

(c)           Additional Interest on Eurodollar Rate Advances.  The Borrower shall pay to each Lender, so long as any such Lender shall be required under regulations of the Federal Reserve Board to maintain
reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the effective date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance.  Such additional interest payable to any Lender shall be determined by such Lender and notified to the Borrower through the Administrative Agent (such notice to include the calculation of such additional interest, which calculation shall be conclusive in the absence of manifest error).

 

(d)           Usury Recapture.

 

(i)           If, with respect to any Lender or the Issuing Lender, the effective rate of interest contracted for under the Loan Documents, including the stated rates of interest and fees contracted for hereunder and any other amounts contracted for under the Loan Documents which are
deemed to be interest, at any time exceeds the Maximum Rate, then the outstanding principal amount of the loans made by such Lender or Issuing Lender, as applicable, hereunder shall bear interest at a rate which would make the effective rate of interest for such Lender or Issuing Lender, as applicable, under the Loan Documents equal the Maximum Rate until the difference between the amounts which would have been due at the stated rates and the amounts which were

 

 

  

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due at the Maximum Rate (the "Lost Interest") has been recaptured by such Lender or Issuing Lender, as applicable.

 

(ii)           If, when the loans and reimbursement obligations made hereunder are repaid in full, the Lost Interest has not been fully recaptured by such Lender or Issuing Lender, as applicable, pursuant to the preceding paragraph, then, to the extent permitted by law, for the loans
and other credit extensions made hereunder by such Lender or Issuing Lender, as applicable, the interest rates charged under Section 2.09 hereunder shall be retroactively increased such that the effective rate of interest under the Loan Documents was at the Maximum Rate since the effectiveness of this Agreement to the extent necessary to recapture the Lost Interest not recaptured pursuant to the preceding sentence and, to the extent allowed by law, the Borrower shall pay to such Lender or Issuing Lender, as applicable,
the amount of the Lost Interest remaining to be recaptured by such Lender or Issuing Lender, as applicable.

 

Section 2.10                      Payments and Computations.

 

(a)           Payment Procedures.  The Borrower shall make each payment under this Agreement not later than 11:00 a.m.  (New York time) on the day when due in Dollars to the Administrative Agent
at 1221 Avenue of the Americas, New York, New York 10020 (or such other location as the Administrative Agent shall designate in writing to the Borrower) in same day funds without deduction, setoff, or counterclaim of any kind.  The Administrative Agent shall promptly thereafter cause to be distributed like funds relating to the payment of principal, interest or fees ratably (other than amounts payable solely to the Administrative Agent, the Issuing Lender, or a specific Lender pursuant to Section 2.08(c),
2.08(d), 2.09(c), 2.12, 2.13, 2.14, 9.04, 9.05, or 9.06, but after taking into account payments effected pursuant to Section 7.04) in accordance with each Lender's pro rata share to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender or the Issuing Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement.

 

(b)           Computations.  All computations of interest based on the Reference Rate and of fees (other than Letter of Credit fees) shall be made by the Administrative Agent on the basis of a year of 365 or
366 days, as the case may be, and all computations of interest based on the Eurodollar Rate and the Federal Funds Rate and Letter of Credit fees shall be made by the Administrative Agent, on the basis of a year of 360 days, in each case for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such interest or fees are payable.  Each determination by the Administrative Agent of an interest rate or fee shall be conclusive and binding for all
purposes, absent manifest error.

 

(c)           Non-Business Day Payments.  Whenever any payment shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day.

 

 

  

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(d)           Payments by Borrower; Presumptions by Administrative Agent.  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 Lender hereunder 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 Lender, 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 Lender, as the case may be, severally agrees
to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Lender, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

Section 2.11                      Sharing of Payments, Etc.  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain
payment in respect of any principal of or interest on any of its Advances or other obligations hereunder resulting in such Lender’s receiving payment of a proportion of the aggregate amount of its Advances and accrued interest thereon or other such obligations greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Advances and such
other obligations of the other Lenders, or make such other adjustments as shall be equitable, 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 Advances and other amounts owing them, subject to Section 2.15(c), provided that: (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest; and (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement, or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in the Letter of Credit Obligations to any assignee or participant, other than to the Borrower or any Subsidiary
thereof (as to which the provisions of this Section shall apply).  The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable Legal Requirement, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff 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 2.12                      Breakage Costs.  If (a) any payment of principal of any Eurodollar Rate Advance is made other than on the last day
of the Interest Period for such Advance, whether as a result of any payment pursuant to Section 2.05, the acceleration of the maturity of the Obligations pursuant to Article VII, or otherwise, or (b) the Borrower fails to make a principal or interest payment with respect to any Eurodollar Rate Advance on the date such payment is due and payable, the Borrower shall, within 10 days of any written demand sent by any Lender to the Borrower through the Administrative Agent, pay to the Administrative
Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, out-of-pocket costs or expenses which it may reasonably incur as a result of such payment or

 

 

  

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nonpayment, including any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance.

 

Section 2.13                      Increased Costs.

 

(a)           Increased Costs Generally.  If any Change in Law shall:

 

(i)           impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected
in the Eurodollar Rate Reserve Percentage) or the Issuing Lender;

 

(ii)           subject any Lender or the Issuing Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Rate Advance made by it, or change the basis of taxation of payments to such Lender
or the Issuing Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 2.14 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the Issuing Lender); or

 

(iii)           impose on any Lender or the Issuing Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Advances made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Advance (or of maintaining its obligation to make any such Advance), or to increase the cost to such Lender or the Issuing Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining
its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the Issuing Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the Issuing Lender, the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender, as the case may be, for such additional costs incurred or reduction
suffered.

 

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

 

 

  

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be, such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender’s or the Issuing Lender's holding company for any such reduction suffered.

 

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

 

(d)           Delay in Requests.  Failure or delay on the part of any Lender or the Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the
Issuing Lender's right to demand such compensation.

 

Section 2.14                      Taxes.

 

(a)           Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction
or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable Legal Requirement to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Lender,
as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Legal Requirement.

 

(b)           Payment of Other Taxes by the Borrower.  Without limiting the provisions of paragraph (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable Legal Requirement.

 

(c)           INDEMNIFICATION BY THE BORROWER.  THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, EACH LENDER AND THE ISSUING LENDER,
WITHIN 10 DAYS AFTER DEMAND THEREFOR, FOR THE FULL AMOUNT OF ANY INDEMNIFIED TAXES OR OTHER TAXES (INCLUDING INDEMNIFIED TAXES OR OTHER TAXES IMPOSED OR ASSERTED ON OR ATTRIBUTABLE TO AMOUNTS PAYABLE UNDER THIS SECTION) PAID BY THE ADMINISTRATIVE AGENT, SUCH LENDER OR THE ISSUING LENDER, AS THE CASE MAY BE, AND ANY PENALTIES, INTEREST AND REASONABLE EXPENSES ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH INDEMNIFIED TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY IMPOSED OR ASSERTED BY THE RELEVANT
GOVERNMENTAL AUTHORITY.  A CERTIFICATE AS TO THE AMOUNT OF SUCH PAYMENT OR LIABILITY DELIVERED TO THE BORROWER BY A LENDER OR THE ISSUING LENDER (WITH A COPY TO THE ADMINISTRATIVE AGENT), OR BY THE

 

 

  

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Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Lender, 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 to a Governmental Authority, the Borrower shall deliver to the Administrative
Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

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

 

Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States of America, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

 

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

 

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

 

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

 

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

 

 

  

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(f)           Treatment of Certain Refunds.  If the Administrative Agent, a Lender or the Issuing Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which
it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses of the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and without
interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the Issuing Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the Issuing Lender in the event the Administrative
Agent, such Lender or the Issuing Lender is required to repay such refund to such Governmental Authority.  This paragraph shall not be construed to require the Administrative Agent, any Lender or the Issuing Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

 

Section 2.15                      Reallocation of Defaulting Lender Commitment, Etc.  If a Lender becomes, and during the period it remains, a Defaulting
Lender, the following provisions shall apply with respect to any outstanding Letter of Credit Exposure of such Defaulting Lender:

 

(a)           the Letter of Credit Exposure of such Defaulting Lender will, subject to the proviso below, automatically be reallocated (effective on the day such Lender becomes a Defaulting Lender) among the Non-Defaulting Lenders pro rata in
accordance with their respective Revolving Commitments;  provided that (i) the sum of each Non-Defaulting Lender’s total Revolving Credit Extensions after giving effect thereto may not in any event exceed the Revolving Commitment of such Non-Defaulting Lender as in effect at the time of such reallocation and (ii) neither such reallocation nor any payment by a Non-Defaulting Lender pursuant thereto will constitute a waiver or release
of any claim the Borrower, the Administrative Agent, the Issuing Bank or any other Revolving Lender may have against such Defaulting Lender or cause such Defaulting Lender to be a Non-Defaulting Lender;

 

(b)           to the extent that any portion (the "Unreallocated Portion") of the Defaulting Lender’s Letter of Credit Exposure cannot be so reallocated, whether by reason of the first proviso in clause (a) above
or otherwise, the Borrower will, not later than three Business Days after demand by the Administrative Agent (at the direction of the Issuing Bank), (i) deposit into the Cash Collateral Account an amount equal to at least the aggregate amount of the Unreallocated Portion of such Letter of Credit Exposure, or (ii) make other arrangements satisfactory to the Administrative Agent and the Issuing Bank, in their sole discretion to protect them against the risk of non-payment by such Defaulting Lender; and

 

(c)           if any payment made by the Borrower under this Agreement includes amounts in respect of Obligations owing to any Defaulting Lender, the portion of such payment that would be for the account of such Defaulting Lender under this Agreement (whether on account of principal,
interest, fees, indemnity payments or other amounts) will be applied by the Administrative Agent, to the fullest extent permitted by law, to the making of payments from

 

 

  

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time to time in the following order of priority:  first to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent under this Agreement, second to the payment of any amounts
owing by such Defaulting Lender to the Issuing Bank under this Agreement, third to the payment of any costs or expenses of Administrative Agent or Issuing Bank incurred as a result of such Defaulting Lender's being a Defaulting Lender, and fourth to pay amounts owing under this Agreement to such Defaulting Lender, or as a court of competent jurisdiction may otherwise direct.

 

Section 2.16                      Right to Give Drawdown Notices.  In furtherance of the foregoing, if any Lender becomes, and during the period it remains,
a Defaulting Lender or a Potential Defaulting Lender, the Issuing Bank is hereby authorized by the Borrower (which authorization is irrevocable and coupled with an interest) to give, in its discretion, through the Administrative Agent, Notices of Borrowing pursuant to Section 2.03 in such amounts and at such times as may be required to (i) reimburse an outstanding disbursement made with respect to a Letter of Credit, or (ii) deposit into the Cash Collateral Account an amount equal to at least the aggregate amount
of the obligations (contingent or otherwise) of such Defaulting Lender or Potential Defaulting Lender in respect of each outstanding Letter of Credit.

 

ARTICLE III

 

CONDITIONS OF LENDING

 

Section 3.01                      Conditions Precedent to Initial Borrowings and the Initial Letter of Credit.  The obligations of each Lender to make its
Term Advance and its initial Revolving Advance and the Issuing Lender to issue any initial Letter of Credit shall be subject to the conditions precedent that:

 

(a)           Documentation.  The Administrative Agent shall have received the following duly executed by all the parties thereto, in form and substance satisfactory to the Administrative Agent, the Issuing
Lender and the Lenders, and, where applicable, in sufficient copies for each Lender:

 

(i)           this Agreement, a Term Note payable to the order of each requesting Term Lender in the amount of its Term Commitment, a Revolving Note payable to the order of each requesting Revolving Lender in the amount of its Revolving Commitment, the Security Agreements, the Guaranties,
the Pledge Agreements, and Mortgages encumbering substantially all of the Borrower's and its Subsidiaries' personal property and encumbering at least 90% of all of the Loan Parties' Proven Reserves (as set forth in the Initial Engineering Report) and Oil and Gas Properties in connection therewith, account control agreements required pursuant to Section 5.12 and each of the other Loan Documents, and all attached exhibits and schedules;

 

(ii)           a favorable opinion of the Borrower's and the Guarantors' primary counsel dated as of the date of this Agreement in form and covering such matters as the Administrative Agent may reasonably request;

 

(iii)           a favorable opinion of local counsel in each jurisdiction where a Mortgage will be filed in such form and covering such matters as the Administrative Agent may reasonably request;

 

 

  

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(iv)           copies, certified as of the date of this Agreement by a Responsible Officer or the secretary or an assistant secretary of the Borrower of (A) the resolutions of the Board of Directors of the Borrower approving the Loan Documents to which the Borrower is a party,
(B) the articles or certificate of incorporation and the bylaws of the Borrower, and (C) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Notes, and the other Loan Documents;

 

(v)           certificates of the secretary or assistant secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement, the Notes, Notices of Borrowing, Notices of Conversion or Continuation, and the other Loan
Documents to which the Borrower is a party;

 

(vi)           copies, certified as of the date of this Agreement by a Responsible Officer or the secretary or an assistant secretary of each Guarantor of (A) the resolutions of the Board of Directors (or other applicable governing body) of such Guarantor approving the Loan Documents
to which it is a party, (B) the articles or certificate (as applicable) of incorporation (or organization or formation) and bylaws (or partnership or company agreement) of such Guarantor, and (C) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Guaranty, the Security Instruments, and the other Loan Documents to which such Guarantor is a party;

 

(vii)           a certificate of the secretary or an assistant secretary of each Guarantor certifying the names and true signatures of officers of such Guarantor authorized to sign the Guaranty, Security Instruments and the other Loan Documents to which such Guarantor is a party;

 

(viii)           a certificate dated as of the Initial Funding Date from a Responsible Officer of the Borrower stating that (A) all representations and warranties of the Borrower set forth in this Agreement are true and correct in all material respects; (B) no Default has
occurred and is continuing; (C) the conditions in this Section 3.01 have been met; (D) that after giving effect to the Credit Extensions occurring on the Initial Funding Date and the Merger, the Borrower shall have Liquidity in excess of $10,000,000; (E) attached to such certificate are true, correct and complete copies of the Merger Agreement and the Accession Agreement as in full force and effect as of the date of such certificate; and (F) the Merger is being consummated substantially simultaneously
with delivery of such certificate, in compliance with applicable law and regulatory approvals, and substantially in accordance with the Merger Agreement;

 

(ix)           appropriate UCC-1 and UCC-3, as applicable, Financing Statements covering the Collateral for filing with the appropriate authorities and any other documents, agreements or instruments necessary to create an Acceptable Security Interest in such Collateral;

 

(x)           property insurance certificates naming the Administrative Agent loss payee and liability insurance certificates and endorsements naming the Administrative Agent as additional insured, as applicable, and evidencing insurance which meets the requirements of this Agreement
and the Security Instruments, and otherwise satisfactory to the Administrative Agent;

 

(xi)           the Initial Engineering Report;

 

 

  

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(xii)           stock, membership or partnership certificates required in connection with the Pledge Agreements and stock powers executed in blank for each such stock certificate;

 

(xiii)           a Compliance Certificate completed and executed by a Responsible Officer of the Borrower showing the calculation of, and Borrower’s pro forma compliance with Section 6.18, 6.19 and 6.20 as of the Initial Funding Date after giving effect to the Credit Extensions
requested and made on the Initial Funding Date;

 

(xiv)           certificates of good standing and existence for each Loan Party in (a) the state, province or territory in which each such Person is organized and (b) each state, province or territory in which such good standing is necessary, which certificates shall be dated a date
not earlier than 30 days prior to the date hereof; and

 

(xv)           such other documents, governmental certificates, agreements and lien searches as the Administrative Agent or any Lender may reasonably request.

 

(b)           Payment of Fees.  On the date of this Agreement, the Borrower shall have paid the fees required by Section 2.08(c) and all costs and expenses that have been invoiced and are payable pursuant
to Section 9.04.

 

(c)           Delivery of Financial Information.  The Administrative Agent and the Lenders shall have received true and correct copies of (i) the Financial Statements, (ii) the Projections, and (iii) such other
financial information as the Lenders may reasonably request.

 

(d)           Security Instruments.  The Administrative Agent shall have received all appropriate evidence required by the Administrative Agent and the Lenders in their sole discretion necessary to determine
that the Administrative Agent (for its benefit and the benefit of the Lenders) shall have an Acceptable Security Interest in the Collateral and that all actions or filings necessary to protect, preserve and validly perfect such Liens have been made, taken or obtained, as the case may be, and are in full force and effect.

 

(e)           Title.  The Administrative Agent shall be satisfied in its sole discretion with the title to the Oil and Gas Properties included in the Borrowing Base and that such Oil and Gas Properties constitute
at least 80% of the PV-10 of the Proven Reserves of the Borrower and its Subsidiaries (as set forth in the Initial Engineering Report), including mortgagee's title opinions in favor of the Administrative Agent and the Lenders in form and substance satisfactory to the Administrative Agent and issued by title counsel satisfactory to the Administrative Agent covering such percentage of the PV-10 of Proven Reserves set forth on the Independent Engineering Report delivered to the Administrative Agent prior to the
effective date of this Agreement acceptable to the Administrative Agent.

 

(f)           No Default.  No Default shall have occurred and be continuing.

 

(g)           Representations and Warranties.  The representations and warranties contained in Article IV and in each other Loan Document shall be true and correct in all material respects.

 

(h)           Material Adverse Change.  No event or circumstance that could cause a Material Adverse Change shall have occurred.

 

 

  

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(i)           No Proceeding or Litigation; No Injunctive Relief.  No action, suit, investigation or other proceeding (including the enactment or promulgation of a statute or rule) by or before any arbitrator
or any Governmental Authority shall be threatened or pending and no preliminary or permanent injunction or order by a state or federal court shall have been entered (i) in connection with this Agreement or any transaction contemplated hereby or (ii) which, in any case, in the judgment of the Administrative Agent, could reasonably be expected to result in a Material Adverse Change.

 

(j)           Consents, Licenses, Approvals, etc.  The Administrative Agent shall have received true copies (certified to be such by the Borrower or other appropriate party) of all consents, licenses and approvals
required in accordance with applicable Legal Requirements, or in accordance with any document, agreement, instrument or arrangement to which the Borrower, any Guarantor or any of their respective Subsidiaries is a party, in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any of the other Loan Documents.  In addition, the Borrower, the Guarantors and their respective Subsidiaries shall have all such material consents, licenses and approvals required
in connection with the continued operation of the Borrower, such Guarantors and such Subsidiaries and such approvals shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on this Agreement and the actions contemplated hereby.

 

(k)           Material Contracts.  The Borrower shall have delivered to the Administrative Agent copies of all material contracts, agreements or instruments listed on the attached Schedule
4.21.

 

(l)           Notice of Borrowing.  The Administrative Agent shall have received a Notice of Borrowing from the Borrower in the form of Exhibit
G, with appropriate insertions and executed by a duly authorized Responsible Officer of the Borrower.

 

(m)           USA Patriot Act.  The Borrower has delivered to each Lender that is subject to the Act such information requested by such Lender in order to comply with the Act.

 

(n)           Merger.

 

(i)           The Merger Agreement shall not have been materially altered, amended, or otherwise changed, or supplemented or any material condition or requirement therein waived, in each case without the prior written consent of the Lenders.

 

(ii)           The Merger shall be consummated substantially simultaneously with the funding of the initial Advances hereunder, in compliance with applicable law and regulatory approvals, and substantially in accordance with the Merger Agreement.

 

(o)           Hedging. The Borrower shall have entered into or assumed hedging arrangements in compliance with Section 5.13.

 

Section 3.02                      Conditions Precedent to All Borrowings.  The obligation of each Lender to make an Advance on the occasion of each Borrowing
and of the Issuing Lender to issue, increase, or extend any Letter of Credit shall be subject to the further conditions precedent that

 

 

  

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on the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit:

 

(a)           the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Conversion or Continuation, or Letter of Credit Application and the acceptance by the Borrower of the proceeds of such Borrowing or the issuance, increase,
or extension of such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or on the date of such issuance, increase, or extension of such Letter of Credit, as applicable, such statements are true):

 

(i)           the representations and warranties contained in Article IV of this Agreement and the representations and warranties contained in the Security Instruments, the Guaranties, and each of the other Loan Documents are true and correct in all material respects on and as
of the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit, before and after giving effect to such Borrowing or to the issuance, increase, or extension of such Letter of Credit and to the application of the proceeds from such Borrowing, as though made on and as of such date; and

 

(ii)           no Default has occurred and is continuing or would result from such Borrowing or from the application of the proceeds therefrom, or would result from the issuance, increase, or extension of such Letter of Credit; and

 

(b)           the Administrative Agent shall have received such other approvals, opinions, or documents reasonably deemed necessary or desirable by any Lender as a result of circumstances occurring after the date of this Agreement, as any Lender through the Administrative Agent may
reasonably request.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants as follows:

 

Section 4.01                      Existence; Subsidiaries.  The Borrower is a corporation duly incorporated, validly existing and in good standing under
the laws of Nevada and in good standing and qualified to do business in each other jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification.  Each Subsidiary of the Borrower is duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation and in good standing and qualified to do business in each jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification.  As
of the date of this Agreement, Schedule 4.01 sets forth the capital structure of the Borrower and the Subsidiaries of the Borrower.

 

Section 4.02                      Power.  The execution, delivery, and performance by the Borrower of this Agreement, the Notes, and the other Loan Documents
to which it is a party and by the Guarantors of the Guaranties and the other Loan Documents to which they are a party and the consummation of the transactions contemplated hereby and thereby (a) are within the Borrower's and such Guarantors' governing powers, (b) have been duly authorized by all necessary governing action, (c) do not contravene (i) the Borrower's or any Guarantor's certificate or

 

 

  

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articles of incorporation, bylaws, limited liability company agreement, or other similar governance documents or (ii) any law or any contractual restriction binding on or affecting the Borrower or any Guarantor, and (d) will not result in or require the creation or imposition of any Lien prohibited by this Agreement.  At
the time of each Advance and the issuance, extension or increase of a Letter of Credit, such Advance and such Letter of Credit, and the use of the proceeds of such Advance and such Letter of Credit, will be within the Borrower's governing powers, will have been duly authorized by all necessary governing action, will not contravene (i) the Borrower's articles or certificate of incorporation or other organizational documents or (ii) any law or any contractual restriction binding on or affecting the Borrower
and will not result in or require the creation or imposition of any Lien prohibited by this Agreement.

 

Section 4.03                      Authorization and Approvals.  No consent, order, authorization, or approval or other action by, and no notice to or filing
with, any Governmental Authority or any other Person is required for the due execution, delivery, and performance by the Borrower of this Agreement, the Notes, or the other Loan Documents to which the Borrower is a party or by each Guarantor of its Guaranty or the other Loan Documents to which it is a party or the consummation of the transactions contemplated thereby.  At the time of each Borrowing and each issuance, increase or extension of a Letter of Credit, no authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority will be required for such Borrowing or such issuance, increase or extension of such Letter of Credit or the use of the proceeds of such Borrowing or such Letter of Credit.

 

Section 4.04                      Enforceable Obligations.  This Agreement, the Notes, and the other Loan Documents to which the Borrower is a party have
been duly executed and delivered by the Borrower and the Guaranties and the other Loan Documents to which each Guarantor is a party have been duly executed and delivered by such Guarantors.  Each Loan Document is the legal, valid, and binding obligation of the Borrower and any Guarantor which is a party to it enforceable against the Borrower and each such Guarantor in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium,
or similar law affecting creditors' rights generally and by general principles of equity.

 

Section 4.05                      Financial Statements.

 

(a)           The Borrower has delivered to the Administrative Agent and the Lenders copies of the Financial Statements, and the Financial Statements present fairly the financial condition of Borrower and its Subsidiaries as of their respective dates and for their respective periods
in accordance with GAAP.  As of the date of the Financial Statements, there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower, except as disclosed therein in accordance with GAAP and adequate reserves for such items have been made in accordance with GAAP.

 

(b)           All projections, estimates, and pro forma financial information furnished by the Borrower were prepared on the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information
were furnished.

 

 

  

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(c)           Since September 8, 2009, no event or circumstance that could reasonably be expected to cause a Material Adverse Change has occurred.

 

(d)           As of the date of this Agreement, neither the Borrower nor any of its Subsidiaries has any Debt other than the Debt listed on Schedule 4.05.

 

Section 4.06                      True and Complete Disclosure.  All factual information (excluding estimates) heretofore or contemporaneously furnished
by or on behalf of the Borrower or any of the Guarantors in writing to any Lender or the Administrative Agent for purposes of or in connection with this Agreement, any other Loan Document or any transaction contemplated hereby or thereby is, and all other such factual information hereafter furnished by or on behalf of the Borrower and the Guarantors in writing to the Administrative Agent or any of the Lenders shall be, true and accurate in all material respects on the date as of which such information is dated
or certified and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein not misleading at such time.  All projections, estimates, and pro forma financial information furnished by the Borrower were prepared on the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished.

 

Section 4.07                      Litigation; Compliance with Laws.

 

(a)           Other than as set forth in Schedule 4.07, there is no pending or, to the best knowledge of the Borrower, threatened action or proceeding affecting the Borrower or any of the Guarantors before any court,
Governmental Authority or arbitrator which could reasonably be expected to cause a Material Adverse Change or which purports to affect the legality, validity, binding effect or enforceability of this Agreement, any Note, or any other Loan Document.  Additionally, there is no pending or, to the best knowledge of the Borrower, threatened action or proceeding instituted against the Borrower or any of the Guarantors which seeks to adjudicate the Borrower or any of the Guarantors as bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property.

 

(b)           The Borrower and its Subsidiaries have complied in all material respects with all material statutes, rules, regulations, orders and restrictions of any Governmental Authority having jurisdiction over the conduct of their respective businesses or the ownership of their
respective Property.

 

Section 4.08                      Use of Proceeds.  The proceeds of the Advances will be used by the Borrower for the purposes described in Section 5.09.  The
Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U).  No proceeds of any Advance will be used to purchase or carry any margin stock in violation of Regulation T, U or X.

 

 

  

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Section 4.09                      Investment Company Act.  Neither the Borrower nor any of the Guarantors is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

 

Section 4.10                      Federal Power Act.  No Loan Party and no Subsidiary of a Loan Party is subject to regulation under the Federal Power Act,
as amended or any other Legal Requirement which regulates the incurring by such Person of Debt, including Legal Requirements relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services.

 

Section 4.11                      Taxes.

 

(a)           Reports and Payments.  All Returns (as defined below in clause (c) of this Section 4.11) required to be filed by or on behalf of the Borrower, the Guarantors, or any member of the Controlled Group
(hereafter collectively called the "Tax Group") have been duly filed on a timely basis or appropriate extensions have been obtained and such Returns are and will be true, complete and correct, except where the failure to so file would not be reasonably expected to cause a Material Adverse Change; and all Taxes shown to be payable on the Returns or on subsequent assessments with respect thereto will have been paid in full on a timely basis, and no
other Taxes will be payable by the Tax Group with respect to items or periods covered by such Returns, except in each case to the extent of (i) reserves reflected in the Financial Statements or subsequent financial statements delivered under Section 5.06 or (ii) Taxes that are being contested in good faith.  The reserves for accrued Taxes reflected in the financial statements delivered to the Lenders under this Agreement are adequate in the aggregate for the payment of all unpaid Taxes, whether or not
disputed, for the period ended as of the date thereof and for any period prior thereto, and for which the Tax Group may be liable in its own right, as withholding agent or as a transferee of the assets of, or successor to, any Person, except for such Taxes or reserves therefor, the failure to pay or provide for which does not and would not reasonably be expected to cause a Material Adverse Change.

 

(b)           Taxes Definition.  "Taxes" in this Section 4.11 shall mean all taxes, charges, fees, levies, or other assessments imposed by any
federal, state, local, or foreign taxing authority, including income, gross receipts, excise, real or personal property, sales, occupation, use, service, leasing, environmental, value added, transfer, payroll, and franchise taxes (and including any interest, penalties, or additions to tax attributable to or imposed on or with respect to any such assessment).

 

(c)           Returns Definition.  "Returns" in this Section 4.11 shall mean any federal, state, local, or foreign report, estimate, declaration
of estimated Tax, information statement or return relating to, or required to be filed in connection with, any Taxes, including any information return or report with respect to backup withholding or other payments of third parties.

 

Section 4.12                      Pension Plans.  All Plans are in compliance in all material respects with all applicable provisions of ERISA.  No
Termination Event has occurred with respect to any Plan, and each Plan has complied with and been administered in all material respects in accordance with applicable provisions of ERISA and the Code.  No "accumulated funding deficiency" (as defined in Section 302 of ERISA) has occurred, and for plan years after December 31, 2008, no

 

 

  

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unpaid minimum required contribution exists, and there has been no excise tax imposed under Section 4971 of the Code.  No Reportable Event has occurred with respect to any Multiemployer Plan, and each Multiemployer Plan has complied with and been administered in all material respects in accordance with applicable provisions
of ERISA and the Code.  The present value of all benefits vested under each Plan (based on the assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such Plan allocable to such vested benefits by more than $1,000,000.  Neither the Borrower nor any member of the Controlled Group has had a complete or partial withdrawal from any Multiemployer Plan for which there is any withdrawal liability in excess of $1,000,000.  As
of the most recent valuation date applicable thereto, neither the Borrower nor any member of the Controlled Group would become subject to any liability under ERISA in excess of $1,000,000 if the Borrower or any member of the Controlled Group has received notice that any Multiemployer Plan is insolvent or in reorganization.  Based upon GAAP existing as of the date of this Agreement and current factual circumstances, the Borrower has no reason to believe that the annual cost during the term of this Agreement
to the Borrower or any member of the Controlled Group for post-retirement benefits to be provided to the current and former employees of the Borrower or any member of the Controlled Group under Plans that are welfare benefit plans (as defined in Section 3(1) of ERISA) could, in the aggregate, reasonably be expected to cause a Material Adverse Change.

 

Section 4.13                      Title; Condition of Property; Casualties.  Each of the Borrower and the Guarantors has good and defensible title to all
of its Properties free and clear of all Liens except for Permitted Liens.  The material Properties used or to be used in the continuing operations of the Borrower and each of the Guarantors are in good repair, working order and condition, ordinary wear and tear excepted.  Since December 31, 2008, neither the business nor the material Properties of the Borrower and each of the Guarantors, taken as a whole, has been materially and adversely affected as a result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or cancellation of contracts, Permits, or concessions by a Governmental Authority, riot, activities of armed forces, or acts of God or of any public enemy.

 

Section 4.14                      No Burdensome Restrictions; No Defaults.

 

(a)           Neither the Borrower nor any Guarantor is a party to any indenture, loan, or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction or provision of applicable Legal Requirement that could reasonably be expected
to cause a Material Adverse Change.  Neither the Borrower nor any of its Subsidiaries is in default (i) under or with respect to any contract, agreement, lease, or other instrument to which the Borrower or any Subsidiary is a party and which default could reasonably be expected to cause a Material Adverse Change or (ii) under any agreement in connection with any Debt.  Neither the Borrower nor any of its Subsidiaries has received any notice of default under any material contract, agreement,
lease, or other instrument to which the Borrower or such Subsidiary is a party.

 

(b)           No Default has occurred and is continuing.

 

Section 4.15                      Environmental Condition.

 

 

  

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(a)           Permits, Etc.  The Borrower and the Guarantors, or to the extent that the right of operation is vested in others, such operators on behalf of the Borrower and the Guarantors, (i) have obtained
all Environmental Permits necessary for the ownership and operation of their respective Properties and the conduct of their respective businesses except where the failure to obtain such Environmental Permit could not reasonably be expected to cause a Material Adverse Change; (ii) have at all times been and are in compliance with all terms and conditions of such Permits and with all other requirements of applicable Environmental Laws except where the failure to be in compliance could not reasonably be expected
to cause a Material Adverse Change; (iii) have not received notice of any material violation or alleged violation of any Environmental Law or Permit; and (iv) are not subject to any actual or contingent Environmental Claim, which could reasonably be expected to cause a Material Adverse Change.

 

(b)           Certain Liabilities.  To the Borrower's actual knowledge, none of the present or previously owned or operated Property of the Borrower or any Guarantor or of any of their former Subsidiaries, wherever
located: (i) has been placed on or proposed to be placed on the National Priorities List, the Comprehensive Environmental Response Compensation Liability Information System list, or their state or local analogs, or have been otherwise investigated, designated, listed, or identified as a potential site for removal, remediation, cleanup, closure, restoration, reclamation, or other response activity under any Environmental Laws; (ii) is subject to a Lien, arising under or in connection with any Environmental
Laws, that attaches to any revenues or to any Property owned or operated by the Borrower or any of the Guarantors, wherever located, which could reasonably be expected to cause a Material Adverse Change; or (iii) has been the site of any Release of Hazardous Substances or Hazardous Wastes from present or past operations which has caused at the site or at any third-party site any condition that has resulted in or could reasonably be expected to result in the need for Response that would cause a Material Adverse
Change.

 

(c)           Certain Actions.  Without limiting the foregoing: (i) all necessary notices have been properly filed, and no further action is required under current Environmental Law as to each Response
or other restoration or remedial project undertaken by the Borrower or the Guarantors (or to the extent that the right of operation is vested in others, undertaken by such operators on behalf of the Borrower or the Guarantors), or any of their former Subsidiaries on any of their presently or formerly owned or operated Property and (ii) the present and, to the Borrower's knowledge, future liability, if any, of the Borrower and the Guarantors which could reasonably be expected to arise in connection with requirements
under Environmental Laws will not result in a Material Adverse Change.

 

Section 4.16                      Permits, Licenses, Etc.  The Borrower and the Guarantors, or to the extent that the right of operation is vested in others,
such operators on behalf of the Borrower and the Guarantors, possess all authorizations, Permits, licenses, patents, patent rights or licenses, trademarks, trademark rights, trade name rights and copyrights which are material to the conduct of their business.  The Borrower and the Guarantors, or to the extent that the right of operation is vested in others, such operators on behalf of the Borrower and the Guarantors, manage and operate their business in all material respects in accordance with all applicable
Legal Requirements and good industry practices.

 

 

  

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Section 4.17                      Gas Contracts.  Other than as set forth in Schedule 4.17,
neither the Borrower nor any of the Guarantors, as of the date hereof and as of the Initial Funding Date: (a) is obligated in any material respect by virtue of any prepayment made under any contract containing a "take-or-pay" or "prepayment" provision or under any similar agreement to deliver hydrocarbons produced from or allocated to any of the Borrower's and its Subsidiaries' Oil and Gas Properties at some future date without receiving full payment therefor at the time of delivery, or (b) has produced gas,
in any material amount, subject to, and none of the Borrower's and the Guarantors' Oil and Gas Properties is subject to, balancing rights of third parties or subject to balancing duties under governmental requirements, in each case other than in the ordinary course of business and which prepayments and balancing rights, in the aggregate, do not result in the Borrower or any Guarantor having net aggregate liability at any time in excess of an amount equal to 1% of the Proven Reserves categorized as "proved, developed
and producing" on the most recently delivered Engineering Report.

 

Section 4.18                      Liens, Titles, Leases, Etc.  None of the Property of the Borrower or any of the Guarantors is subject to any Lien other
than Permitted Liens.  On the date of this Agreement, all governmental actions and all other filings, recordings, registrations, third party consents and other actions which are necessary to create and perfect the Liens provided for in the Security Instruments will have been made, obtained and taken in all relevant jurisdictions.  All Leases and agreements for the conduct of business of the Borrower and the Guarantors are valid and subsisting, in full force and effect and there exists no default
or event of default or circumstance which with the giving of notice or lapse of time or both would give rise to a default under any such Leases or agreements which could reasonably be expected to cause a Material Adverse Change.  Neither the Borrower nor any of the Guarantors is a party to any agreement or arrangement (other than this Agreement and the Security Instruments), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to
secure the Obligations against their respective assets or Properties.

 

Section 4.19                      Solvency and Insurance.  Before and after giving effect to the making of the initial Advances, each of the Borrower and
its Subsidiaries is Solvent.  Additionally, each of the Borrower and its Subsidiaries carry insurance required under Section 5.02.

 

Section 4.20                      Hedging Agreements.  Schedule 4.20 sets forth, as of
the date hereof and as of the Initial Funding Date, a true and complete list of all Interest Hedge Agreements, Hydrocarbon Hedge Agreements, and any other Hedge Contract, in each case of the Borrower and each Guarantor, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied), and the counterparty to each such agreement.

 

Section 4.21                      Material Agreements.  Schedule 4.21 sets forth a complete
and correct list of all material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, joint venture agreements, and other instruments in effect or to be in effect as of the date hereof and as of the Initial Funding Date (other than the agreements set forth in Schedule 4.20) providing for, evidencing, securing or otherwise relating to any Debt of the Borrower or any of the Guarantors, and all
obligations of the Borrower or any of the Guarantors to issuers of surety or appeal bonds issued for account of the Borrower or any such Guarantor,

 

 

  

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and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Debt or lease obligations outstanding or to be outstanding and the Property subject to any Lien securing such Debt or lease obligation.  Also set forth on Schedule
4.21 is a complete and correct list of all material agreements and other instruments of the Borrower and the Guarantors relating to the purchase, transportation by pipeline, gas processing, marketing, sale and supply of natural gas and other Hydrocarbons.  Except as detailed otherwise in Schedule 4.21, the Borrower has heretofore delivered to the Administrative Agent and the Lenders a complete and correct copy of all such material
credit agreements, indentures, purchase agreements, contracts, letters of credit, guarantees, joint venture agreements, or other instruments, including any modifications or supplements thereto, as in effect on the date hereof and as of the Initial Funding Date.

 

Section 4.22                      Canadian Abraxas.  Canadian Abraxas owns no Property other than (a) the Office Service Agreement dated as of August 5,
2009 among Canadian Abraxas and RGN Management Limited Partnership and (b) other Property, provided that Canadian Abraxas has provided prior written notice of the acquisition of such other Property to the Administrative Agent, and provided further that the acquisition and funding of such other Property complies with the terms of this Agreement, including without limitation Sections 6.01, 6.02, 6.06 and 6.07.

 

Section 4.23                      Abraxas Properties.  Abraxas Properties owns no Property other than (a) the Headquarters, (b) 100% of the Equity Interests
in Sandia, and (c) other Property in an amount not to exceed $500,000.

 

 

ARTICLE V

 

AFFIRMATIVE COVENANTS

 

So long as any Obligation or any Letter of Credit shall remain outstanding, any Letter of Credit Exposure shall exist, or any Lender shall have any Commitment hereunder, the Borrower agrees, unless the Required Lenders shall otherwise consent in writing, to comply with the following covenants:

 

Section 5.01                      Compliance with Laws, Etc.  The Borrower shall comply, and cause each of its Subsidiaries to comply, in all material respects
with all Legal Requirements.  Without limiting the generality and coverage of the foregoing, the Borrower shall comply, and shall cause each of its Subsidiaries to comply, in all material respects, with all Environmental Laws and all laws, regulations, or directives with respect to equal employment opportunity and employee safety in all jurisdictions in which the Borrower, or any of its Subsidiaries do business; provided, however, that
this Section 5.01 shall not prevent the Borrower or any of its Subsidiaries from, in good faith and with reasonable diligence, contesting the validity or application of any such laws or regulations by appropriate legal proceedings.  Without limitation of the foregoing, the Borrower shall, and shall cause each of its Subsidiaries to, (a) maintain and possess all authorizations, Permits, licenses, trademarks, trade names, rights and copyrights which are material to the conduct of its business
and (b) obtain, as soon as practicable, all consents or approvals required from the United States or any states of the United States (or other

 

 

  

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Governmental Authorities) necessary to grant the Administrative Agent an Acceptable Security Interest in the Borrower's and its Subsidiaries' Oil and Gas Properties.

 

Section 5.02                      Maintenance of Insurance.

 

(a)           The Borrower shall, and shall cause each of its Subsidiaries to, procure and maintain or shall cause to be procured and maintained continuously in effect policies of insurance in form and amounts and issued by companies, associations or organizations reasonably satisfactory
to the Administrative Agent covering such casualties, risks, perils, liabilities and other hazards reasonably required by the Administrative Agent.  In addition, the Borrower shall, and shall cause each of its Subsidiaries to, comply with all requirements regarding insurance contained in the Security Instruments.

 

(b)           All certified copies of policies or certificates thereof, and endorsements and renewals thereof shall be delivered to and retained by the Administrative Agent.  All policies of insurance shall either have attached thereto a Lender's loss payable endorsement
for the benefit of the Administrative Agent, as loss payee in form reasonably satisfactory to the Administrative Agent or shall name the Administrative Agent as an additional insured, as applicable.  The Borrower shall furnish the Administrative Agent with a certificate of insurance and, if applicable, an endorsement, or a certified copy of all policies of insurance required at closing, and simultaneously with the effectiveness of any new or replacement policy.  All policies or certificates
of insurance shall set forth the coverage, the limits of liability, the name of the carrier, the policy number, and the period of coverage.  In addition, all policies of insurance required under the terms hereof shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act of negligence of the Borrower, or a Subsidiary or any party holding under the Borrower or a Subsidiary which might otherwise result in a
forfeiture of the insurance and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against the Borrower and its Subsidiaries.  Without limiting the generality of the foregoing provisions, Administrative Agent will be named as an additional insured and will be provided a waiver of subrogation on the Borrower's general liability and umbrella policies.   All such policies shall contain a provision that notwithstanding any contrary agreements between the Borrower,
its Subsidiaries, and the applicable insurance company, such policies will not be canceled, allowed to lapse without renewal, surrendered or amended (which provision shall include any reduction in the scope or limits of coverage) without at least 30 days' prior written notice to the Administrative Agent and Borrower unless such is cancelled for non-payment of premium and then the Administrative Agent and Borrower will be given 10 days notice of cancellation.  In the event that, notwithstanding the "lender's
loss payable endorsement" requirement of this Section 5.02, the proceeds of any insurance policy described above are paid to the Borrower or a Subsidiary and any Obligations are outstanding, the Borrower shall deliver such proceeds to the Administrative Agent immediately upon receipt.

 

Section 5.03                      Preservation of Existence, Etc.  The Borrower shall preserve and maintain, and cause each of its Subsidiaries to preserve
and maintain, its partnership, corporate or limited liability company, as applicable, existence, rights, franchises, and privileges in the jurisdiction of its formation, and qualify and remain qualified, and cause each such Subsidiary to qualify and remain qualified, as a foreign entity in each jurisdiction in which qualification is necessary or

 

 

  

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desirable in view of its business and operations or the ownership of its Properties, and, in each case, where failure to qualify or preserve and maintain its rights and franchises could reasonably be expected to cause a Material Adverse Change.

 

Section 5.04                      Payment of Taxes, Etc.  The Borrower shall pay and discharge, and cause each of its Subsidiaries to pay and discharge,
before the same shall become delinquent, (a) all Taxes, assessments, and governmental charges or levies imposed upon it or upon its income or profits or Property that are material in amount, prior to the date on which penalties attach thereto and (b) all lawful claims that are material in amount which, if unpaid, might by law become a Lien upon its Property; provided, however, that neither the Borrower nor any such Subsidiary shall be
required to pay or discharge any such Tax, assessment, charge, levy, or claim which is being contested in good faith and by appropriate proceedings, and with respect to which reserves in conformity with GAAP have been established.

 

Section 5.05                      Visitation Rights.  At any reasonable time and from time to time, upon reasonable notice, the Borrower shall, and shall
cause its Subsidiaries to, permit the Administrative Agent and any Lender or any of their respective agents or representatives thereof, to (a) examine and make copies of and abstracts from the records and books of account of, and visit and inspect at their reasonable discretion the Properties of, the Borrower and any such Subsidiary, and (b) discuss the affairs, finances and accounts of the Borrower and any such Subsidiary with any of their respective officers or directors.

 

Section 5.06                      Reporting Requirements.  The Borrower shall furnish to the Administrative Agent and each Lender (unless otherwise provided
below):

 

(a)           Annual Financials.  As soon as available and in any event not later than 90 days after the end of each fiscal year (commencing with fiscal year ending December 31, 2009) of the Borrower (or such
later date authorized by the SEC; provided that, the Borrower shall have delivered proper and timely notices of late filings filed with the SEC and also delivered such to the Administrative Agent and such later date may not be a date later than 90 days after the end of such fiscal year), a certificate of a Responsible Officer of the Borrower certifying that attached thereto are true and correct copies of: (i) the Form 10-K filed with the SEC for such fiscal year end, (ii) to the extent not otherwise provided
in such Form 10-K, a copy of the annual audit report for such year for the Borrower, its Subsidiaries, and Canadian Abraxas, on a consolidated basis, including therein the Borrower's consolidated balance sheet as of the end of such fiscal year and the Borrower's consolidated statements of income, cash flows, and retained earnings, in each case certified by independent certified public accountants of national standing reasonably acceptable to the Administrative Agent and including any management letters delivered
by such accountants to the Borrower, any Subsidiary, or Canadian Abraxas in connection with such audit, (iii) a certificate of such accounting firm to the Administrative Agent and the Lenders stating that, in the course of the regular audit of the business of the Borrower, its Subsidiaries, and Canadian Abraxas, on a consolidated basis, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred
and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (iv) a Compliance Certificate, as described in Section 5.06(c), (v) a Production Report as described in Section 5.06(d), and (vi) a Hedging Report as described in Section 5.06(e);

 

 

  

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(b)           Quarterly Financials.  As soon as available and in any event not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year (commencing with fiscal quarter ending
September 30, 2009, adjusted to reflect the pro forma effect of the Merger) of the Borrower, its Subsidiaries, and Canadian Abraxas, on a consolidated basis (or such later date authorized by the SEC; provided that, the Borrower shall have delivered proper and timely notices of late filings filed with the SEC and also delivered such to the Administrative Agent and such later date may not be a date later than 90 days after the end of such fiscal quarter), a certificate of a Responsible Officer of the Borrower certifying
that attached thereto are true and correct copies of: (i) the Form 10-Q filed with the SEC for such fiscal quarter end, (ii) to the extent not otherwise provided in such Form 10-Q, the consolidated unaudited balance sheet and the consolidated unaudited statements of income, cash flows, and retained earnings of Borrower for the period commencing at the end of the previous year and ending with the end of such fiscal quarter, all in reasonable detail and duly certified with respect to such consolidated statements
(subject to the absence of footnotes and to year-end audit adjustments) by a Responsible Officer of the Borrower as having been prepared in accordance with GAAP; (iii) a Compliance Certificate, as described in Section 5.06(c), (iv) a Production Report as described in Section 5.06(d), and (v) a Hedging Report as described in Section 5.06(e);

 

(c)           Compliance Certificate.  In connection with clauses (a) and (b) above, the Borrower shall deliver a Compliance Certificate executed by a Responsible Officer of the Borrower;

 

(d)           Production Report.  In connection with clauses (a) and (b) above, the Borrower shall deliver a report in form and substance satisfactory to the Administrative Agent prepared by the Borrower covering
each of the Oil and Gas Properties of the Borrower and its Subsidiaries and detailing on a quarterly basis (i) the production, revenue, and price information and associated operating expenses for each such quarter, (ii) any changes to any producing reservoir (other than ordinary depletion), production equipment (other than ordinary wear and tear), or producing well (other than ordinary depletion) during each such quarter, which changes could cause a Material Adverse Change, and (iii) any sales of the Borrower’s
or any Subsidiaries’ Oil and Gas Properties during each such quarter;

 

(e)           Hedging Report. In connection with clauses (a) and (b) above, the Borrower shall deliver a report in form and substance satisfactory to the Administrative Agent prepared by the Borrower (i) setting forth
in reasonable detail all Hydrocarbon Hedge Agreements to which any production of oil, gas or other Hydrocarbons from the Oil and Gas Properties of the Borrower and its Subsidiaries is then subject, together with a statement of the Borrower's position with respect to each such Hydrocarbon Hedge Agreement; provided, however, if the price of any of the oil, gas or other Hydrocarbons produced from such Oil and Gas Properties is subject to a Hydrocarbon
Hedge Agreement, then Borrower shall promptly notify the Administrative Agent and the Lenders if such Hydrocarbon Hedge Agreement is terminated, modified, amended or altered prior to the end of its contractual term, or if there is an amendment, adjustment or modification of the price of any of the oil, gas or other Hydrocarbons produced from such Oil and Gas Properties that is subject to or established by a Hydrocarbon Hedge Agreement, (ii) setting forth, to the extent not already described in clause (i), all
Hedge Contracts of the Borrower and its Subsidiaries and detailing the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value

 

 

  

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thereof, all credit support agreements relating thereto (including any margin required or supplied), and the counterparty to each such agreement, and (iii) demonstrating the Borrower's compliance with Section 5.13 and Section 6.14(b) hereof.

 

(f)           Monthly Liquidity and Capital Expenditure Reports. Within 45 days after the end of each month, a certificate executed by a Responsible Officer of the Borrower, certifying (i) the Liquidity of the Loan Parties
as of the last day of such month and (ii) capital expenditures (as determined in accordance with GAAP) made by Borrower and its Subsidiaries during such month.

 

(g)           Oil and Gas Reserve Reports.

 

(i)           As soon as available but in any event on or before February 28th (or 29th, as applicable) of each year, an Independent
Engineering Report dated effective as of December 31 for the immediately preceding year;

 

(ii)           As soon as available but in any event on or before August 31st of each year, an Internal Engineering Report dated effective as of the immediately preceding June 30;

 

(iii)           Such other information as may be reasonably requested by the Administrative Agent or any Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base;

 

(iv)           With the delivery of each Engineering Report, a certificate from a Responsible Officer of the Borrower certifying that, to the best of his knowledge and in all material respects: (a) the information contained in the Engineering Report and any other information delivered
in connection therewith is true and correct in all material respects, (b) the Borrower or its Subsidiary, as applicable, owns good and defensible title to the Oil and Gas Properties evaluated in such Engineering Report, and such Properties are subject to an Acceptable Security Interest and are free of all Liens except for Permitted Liens, (c) except as set forth on an exhibit to the certificate, on a net basis there are no Gas Imbalances, take or pay or other prepayments with respect to its Oil and Gas Properties
evaluated in such Engineering Report which would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (d) none of its Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in such detail as reasonably required
by the Required Lenders, (e) attached to the certificate is a list of its Oil and Gas Properties added to and deleted from the immediately prior Engineering Report and a list showing any change in working interest or net revenue interest in its Oil and Gas Properties occurring and the reason for such change, (f) attached to the certificate is a list of all Persons disbursing proceeds to the Borrower or to its Subsidiary, as applicable, from its Oil and Gas Properties, (g) except as set forth on a schedule attached
to the certificate, 90% of the PV-10 of the Proven Reserves evaluated by such Engineering Report are pledged as Collateral for the Obligations and attached to the certificate is a schedule detailing compliance with Section 5.08, and (h) attached to the certificate is a monthly cash flow budget for the 12 months following the

 

 

  

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delivery of such certificate setting forth the Borrower's projections for production volumes, revenues, expenses, taxes and budgeted capital expenditures during such period;

 

(h)           Defaults.  As soon as practicable and in any event within five days after (i) the occurrence of any Default or (ii) the occurrence of any default under any instrument or document evidencing Debt
of the Borrower or any Subsidiary, in each case known to any officer of the Borrower or any of its Subsidiaries which is continuing on the date of such statement, a statement of a Responsible Officer of the Borrower setting forth the details of such Default or default, as applicable, and the actions which the Borrower or such Subsidiary has taken and proposes to take with respect thereto;

 

(i)           Termination Events.  As soon as practicable and in any event (i) within 30 days after (A) the Borrower knows or has reason to know that any Termination Event described in clause (a) of the definition
of Termination Event with respect to any Plan has occurred, or (B) the Borrower acquires knowledge that any member of the Controlled Group knows that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan has occurred, and (ii) within 10 days after (A) the Borrower knows or has reason to know that any other Termination Event with respect to any Plan has occurred, or (B) the Borrower acquires knowledge that any of its Affiliates knows that any other Termination
Event with respect to any Plan has occurred, a statement of a Responsible Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such Affiliate proposes to take with respect thereto;

 

(j)           Termination of Plans.  Promptly and in any event within two (2) Business Days after (i) receipt thereof by the Borrower from the PBGC, or (ii) the Borrower acquires knowledge of any Controlled
Group member's receipt thereof from the PBGC, copies of each notice received by the Borrower or any such member of the Controlled Group of the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan;

 

(k)           Other ERISA Notices.  Promptly and in any event within five (5) Business Days after (i) receipt thereof by the Borrower from a Multiemployer Plan sponsor, or (ii) the Borrower acquires knowledge
of any Controlled Group member's receipt thereof from a Multiemployer Plan sponsor, a copy of each notice received by the Borrower or any member of the Controlled Group concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA;

 

(l)           Environmental Notices.  Promptly upon the receipt thereof by the Borrower or any of its Subsidiaries, a copy of any form of request, notice, summons or citation received from the Environmental
Protection Agency, or any other Governmental Authority, concerning (i) violations or alleged violations of Environmental Laws, which seeks to impose liability therefor and could reasonably be expected to cause a Material Adverse Change, (ii) any action or omission on the part of the Borrower or any Subsidiary or any of their former Subsidiaries in connection with Hazardous Waste or Hazardous Substances which could result in the imposition of liability therefor that could reasonably be expected to cause
a Material Adverse Change, including any information request related to, or notice of, potential responsibility under CERCLA, or (iii) concerning the filing of a Lien upon, against or in connection with the

 

 

  

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Borrower or any Subsidiary or their former Subsidiaries, or any of their leased or owned Property, wherever located;

 

(m)           Other Governmental Notices.  Promptly and in any event within five (5) Business Days after receipt thereof by the Borrower or any Subsidiary, a copy of any notice, summons, citation, or proceeding
seeking to modify in any material respect, revoke, or suspend any material contract, license, permit or agreement with any Governmental Authority;

 

(n)           Material Changes.  Prompt written notice of any condition or event of which the Borrower has knowledge, which condition or event has resulted or may reasonably be expected to result in (i) a Material
Adverse Change (other than global changes in the Oil and Gas Business or the world economy generally) or (ii) a breach of or noncompliance with any material term, condition, or covenant of any material contract to which the Borrower or any of its Subsidiaries is a party or by which they or their Properties may be bound;

 

(o)           Disputes, Etc.  Prompt written notice of (i) any claims, legal or arbitration proceedings, proceedings before any Governmental Authority, or disputes, or to the knowledge of the Borrower threatened,
or affecting the Borrower, or any of its Subsidiaries which, if adversely determined, could reasonably be expected to cause a Material Adverse Change, or any material labor controversy of which the Borrower or any of its Subsidiaries has knowledge resulting in or reasonably considered to be likely to result in a strike against the Borrower or any of its Subsidiaries and (ii) any claim, judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any Property of the Borrower or any Subsidiary if
the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $1,000,000;

 

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

 

(q)           Notices Under Other Loan Agreements.  Promptly after the furnishing thereof, copies of any statement, report or notice furnished to any Person pursuant to the terms of any indenture, loan or credit
or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 5.06;

 

(r)           SEC Filings.  Promptly after the sending or filing thereof, copies of all proxy material, reports and other information which the Borrower or any of its Subsidiaries sends to or files with the
SEC or sends to the stockholders of the Borrower or the holders of Equity Interests in any of its Subsidiaries; and

 

(s)           Other Information.  Such other information respecting the business or Properties, or the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries, as any Lender
through the Administrative Agent may from time to time reasonably request.

 

 

  

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The Administrative Agent agrees to provide the Lenders with copies of any material notices and information delivered solely to the Administrative Agent pursuant to the terms of this Agreement.

 

Section 5.07                      Maintenance of Property.  Subject to Section 6.04, the Borrower shall, and shall cause each of its Subsidiaries to, maintain
their owned, leased, or operated Property in good condition and repair, ordinary wear and tear excepted; and shall abstain, and cause each of its Subsidiaries to abstain from, knowingly or willfully permitting the commission of waste or other injury, destruction, or loss of natural resources, or the occurrence of pollution, contamination, or any other condition in, on or about the owned or operated Property involving the Environment that could reasonably be expected to result in Response activities and that could
reasonably be expected to cause a Material Adverse Change.

 

Section 5.08                      Agreement to Pledge.  The Borrower (a) shall, and shall cause each Subsidiary to, grant to the Administrative Agent an
Acceptable Security Interest in all personal Property of the Borrower or any Subsidiary now owned or hereafter acquired, and (b) shall, and shall cause each Subsidiary to, grant to the Administrative Agent an Acceptable Security Interest in at least 90% of the PV-10 of the Proven Reserves of the Borrower and its Subsidiaries based on its most recently delivered Engineering Report.

 

Section 5.09                      Use of Proceeds.  The Borrower shall use the proceeds of the Advances to (a) consummate the Merger, (b) refinance existing
Debt, (c) provide for the acquisition, exploration and development, maintenance and production of Oil and Gas Properties, and (d) other working capital and general corporate purposes.  The Letters of Credit shall be used solely for the support of:  (i) hedging obligations incurred by Borrower and its Subsidiaries in the ordinary course of business, and (ii) other obligations incurred by Borrower and its Subsidiaries in the ordinary course of business.

 

Section 5.10                      Title Opinions.  The Borrower shall from time to time upon the reasonable request of the Administrative Agent, take such
actions and execute and deliver such documents and instruments as the Administrative Agent shall require to ensure that the Administrative Agent shall, at all times, have received satisfactory title evidence (including, if requested, supplemental or new title opinions addressed to it) covering at least 80% of the PV-10 of the Proven Reserves of the Borrower and its Subsidiaries as reasonably determined by the Administrative Agent and at least 80% of the PV-10 of the Proven Reserves which are categorized as "proved,
developed and producing", which title opinions shall be in form and substance acceptable to the Administrative Agent in its sole discretion and shall include opinions regarding the before payout and after payout ownership interests held by the Borrower and the Borrower's Subsidiaries, for all wells located on the Oil and Gas Properties covered thereby as to the ownership of Oil and Gas Properties of the Borrower and its Subsidiaries, and reflecting that the Administrative Agent has an Acceptable Security Interest
in such Oil and Gas Properties of the Borrower and its Subsidiaries.

 

Section 5.11                      Further Assurances; Cure of Title Defects.  The Borrower shall, and shall cause each Subsidiary to, cure promptly any
defects in the creation and issuance of the Notes and the execution and delivery of the Security Instruments and this Agreement.  The Borrower hereby authorizes the Lenders or the Administrative Agent to file any financing statements

 

 

  

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without the signature of the Borrower to the extent permitted by applicable Legal Requirements in order to perfect or maintain the perfection of any security interest granted under any of the Loan Documents.  Borrower shall ensure that the Administrative Agent at all times has an Acceptable Security Interest in Oil and Gas Properties
of the Borrower and its Subsidiaries in an amount not less than 90% of the PV-10of the Proven Reserves of the Borrower and its Subsidiaries as reasonably determined by the Administrative Agent. If any certificate delivered pursuant to Section 5.06(g) demonstrates that the Oil and Gas Properties of the Borrower and its Subsidiaries in which the Administrative Agent has an Acceptable Security Interest is less than 90% of the PV-10 of the Proven Reserves of the Borrower and its Subsidiaries, the Borrower shall,
or shall cause its Subsidiaries to (i) promptly, but in any event within 30 days of the delivery of such certificate, grant to the Administrative Agent an Acceptable Security Interest in additional Oil and Gas Properties of the Borrower or the Subsidiaries as necessary to cause the PV-10 of the Proven Reserves of the Borrower and its Subsidiaries in which Administrative Agent has an Acceptable Security Interest to equal or exceed 90% of the PV-10 of the Proven Reserves of the Borrower and its Subsidiaries. The
Borrower at its expense will, and will cause each Subsidiary to, promptly execute and deliver to the Administrative Agent upon request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Subsidiary, as the case may be, in the Security Instruments and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Obligations, or to correct any omissions in the Security Instruments, or to
state more fully the security obligations set out herein or in any of the Security Instruments, or to perfect, protect or preserve any Liens created pursuant to any of the Security Instruments, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith or to enable the Administrative Agent to exercise and enforce its rights and remedies with respect to any Collateral.  Within 30 days after (a) a request by the Administrative
Agent or the Lenders to cure any title defects or exceptions which are not Permitted Liens raised by such information or (b) a notice by the Administrative Agent that the Borrower has failed to comply with Section 5.10, the Borrower shall (i) cure such title defects or exceptions which are not Permitted Liens or substitute acceptable Oil and Gas Properties with no title defects or exceptions except for Permitted Liens covering Collateral of an equivalent value and (ii) deliver to the Administrative Agent satisfactory
title evidence (including supplemental or new title opinions meeting the foregoing requirements) in form and substance acceptable to the Administrative Agent in its reasonable business judgment as to the Borrower's and its Subsidiaries' ownership of such Oil and Gas Properties and the Administrative Agent's Liens and security interests therein as are required to maintain compliance with Section 5.10.

 

Section 5.12                      Deposit Accounts.  The Borrower shall, and shall cause each of its Subsidiaries to, maintain each of their operating accounts
and other deposit accounts with the Administrative Agent or any Lender or any other bank that has executed an account control agreement reasonably acceptable in form and substance to the Administrative Agent.

 

Section 5.13                      Hedge Contracts.  The Borrower shall, and shall cause its Subsidiaries to, enter into or assume Hydrocarbon Hedge Agreements
on or prior to the Closing Date, and shall maintain such Hydrocarbon Hedge Agreements in place, which Hydrocarbon Hedge Agreements shall, on the Closing Date, cover (a) for the period from October 1, 2009 through December 31, 2012, notional volumes equal to or greater than 85% of the anticipated production volumes of crude oil and natural gas, calculated separately, attributable to Proven Reserves categorized as

 

 

  

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"proved, developed and producing" of the Loan Parties as shown on the Initial Engineering Report and (b) for the period from January 1, 2013 through December 31, 2013, notional volumes equal to or greater than 70% of the anticipated production volumes of crude oil and natural gas, calculated separately, attributable to Proven Reserves categorized
as "proved, developed and producing" of the Loan Parties as shown on the Initial Engineering Report.

 

ARTICLE VI

 

NEGATIVE COVENANTS

 

So long as any Obligation or any Letter of Credit shall remain outstanding, any Letter of Credit Exposure shall exist, or any Lender shall have any Commitment hereunder, the Borrower agrees, unless the Required Lenders shall otherwise consent in writing, to comply with the following covenants:

 

Section 6.01                      Liens, Etc.  The Borrower shall not create, assume, incur, or suffer to exist, or permit any of its Subsidiaries to create,
assume, incur, or suffer to exist, any Lien on or in respect of any of its Property whether now owned or hereafter acquired, or assign any right to receive income, except that the Borrower and its Subsidiaries may create, incur, assume, or suffer to exist (all of which shall be referred to as "Permitted Liens"):

 

(a)           Liens securing the Obligations;

 

(b)           purchase money Liens or purchase money security interests upon or in any equipment acquired or held by the Borrower or any of its Subsidiaries in the ordinary course of business prior to or at the time of, or within 20 days after, the Borrower's or such Subsidiary's acquisition
of such equipment; provided, that, the Debt secured by such Liens (i) was incurred solely for the purpose of financing the acquisition of such equipment, and does not exceed the aggregate purchase price of such equipment, (ii) is secured only by such equipment and not by any other assets of the Borrower and its Subsidiaries, and (iii) is not increased in amount;

 

(c)           Liens for Taxes, assessments, or other governmental charges or levies not yet due or that (provided foreclosure, sale, or other similar proceedings shall not have been initiated) are being contested in good faith by appropriate proceedings, and such reserve as may be
required by GAAP shall have been made therefor;

 

(d)           Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics, workmen, materialmen, suppliers, laborers, construction, or similar Liens arising by operation of law in the ordinary course of business in respect of obligations that are not yet due or that are
being contested in good faith by appropriate proceedings, provided, that, such reserves as may be required by GAAP shall have been made therefor;

 

(e)           Liens to operators and non-operators under joint operating agreements arising in the ordinary course of the business of the Borrower or the relevant Subsidiary to secure amounts owing, which amounts are not yet due or are being contested in good faith by appropriate proceedings,
if any reserves as may be required by GAAP shall have been made therefor;

 

(f)           royalties, overriding royalties, net profits interests, production payments, reversionary interests, calls on production, preferential purchase rights and other burdens on or

 

 

  

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deductions from the proceeds of production, that do not secure Debt for borrowed money and that are taken into account in computing the net revenue interests and working interests of the Borrower or any of its Subsidiaries warranted in the Security Instruments;

 

(g)           Liens arising in the ordinary course of business out of pledges or deposits under workers' compensation laws, unemployment insurance, old age pensions or other social security or retirement benefits, or similar legislation or to secure public or statutory obligations
of the Borrower;

 

(h)           Liens arising under operating agreements, unitization and pooling agreements and orders, Farmout agreements, gas balancing agreements and other similar agreements, in each case that are customary in the Oil and Gas Business and that are entered into in the ordinary course
of business that are taken into account in computing the net revenue interests and working interests of the Borrower or any of its Subsidiaries warranted in the Security Instruments, to the extent that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto;

 

(i)           easements, rights-of-way, and other similar encumbrances, and minor defects in the chain of title that are customarily accepted in the oil and gas financing industry, none of which interfere with the ordinary conduct of the business of Borrower or any Subsidiary or materially
detract from the value or use of the Property to which they apply;

 

(j)           Liens in favor of landlords or lessors under operating leases or Capital Leases of a Loan Party; provided that (i) any such Lien shall secure only the obligations of such Loan Party arising under the applicable operating lease or Capital Lease, (ii) the Debt under such
Capital Leases is permitted under Section 6.02 below, and (iii) any such Lien extends only to the assets that are financed by or leased pursuant to such operating lease or Capital Lease (or in the case of a Lease of premises, the Borrower's assets located on such premises);

 

(k)           Liens on cash or securities pledged to secure performance of bids, tenders, performance bonds, surety and appeals bonds, or regulatory compliance or other obligations of a like nature incurred in the ordinary course of business and not in connection with the borrowing
of money;

 

(l)           Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of any of the Company Group on deposit with or in possession of such bank;

 

(m)           Liens on cash and Liquid Investments securing the performance obligations of Borrower under any Hedge Contract (subject to the limitations set forth in Section 6.14);

 

(n)           Liens in favor of Persons financing unpaid insurance premiums so long as (i) such Liens are limited to insurance policies with respect to which such premiums are financed, and (ii) the obligations secured by such Liens do not exceed $500,000 in the aggregate;

 

 

  

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(o)           Subject to paragraphs (c) and (d) of this Section 6.01, non-consensual statutory Liens on pipeline or pipeline facilities, Hydrocarbons or Properties of the Company Group which arise out of operation of law and are not in connection with the borrowing of money;

 

(p)           Liens in the Property of Abraxas Properties arising under the Existing Mortgage, as in effect on the date hereof, securing Debt permitted by Section 6.02(i), for so long as Abraxas Properties owns the Headquarters; provided that the Property subject to such Liens shall
not include any Oil and Gas Properties or any assets related to Oil and Gas Properties (including without exclusion seismic data and accounts receivable from the Oil and Gas Properties); and

 

(q)           Liens not otherwise permitted under this Agreement incurred in the ordinary course of business securing Debt in an aggregate principal amount at any time outstanding not to exceed $1,000,000.

 

In addition, the Borrower shall not create, assume, incur, or suffer to exist, or permit any of its Subsidiaries or Canadian Abraxas to create, assume, incur, or suffer to exist, any Lien on or in respect of any of the Equity Interests in Canadian Abraxas or any Property owned by Canadian Abraxas, whether now owned or hereafter acquired,
or assign any right of Canadian Abraxas to receive income.

 

Section 6.02                      Debts, Guaranties, and Other Obligations.  The Borrower shall not, and shall not permit any of its Subsidiaries to, create,
assume, suffer to exist, or in any manner become or be liable in respect of, any Debt except:

 

(a)           Debt of the Borrower and its Subsidiaries under the Loan Documents;

 

(b)           Debt in the form of obligations for the deferred purchase price of Property or services incurred in the ordinary course of business which are not yet due and payable or are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP have been established;

 

(c)           Debt secured by the Liens permitted under Section 6.01(b); provided that the sum of such Debt and the unsecured Debt permitted under Section 6.02(j) does not exceed $1,000,000 at any time;

 

(d)           Debt under Hydrocarbon Hedge Agreements or Interest Hedge Agreements which are not prohibited by the terms of Section 6.14;

 

(e)           Debt consisting of sureties or bonds provided to any Governmental Authority or other Person and assuring payment of contingent liabilities of the Borrower in connection with the operation of the Oil and Gas Properties, including with respect to plugging, facility removal
and abandonment of its Oil and Gas Properties;

 

(f)           Intercompany Debt;

 

(g)           Debt constituting letters of credit for the account of any member of the Company Group provided as security (i) for any matter in connection with which a Lien would be permitted but has not been granted under paragraphs , (k), (m) or (n) of Section 6.01; provided

 

 

  

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that the amount of such Debt shall not exceed the underlying obligations that would be secured by such Lien, and (ii) to secure payment obligations in connection with self-insurance or similar requirements in the ordinary course of business;

 

(h)           Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business if such Debt is extinguished within two (2) Business Days of incurrence and does not exceed
$50,000;

 

(i)           Debt under the Business Loan Agreement secured by the Existing Mortgage and not to exceed $5,350,000, for so long as Borrower owns the Headquarters; and

 

(j)           Debt not otherwise permitted under this Section 6.02, provided, that (i) such Debt is not secured by any Lien, and (ii) the aggregate of amount of such Debt plus the aggregate amount of Debt permitted under
Section 6.02(c) shall not exceed $1,000,000 at any time.

 

In addition, the Borrower shall not permit Canadian Abraxas to create, assume, suffer to exist, or in any manner become or be liable in respect of, any Debt.

 

Section 6.03                      Agreements Restricting Liens and Distributions.  The Borrower shall not, nor shall it permit any of its Subsidiaries to,
create, incur, assume or permit to exist any contract, agreement or understanding (other than this Agreement and the Security Instruments) which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property, whether now owned or hereafter acquired, to secure the Obligations or restricts any Subsidiary from paying dividends to the Borrower, or which requires the consent of or notice to other Persons in connection therewith.

 

Section 6.04                      Merger or Consolidation; Asset Sales.

 

(a)           The Borrower shall not, nor shall it permit any of its Subsidiaries, to merge or consolidate with or into any other Person other than the merger of a Loan Party with and into the Borrower or another Loan Party.

 

(b)           The Borrower shall not, nor shall it permit any of its Subsidiaries to enter into or effect a Disposition of any of its Properties or to effect a Hedge Termination other than:

 

(i) the sale of Hydrocarbons in the ordinary course of business,

 

(ii) the Disposition of equipment that is (A) obsolete, worn out, depleted or uneconomic and disposed of in the ordinary course of business, (B) no longer necessary for the business of such Person or (C) contemporaneously replaced by equipment of at least comparable use,

 

(iii) Farmouts of undeveloped acreage and assignments in connection with such Farmouts,

 

(iv) Dispositions of Oil and Gas Properties or any interest therein or Subsidiaries owning Oil and Gas Properties provided that (A) the consideration received in respect of

 

 

  

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such Disposition shall be equal to or greater than the fair market value of the Oil and Gas Property, interest therein or Subsidiary subject of such Disposition (as reasonably determined by the Board of Directors of the Borrower and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer
of the Borrower certifying to that effect), (B) the PV-10 of the Oil and Gas Properties that are the subject of such Disposition or that are owned by the Subsidiary that is the subject of such Disposition, individually or when aggregated with those that are the subjects of all such other Dispositions effected during any period between two successive scheduled redeterminations of the Borrowing Base, shall not be in excess of 5% of the Borrowing Base in effect at the time such Disposition is effected, and (C) if
any such Disposition is of a Subsidiary owning Oil and Gas Properties, such Disposition shall include all the Equity Interests of such Subsidiary (or such Subsidiary shall be dissolved substantially simultaneously with such Disposition);

 

(v) Hedge Terminations, provided that (A) the Borrower shall give Administrative Agent 15 Business Days, prior written notice of any such Hedge Termination, (B) the Administrative Agent and the Revolving Lenders shall have the right to redetermine the Borrowing Base if such a right is provided with respect to such Hedge Termination under
Section 2.02(c), and (C) after giving effect to such Hedge Termination, the Borrower shall be in compliance with Section 5.13; and

 

(vi) any Disposition of Properties not otherwise regulated by Section 6.04(b) and having a fair market value not to exceed $1,000,000 during any 12-month period.

 

Section 6.05                      Restricted Payments.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, make any Restricted Payments
except that any Subsidiary may declare and make Restricted Payments to the Borrower or any other Loan Party.

 

Section 6.06                      Investments.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, make or permit to exist any loans,
advances, or capital contributions to, or make any investment in (including the making of any Acquisition), or purchase or commit to purchase any stock or other securities or evidences of indebtedness of or interests in any Person, except:

 

(a)           Liquid Investments;

 

(b)           trade and customer accounts receivable which are for goods furnished or services rendered in the ordinary course of business and are payable in accordance with customary trade terms;

 

(c)           creation of any additional Subsidiaries in compliance with Section 6.15;

 

(d)           investments in negotiable instruments for collection in the ordinary course of business;

 

(e)           investments made in the ordinary course of business and of a nature that is customary in the Oil and Gas Business as a means of actively exploiting, exploring for, acquiring, developing, processing, gathering, marketing or transporting oil and gas through agreements,
transactions, interests or arrangements which provide for the sharing of risks or costs or satisfy other objectives of the Oil and Gas Business, jointly with third parties, including

 

 

  

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entering into operating agreements, working interests, royalty interests, mineral leases, processing agreements, Farmouts, farm-in agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements and area of mutual interest agreements, production
sharing agreements or other similar or customary agreement, transactions, properties, interest and investments and expenditures in connection therewith; provided that (i) no such investments includes an investment in any Equity Interest in a Person, (ii) any Debt incurred or Lien granted or permitted to exist pursuant to such Investments is otherwise permitted under Section 6.01 and Section 6.02, respectively, and (iii) such investments are taken into account in computing the net revenue interests and working
interests of the Borrower or any of its Subsidiaries warranted in the Security Instruments;

 

(f)           Investments in Intercompany Debt; and

 

(g)           Investments not otherwise permitted under this Section 6.06 in an aggregate amount not to exceed $1,000,000.

 

Section 6.07                      Affiliate Transactions.  Other than as set forth on Schedule
6.07, the Borrower shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of transactions (including the purchase, sale, lease or exchange of Property, the making of any investment, the giving of any guaranty, the assumption of any obligation or the rendering of any service) with any of their Affiliates unless such transaction or series of transactions is on terms no less favorable to the Borrower or the Subsidiary, as
applicable, than those that could be obtained in a comparable arm's length transaction with a Person that is not such an Affiliate.

 

Section 6.08                      Compliance with ERISA.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly,
(a) engage in, or permit any Subsidiary or ERISA Affiliate to engage in, any transaction in connection with which the Borrower, any Subsidiary or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code, in either case, in excess of $1,000,000; (b) terminate, or permit any Subsidiary or ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which
could result in any liability to the Borrower, any Subsidiary or any ERISA Affiliate to the PBGC in excess of $1,000,000; (c) fail to make, or permit any Subsidiary or 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 Legal Requirement, the Borrower, a Subsidiary or any ERISA Affiliate is required to pay as contributions thereto; (d) permit to exist, or allow any Subsidiary or ERISA Affiliate to permit to exist,
any accumulated funding deficiency (or unpaid minimum required contribution for plan years after December 31, 2007) within the meaning of Section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan; (e) permit, or allow any Subsidiary or ERISA Affiliate to permit, the actuarial present value of the benefit liabilities (as "actuarial present value of the benefit liabilities" shall have the meaning specified in section 4041 of ERISA) under any Plan maintained by the Borrower,
any Subsidiary or any ERISA Affiliate which is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities by more than $1,000,000; (f) contribute to or

 

 

  

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assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan in excess of $1,000,000; (g) acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate
with respect to the Borrower, any Subsidiary or any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan under which any Subsidiary or ERISA Affiliate would have an obligation to contribute more than $1,000,000, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds
the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities by more than $1,000,000; (h) incur, or permit any Subsidiary or ERISA Affiliate to incur, a liability to or on account of a Plan under section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; (i) contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any
employee welfare benefit plan, as defined in section 3(1) of ERISA, including any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any material liability; (j) amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Borrower, any Subsidiary or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29)
of the Code; or (k) permit to exist any occurrence of any Reportable Event (as defined in Title IV of ERISA), or any other event or condition, which presents a material (in the opinion of the Required Lenders) risk of such a termination by the PBGC of any Plan.

 

Section 6.09                      Sale-and-Leaseback.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, sell or transfer to a Person
any Property, whether now owned or hereafter acquired, if at the time or thereafter the Borrower or a Subsidiary shall lease as lessee such Property or any part thereof or other Property which the Borrower or a Subsidiary intends to use for substantially the same purpose as the Property sold or transferred; provided however, that the Borrower may, so long as the Debt under the Business Loan Agreement is paid off in full or assumed by the buyer of such Property and the Borrower and its Subsidiaries no longer have
any obligation with respect thereto, sell the property encumbered by the Existing Mortgage as of the Closing Date and enter into a lease with the buyer of such property, pursuant to which the Borrower leases such property from such buyer.

 

Section 6.10                      Change of Business.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, make any material change
in the character of its business as an independent oil and gas exploration and production company, nor will the Borrower or any Subsidiary operate or carry on business in any jurisdiction other than the United States or Canada.

 

Section 6.11                      Organizational Documents, Name Change.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, amend,
supplement, modify or restate their articles or certificate of incorporation, bylaws, limited liability company agreements, or other equivalent organizational documents or amend its name or change its jurisdiction of incorporation, organization or formation, in any case, without prior written notice to, and prior consent of, the Administrative Agent which such consent shall not be unreasonably withheld.

 

 

  

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Section 6.12                      Use of Proceeds; Letters of Credit.  The Borrower will not permit the proceeds of any Advance or Letters of Credit to be
used for any purpose other than those permitted by Section 5.09.  The Borrower will not engage in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U).  Neither the Borrower nor any Person acting on behalf of the Borrower has taken or shall take, nor permit any of the Borrower's Subsidiaries to take any action which might cause any of the Loan Documents to violate Regulation T, U or X or any other regulation of the
Board of Governors of the Federal Reserve System 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, including the use of the proceeds of any Advance or Letters of Credit to purchase or carry any margin stock in violation of Regulation T, U or X.

 

Section 6.13                      Gas Imbalances, Take-or-Pay or Other Prepayments.  The Borrower shall not, nor shall it permit any of its Subsidiaries
to, allow Gas Imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower or any Subsidiary which would require the Borrower or any Subsidiary to deliver their respective Hydrocarbons produced on a monthly basis from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor other than Gas Imbalances, take-or-pay or other prepayments incurred in the ordinary course of business and which Gas Imbalances, take-or-pay, or
other prepayments and balancing rights, in the aggregate, do not result in the Borrower or any Guarantor having net aggregate liability at any time  in excess of an amount equal to 1% of the Proven Reserves that are categorized as "proved , developed and producing" on the most recently delivered Engineering Report.

 

Section 6.14                      Limitation on Hedging.  The Borrower shall not, nor shall it permit any of its Subsidiaries to:

 

(a)           purchase, assume, or hold a speculative position in any commodities market or futures market or enter into any Hedge Contract for speculative purposes, or

 

(b)           be party to or otherwise enter into any Hydrocarbon Hedge Agreement, Interest Hedge Agreement or any other Hedge Contract which (i) is entered into for reasons other than as a part of its normal business operations as a risk management strategy and/or hedge against changes
resulting from market conditions related to the Borrower’s operations, (ii) fixes a price for a term of more than 5 years, (iii) covers an aggregate monthly production (determined, in the case of contracts that are not settled on a monthly basis, by a monthly proration acceptable to Administrative Agent) for any single month which exceeds 90% of such Loan Party's aggregate Projected Oil and Gas Production for such month, (iv) except for the Collateral under the Security Documents with respect to Lender
Hedging Obligations and letters of credit up to $500,000 in the aggregate with respect to Hedge Contracts entered into from time to time with a counterparty that is not a Lender or an Affiliate of a Lender, requires such Loan Party to put up money, assets, or other security against the event of its nonperformance prior to actual default by such Loan Party in performing its obligations thereunder, or (v) is with a counterparty or has a guarantor of the obligation of the counterparty who (unless such counterparty
is a Lender or one of its Affiliates) at the time the contract is made has long-term obligations rated less than A- or A3, respectively, by S&P or Moody's.

 

 

  

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Section 6.15                      Additional Subsidiaries.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, create or acquire any
additional Subsidiaries without (a) prior written notice to the Administrative Agent and the Required Lenders, (b) such new Subsidiary executing and delivering to the Administrative Agent, at its request, a Guaranty, a Pledge Agreement (if applicable), a Security Agreement and a Mortgage (if applicable), or joinders to the existing Loan Documents, as applicable, and such other Security Instruments as the Administrative Agent or the Required Lenders may reasonably request, (c) the equity holder of such Subsidiary
executing and delivering to the Administrative Agent a Pledge Agreement pledging 100% of the Equity Interest owned by such equity holder of such Subsidiary along with the certificates pledged thereby, if any, and appropriately executed stock powers in blank, if applicable, and (d) the delivery by the Borrower and such Subsidiary of any certificates, opinions of counsel, title opinions or other documents as the Administrative Agent may reasonably request relating to such Subsidiary.

 

Section 6.16                      Account Payables.  The Borrower shall not, nor shall it permit any of its Subsidiaries to, allow any of its trade payables
or other accounts payable to be outstanding for more than 90 days beyond the date when due (except in cases where any such trade payable is being disputed in good faith and adequate reserves under GAAP have been established).

 

Section 6.17                      Abraxas Properties.   The Borrower shall not permit Abraxas Properties to own any Property other than (a) the Headquarters,
(b) 100% of the Equity Interests in Sandia, and (c) other Property in an amount not to exceed $500,000.

 

Section 6.18                      Current Ratio.  The Borrower shall not permit, as of the end of any fiscal quarter, the ratio of (a) its consolidated
current assets to (b) its consolidated current liabilities, to be less than 1.00 to 1.00.  For purposes of this calculation, (i) "current assets" shall include, as of the date of calculation, the aggregate Unused Revolving Commitment Amounts but shall exclude, as of the date of calculation (A) any cash deposited with or at the request of a counterparty to any Hedge Contract of Borrower, any of its Subsidiaries, or Canadian Abraxas, and (B) any assets of Borrower, any of its Subsidiaries, or Canadian
Abraxas representing a valuation account arising from the application of SFAS 133 and 143, and (ii) "current liabilities" shall exclude, as of the date of calculation, (A) the current portion of long-term Debt of Borrower, any of its Subsidiaries, or Canadian Abraxas, and (B) any liabilities of Borrower, any of its Subsidiaries, or Canadian Abraxas representing a valuation account arising from the application of SFAS 133 and 143.

 

Section 6.19                      Interest Coverage Ratio.  The Borrower (a) shall not permit, as of the last day of each fiscal quarter, the ratio of (i)
the Consolidated EBITDAX of the Borrower, its Subsidiaries, and Canadian Abraxas for the four fiscal quarters then ended, to (ii) the consolidated Interest Expense of the Borrower, its Subsidiaries, and Canadian Abraxas for the four fiscal quarters then ended, to be less than 2.50 to 1.00; provided that, for each such four fiscal quarter period that began prior to the effectiveness of the Merger, such amounts shall be adjusted to give pro forma effect to the Merger.

 

Section 6.20                      Leverage Ratio. The Borrower (a) shall not permit as of the last day of each fiscal quarter ending September 30, 2009, December
31, 2009, March 31, 2010, June 30, 2010, or September 30, 2010, the Total Debt to Consolidated EBITDAX Ratio of the Borrower

 

 

  

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for the four fiscal quarters then ended to be less than 4.50 to 1.00; and (b) shall not permit, as of the last day of each fiscal quarter ending thereafter, the Total Debt to Consolidated EBITDAX Ratio of the Borrower to be less than 4.00 to 1.00; provided that, for each such four fiscal quarter period that began prior to the effectiveness
of the Merger, such amounts shall be adjusted to give pro forma effect to the Merger.

 

ARTICLE VII

 

EVENTS OF DEFAULT; REMEDIES

 

Section 7.01                      Events of Default.  The occurrence of any of the following events shall constitute an "Event of Default" under any Loan
Document:

 

(a)           Payment.  Any Loan Party (i) fails to pay any principal when due under this Agreement or (ii) fails to pay, within three (3) Business Days of the date when due, any other amount due under this
Agreement or any other Loan Document, including payments of interest, fees, reimbursements, and indemnifications.

 

(b)           Representation and Warranties.  Any representation or warranty made or deemed to be made (i) by the Borrower, any Guarantor or any of their respective Subsidiaries (or any of their respective
officers) in this Agreement or in any other Loan Document, or (ii) by the Borrower, any Guarantor or any of their respective Subsidiaries (or any of their respective officers) in connection with this Agreement or any other Loan Document, shall prove to have been incorrect in any material respect when made or deemed to be made;

 

(c)           Covenant Breaches.  The Borrower, any Guarantor or any of their respective Subsidiaries shall fail to (i) perform or observe any covenant contained in Section 2.15(b), Section 5.06(g), Section
5.12, Section 5.13 or Article VI or (ii) perform or observe any covenant contained in Section 5.02(a) if such failure shall remain unremedied for 15 days after the occurrence of such breach or failure or (iii) fail to perform or observe any other term or covenant set forth in this Agreement or in any other Loan Document which is not covered by clauses (i) or (ii) above or any other provision of this Section 7.01, if such failure shall remain unremedied for 30 days after the occurrence
of such breach or failure;

 

(d)           Cross-Defaults.  (i) The Borrower, any Guarantor, or any Subsidiary of a Loan Party shall fail to pay any principal of or premium or interest on its Debt which is outstanding in a principal
amount of at least $1,000,000 individually or when aggregated with all such Debt of the Borrower, any Guarantor, or any such Subsidiary so in default (but excluding the Obligations) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace or cure period, if any, specified in the agreement or instrument relating to such Debt; (ii) any other event shall occur or condition shall exist
under any agreement or instrument relating to Debt which is outstanding in a principal amount of at least $1,000,000 individually or when aggregated with all such Debt of the Borrower, any Guarantor, or any such Subsidiary so in default, and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or (iii) any such Debt which is outstanding in
a principal amount of at least $1,000,000 individually or when aggregated with all such Debt of

 

 

  

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the Borrower, any Guarantor, or any such Subsidiary so in default, shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; provided that, for purposes of this paragraph
(d), the "principal amount" of the obligations in respect of Hedging Contracts at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that would be required to be paid if such Hedging Contracts were terminated at such time;

 

(e)           Insolvency.  The Borrower, any Guarantor, or any Subsidiary of a Loan Party shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower, any Guarantor, or any Subsidiary of a Loan Party seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee or other similar official for it or for any substantial part of its Property and, in the case of any such proceeding instituted against the Borrower, any such Subsidiary, or any such Guarantor either such proceeding shall remain undismissed for a period of 60 days or any of the actions sought in such proceeding shall occur; or the Borrower, any Subsidiary of a Loan Party, or any Guarantor shall take any company action to authorize any of the actions set forth above in this paragraph (e);

 

(f)           Judgments.  Any judgment or order for the payment of money in excess of $1,000,000 shall be rendered against the Borrower, any Guarantor, or any Subsidiary of a Loan Party and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;

 

(g)           Termination Events.  Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent, (i) such
Termination Event shall not have been corrected and (ii) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $1,000,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount);

 

(h)           Plan Withdrawals.  The Borrower or any member of the Controlled Group as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the
plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $1,000,000;

 

(i)           Change in Control.  A Change in Control shall have occurred;

 

(j)           Borrowing Base.  Any failure to cure any Borrowing Base deficiency in accordance with Section 2.05;

 

 

  

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(k)           Loan Documents.  Any material provision of any Loan Document shall for any reason cease to be valid and binding on the Borrower or a Guarantor or any of their respective Subsidiaries or any such
Person shall so state in writing;

 

(l)           Security Instruments.  (i) The Administrative Agent shall fail to have an Acceptable Security Interest in any portion of the Collateral or  (ii) any Security Instrument shall at any time
and for any reason cease to create the Lien on the Property purported to be subject to such agreement in accordance with the terms of such agreement, or cease to be in full force and effect, or shall be contested by the Borrower, any Guarantor or any of their respective Subsidiaries;

 

(m)           Material Adverse Change.  An event resulting in a Material Adverse Change shall have occurred; or

 

(n)           Casualty.  Loss, theft, substantial damage or destruction of Collateral the subject of any Security Instrument not fully covered by insurance (except for deductibles and allowing for the depreciated
value of such Collateral) in an amount greater than $5,000,000 shall have occurred.

 

Section 7.02                      Optional Acceleration of Maturity.  If any Event of Default (other than an Event of Default pursuant to paragraph (e)
of Section 7.01) shall have occurred and be continuing, then, and in any such event,

 

(a)           the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender and the Issuing Lender to make extensions of credit hereunder, including making Advances and issuing,
increasing or extending Letters of Credit, to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the Notes, and the other Loan Documents to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable in full, without notice of intent
to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Borrower;

 

(b)           the Borrower shall, on demand of the Administrative Agent at the request or with the consent of the Required Revolving Lenders, deposit with the Administrative Agent into the Cash Collateral Account an amount of cash equal to the Letter of Credit Exposure as security
for the Obligations; and

 

(c)           the Administrative Agent shall at the request of, or may with the consent of, the Required Lenders proceed to enforce its rights and remedies under the Security Instruments, the Guaranties, and any other Loan Document for the ratable benefit of Secured Parties by appropriate
proceedings.

 

Section 7.03                      Automatic Acceleration of Maturity.  If any Event of Default pursuant to paragraph (e) of Section 7.01 shall
occur,

 

 

  

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(a)           (i) the obligation of each Lender and the Issuing Lender to make extensions of credit hereunder, including making Advances and issuing, increasing or extending Letters of Credit, shall terminate, and (ii) all principal, interest, fees, reimbursements, indemnifications,
and all other amounts payable under this Agreement, the Notes, and the other Loan Documents shall become and be forthwith due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Borrower;

 

(b)           the Borrower shall deposit with the Administrative Agent into the Cash Collateral Account an amount of cash equal to the outstanding Letter of Credit Exposure as security for the Obligations; and

 

(c)           the Administrative Agent shall at the request of, or may with the consent of, the Required Lenders proceed to enforce its rights and remedies under the Security Instruments, the Guaranties, and any other Loan Document for the ratable benefit of Secured Parties by appropriate
proceedings.

 

Section 7.04                      Right of Setoff.  If an Event of Default shall have occurred and be continuing, the Administrative Agent, each Lender,
the Issuing Lender, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Administrative Agent, such Lender, the Issuing Lender or any such Affiliate to or for the credit or the account of the Borrower or any other
Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to the Administrative Agent, such Lender or the Issuing Lender, irrespective of whether or not the Administrative Agent, such Lender or the Issuing Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office
of the Administrative Agent, such Lender or the Issuing Lender different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of the Administrative Agent, each Lender, the Issuing Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that the Administrative Agent, such Lender, the Issuing Lender or their respective Affiliates may have.  The Administrative Agent, each
Lender and the Issuing Lender agree to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

Section 7.05                      Non-exclusivity of Remedies.  No remedy conferred upon the Administrative Agent, the Issuing Lender and the Lenders is
intended to be exclusive of any other remedy, and each remedy shall be cumulative of all other remedies existing by contract, at law, in equity, by statute or otherwise.

 

Section 7.06                      Application of Proceeds.  From and during the continuance of any Event of Default, any monies or Property actually received
by the Administrative Agent pursuant to

 

 

  

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this Agreement or any other Loan Document, the exercise of any rights or remedies under any Security Instrument or any other agreement with the Borrower, any Guarantor or any of their respective Subsidiaries which secures any of the Obligations, shall be applied in the following order:

 

(a)           First, to the payment of all amounts, including costs and expenses incurred in connection with the collection of such proceeds and the payment of any part of the Obligations, due to the Administrative Agent under any of the expense reimbursement or indemnity provisions
of this Agreement or any other Loan Document, any Security Instrument or other collateral documents, and any applicable Legal Requirement;

 

(b)           Second, ratably, according to the then unpaid amounts thereof, without preference or priority of any kind among them, to the payment of the Obligations then due and payable, including Obligations with respect to Letters of Credit, including any Lender Hedging Obligations
of any Loan Party, in each case subject to Section 2.15(c); and

 

(c)           Third, the remainder, if any, to the Borrower or its Subsidiaries, or its respective successors or assigns, or such other Person as may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

 

Administrative Agent shall have no responsibility to determine the existence or amount of Lender Hedging Obligations and may reserve from the application of amounts under this Section amounts distributable in respect of Lender Hedging Obligations until it has received evidence satisfactory to it of the existence and amount of such Lender
Hedging Obligations.  Subject to paragraph (a) of the first sentence of this Section, Administrative Agent and Lenders hereby acknowledge and confirm that the Liens in the Collateral secure the Obligations and the Lender Hedging Obligations on a ratable basis.

 

ARTICLE VIII

 

THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER

 

Section 8.01                      Appointment and Authority.  Each of the Lenders and the Issuing Lender hereby irrevocably appoints Société Générale
to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents 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 or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Lender, and neither the Borrower nor any
other Loan Party shall have rights as a third party beneficiary of any of such provisions.

 

Section 8.02                      Rights as a Lender.  The Person serving as the Administrative Agent hereunder shall have the same rights and powers in
its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind
of business with

 

 

  

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the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

 

Section 8.03                      Exculpatory Provisions.  The Administrative Agent shall not have any duties or obligations except those expressly set
forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, the Administrative Agent:

 

(a)           shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

(b)           shall not have any 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 as directed in writing
by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

 

(c)           shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the
Person serving as the Administrative Agent or any of its Affiliates in any capacity.

 

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided
in Sections 9.01 and 7.02, and 7.03 or (ii) in the absence of its own gross negligence or willful misconduct.  The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the Issuing Lender.  The Administrative Agent 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 thereunder 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 therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument
or document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

Section 8.04                      Reliance by Administrative Agent.  The Administrative Agent shall be entitled to rely upon, and shall not incur any liability
for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The

 

 

  

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Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of an Advance, or the issuance of a Letter of Credit, that
by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Lender prior to the making of such Advance or the issuance of such Letter of Credit.  The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants
and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

Section 8.05                      Delegation of Duties.  The Administrative Agent may perform any and all of its duties and exercise its rights and powers
hereunder or under any other Loan Document 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 of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article 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 8.06                      Successor Administrative Agent and Issuing Lender.  The Administrative Agent and the Issuing Lender may at any time give
notice of its resignation to the Lenders, the Issuing Lender and the Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in New York City or Houston, Texas or an Affiliate of any such bank with an office in New York City or Houston, Texas.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment
within 60 days after the retiring Administrative Agent or Issuing Lender gives notice of its resignation, then the retiring Administrative Agent or Issuing Lender, as applicable, may on behalf of the Lenders, appoint a successor Administrative Agent or Issuing Lender, as applicable, meeting the qualifications set forth above provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring Administrative Agent or Issuing Lender, as applicable, shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that (A) in the case of any Collateral held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such Collateral until such time as a successor Administrative Agent is appointed,
and (B) the retiring Issuing Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the effective date of its resignation and the provisions affecting the Issuing Lender with respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until the termination of all such Letters of Credit) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent or Issuing Lender, as applicable,
shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent or Issuing Lender, as provided for

 

 

  

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above in this Section.  Upon the acceptance of a successor’s appointment as Administrative Agent or Issuing Lender hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent or Issuing Lender, and the retiring Administrative
Agent or Issuing Lender shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section and except that the retiring Issuing Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the effective date of its resignation and the provisions affecting the Issuing Lender with respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until
the termination of all such Letters of Credit).  The fees payable by the Borrower to a successor Administrative Agent or Issuing Lender shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the retiring Administrative Agent’s or Issuing Lender's resignation hereunder and under the other Loan Documents, the provisions of this Article and Sections 9.04 and 9.05 shall continue in effect for the benefit of such retiring
Administrative Agent or Issuing Lender, as applicable, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent or Issuing Lender, as applicable was acting as Administrative Agent or Issuing Lender, as applicable.

 

Section 8.07                      Non-Reliance on Administrative Agent and Other Lenders.  Each Lender and the Issuing Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender and the Issuing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties 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 or any related agreement or any document furnished hereunder or thereunder.

 

Section 8.08                      No Other Duties, Etc.  Anything herein to the contrary notwithstanding, none of the Bookrunners or Arrangers listed on
the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the Issuing Lender hereunder.

 

Section 8.09                      Collateral Matters.

 

(a)           The Administrative Agent is authorized on behalf of the Secured Parties, without the necessity of any notice to or further consent from such Secured Parties, from time to time, to take any actions with respect to any Collateral or Security Documents which may be necessary
to perfect and maintain the Liens upon the Collateral granted pursuant to the Security Documents.  The Administrative Agent is further authorized (but not obligated) on behalf of the Secured Parties, without the necessity of any notice to or further consent from the Secured Parties, from time to time, to take any action in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Secured Parties under the Loan Documents or applicable Legal Requirements.  Persons
that are owed any Lender Hedging Obligations by accepting the

 

 

  

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benefit of the Liens granted pursuant to the Security Documents hereby agrees to the terms of this paragraph (a).

 

(b)           The Lenders hereby, and Persons that are owed any Lender Hedging Obligations by accepting the benefit of the Liens granted pursuant to the Security Documents, irrevocably authorize the Administrative Agent to (i) release any Lien granted to or held by the Administrative
Agent upon any Collateral (a) upon termination of this Agreement, termination of all Hedge Contracts with such Persons, termination of all Letters of Credit, and the payment in full of all outstanding Advances, Letter of Credit Obligations and all other Obligations payable under this Agreement and under any other Loan Document; (b) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted under this Agreement or any other Loan Document; (c) constituting
property in which the Borrower or any Subsidiary owned no interest at the time the Lien was granted or at any time thereafter; or (d) constituting property leased to the Borrower or any Subsidiary under a lease which has expired or has been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Borrower or such Subsidiary to be, renewed or extended; and (ii) release a Guarantor from its obligations under a Guaranty and any
other applicable Loan Document if such Person ceases to be a Subsidiary as a result of a transaction permitted under this Agreement.  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 8.09.

 

Section 8.10                      Cure of Defaulting Lender.  If the Borrower, the Administrative Agent and the Issuing Bank agree in writing in their good
faith discretion that a Lender that is a Defaulting Lender or a Potential Defaulting Lender should no longer be deemed to be a Defaulting Lender or Potential Defaulting Lender, as the case may be, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any amounts then held in the segregated account referred to in Section 2.15), such Lender will, to the
extent applicable, purchase such portion of outstanding Advances of the other Lenders and/or make such other adjustments as the Administrative Agent may determine to be necessary to cause the Revolving Credit Extensions of the Lenders to be on a pro rata basis in accordance with their respective Revolving Commitments, whereupon such Lender will cease to be a Defaulting Lender or Potential
Defaulting Lender and will be a Non-Defaulting Lender (and such Exposure of each Lender will automatically be adjusted on a prospective basis to reflect the foregoing); provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided, further, that except to
the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender or Potential Defaulting Lender to Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender or Potential Defaulting Lender.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.01                      Amendments, Etc.  No amendment or waiver of any provision of this Agreement, the Notes, or any other Loan Document, nor
consent to any departure by the

 

 

  

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Borrower or any Subsidiary therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver, or consent shall:

 

(a)           without the consent of each Lender: (i) waive any of the conditions specified in Article III; (ii) change any provision of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to amend,
waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder; (iii) amend Section 2.11 or any other provision of this Agreement in a manner that would alter the pro rata sharing of payments or the pro rata allocation of disbursements required thereby; (iv) release any Guarantor from its obligations under any Guaranty unless such Guarantor ceases to be a Subsidiary of the Borrower under a transaction permitted by the terms hereof; (v) permit the Borrower or any Subsidiary
to enter into any merger or consolidation with or into any other Person or amend Section 6.04(a); (vi) release any Collateral securing the Obligations, except as provided in Section 8.09 above; (vii) change Section 7.06 or any other provision of this Agreement in a manner that would alter the order of application of proceeds set forth in Section 7.06; or (viii) increase the aggregate Commitments;

 

(b)           without the consent of each Revolving Lender (i) increase the Borrowing Base, or (ii) change the definition of "Required Revolving Lenders";

 

(c)           without the consent of each Term Lender, change the definition of "Required Term Lenders";

 

(d)           without the written consent of each Lender directly affected thereby, (i) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 7.02), (ii) reduce the principal of, or interest on, the Obligations or any fees or other
amounts payable hereunder or under any other Loan Document, or (iii) postpone any date fixed for any payment of principal of, or interest on, the Obligations or any fees or other amounts payable hereunder;

 

(e)           without the written consent of the Required Revolving Lenders, make any amendment or waiver that would disproportionately affect the Revolving Lenders, including without limitation extending the Revolving Maturity Date or the Revolving Commitment Termination Date; or

 

(f)           without the written consent of the Required Term Lenders, make any amendment or waiver that would disproportionately affect the Term Lenders, including without limitation extending the Term Maturity Date;

 

and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the Lenders required above, affect the rights or duties of the Issuing Lender under this Agreement or any Letter of Credit Application relating
to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan

 

 

  

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Document; and (iii) the Administrative Agent’s Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.

 

Anything herein to the contrary notwithstanding, during such period as a Lender is a Defaulting Lender, to the fullest extent permitted by applicable law, such Lender will not be entitled to vote in respect of amendments and waivers hereunder, and the Revolving Commitment and the outstanding Advances or other Credit Extensions of such Lender
hereunder will not be taken into account in determining whether the Required Lenders, Required Revolving Lenders, Required Term Lenders or all of the Lenders, as required, have approved any such amendment or waiver (and the definition of "Required Lenders", "Required Revolving Lenders", or "Required Term Lenders" will automatically be deemed modified accordingly for the duration of such period); provided that (i) any such amendment or waiver that
would increase or extend the term of the Revolving Commitment of such Defaulting Lender, extend the date fixed for the payment of principal or interest owing to such Defaulting Lender hereunder, reduce the principal amount of any obligation owing to such Defaulting Lender, reduce the amount of or the rate or amount of interest on any amount owing to such Defaulting Lender or of any fee payable to such Defaulting Lender hereunder, take any of the actions described in Section 9.01(a)(ii), 9.01(a)(iii), 9.01(a)(iv),
or 9.01(a)(vii), or alter the terms of this proviso, will require the consent of such Defaulting Lender; (ii) if such Defaulting Lender is a Revolving Lender, any such amendment or waiver that would increase the Borrowing Base or change the definition of "Required Revolving Lenders" will require the consent of such Defaulting Lender; and (iii) if such Defaulting Lender is a Term Lender, any such amendment that would change the definition of "Required Term Lenders" will require the consent of such Defaulting Lender.  If
a Defaulting Lender's consent to an amendment or waiver is required pursuant to this Section 9.01, and such Defaulting Lender has failed to respond to a written request from the Administrative Agent to approve such waiver or amendment for 30 days after such Defaulting Lender's receipt of such request, such Defaulting Lender will be deemed to have approved such amendment or waiver.

 

Section 9.02                      Notices, Etc.

 

(a)           General.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (c) below), 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, sent by facsimile or (subject to subsection (c) below) electronic mail address as follows:

 

(i)           if to any Borrower or any other Loan Party, the Administrative Agent, or the Issuing Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule I or
to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties; and

 

(ii)           if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such
party in a notice to the Administrative Agent.

 

 

  

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(b)           Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours
for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in paragraph (c) below, shall be effective as provided in said paragraph (c).  In no event shall a voicemail message be effective as a notice, communication or confirmation hereunder.

 

(c)           Effectiveness of Facsimile Documents and Signatures.  Loan Documents may be transmitted and/or signed by facsimile.  The effectiveness of any such documents and signatures shall, subject
to applicable Legal Requirements, have the same force and effect as manually-signed originals and shall be binding on all Loan Parties, the Administrative Agent and the Lenders.  The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.

 

(d)           Limited Use of Electronic Mail.  Unless expressly provided otherwise herein, notices and other communications to the Lenders and the Issuing Lender hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the Issuing Lender pursuant to Article II, except that, until the Administrative Agent gives notice to the Borrower to the contrary, Notices of Borrowing and Notices of Conversion or Continuation may be delivered to the Administrative Agent by electronic
communication.  The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.  Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address
shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the "read receipt requested" function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day
for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

 

(e)           Reliance by Administrative Agent and Lenders.  The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Notices of Borrowing) purportedly
given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, the Issuing Lender, each Lender
and their Related Parties from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower.

 

 

  

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All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

 

Section 9.03                      No Waiver; Cumulative Remedies.  No failure on the part of any Lender or the Administrative Agent to exercise, and no
delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided in this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

 

Section 9.04                      Costs and Expenses.  The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent
and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Lender or the Issuing Lender (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the Issuing Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other
Loan Documents, including its rights under this Section, or (B) in connection with the Advances made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Advances or Letters of Credit.  The foregoing costs and expenses shall include all search, filing, recording, appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative Agent or any Lender
and the cost of independent public accountants and other outside experts retained by the Administrative Agent or any Lender.  All amounts due under this Section 9.04 shall be payable within thirty (30) days after demand.  The agreements in this Section shall survive the termination of the Commitments and repayment of all other Obligations.

 

Section 9.05                      INDEMNIFICATION.  THE BORROWER SHALL INDEMNIFY THE
ADMINISTRATIVE AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER AND THE ISSUING LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES (INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR
ANY INDEMNITEE), AND SHALL INDEMNIFY AND HOLD HARMLESS EACH INDEMNITEE FROM ALL FEES AND TIME CHARGES AND DISBURSEMENTS FOR ATTORNEYS WHO MAY BE EMPLOYEES OF ANY INDEMNITEE, INCURRED BY ANY INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY THE BORROWER OR ANY OTHER

 

 

  

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Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, (ii) any Advance or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or
any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. All amounts due under this Section 9.05 shall be payable within ten (10) Business Days after demand therefor.  The agreements in this Section shall survive the resignation
of the Administrative Agent, the Resignation of the Issuing Lender, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

Section 9.06                      Reimbursement by Lenders.  To the extent that the Borrower for any reason fails to indefeasibly pay any amount
required under Section 9.04 or Section 9.05 to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Lender or such Related Party, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the Issuing Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or Issuing Lender in connection with such capacity.  The failure of any Lender to pay its Pro Rata Share of such unpaid amounts shall not relieve any other Lender of
its obligation, if any, to pay its respective share of such unpaid amounts.  No Lender shall be responsible for the failure of any other Lender to comply with this Section.  All amounts due under this Section 9.06 shall be payable within ten (10) Business Days after demand therefor. The agreements in this Section shall
survive the resignation of the Administrative Agent, the Resignation of the Issuing Lender, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

Section 9.07                      WAIVER OF DAMAGES.  TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, EACH LOAN PARTY SHALL NOT ASSERT, AND HEREBY WAIVES, ANY CLAIM AGAINST ANY INDEMNITEE, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR

 

 

  

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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, the transactions contemplated hereby or thereby, any Advance or Letter of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages arising
from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

 

Section 9.08                      Successors and Assigns.

 

(a)           Generally.  The terms and provisions of this Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of Sections 9.08(e) or 9.08(f) and any other attempted assignment or transfer by any party hereto shall be null and void.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

 

(b)           Assignments by Lenders.  Any Lender may assign to one or more Eligible Assignees all or any portion of its rights and obligations under this Agreement (including, without limitation, all or a portion
of its Commitments, the Advances owing to it, participations in Letter of Credit Obligations at the time owing to it); provided, however, that

 

(i)           except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Advances being assigned at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect
to a Lender, the aggregate amount of the Commitments and Advances of such Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall not be less than $5,000,000.00;

 

(ii)           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 with respect to the Advances or the Commitment assigned;

 

(iii)           the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance; and

 

(iv)           each Eligible Assignee (other than an Eligible Assignee that is a Lender or an Affiliate of a Lender) shall pay to the Administrative Agent a $3,500 processing and

 

 

  

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recording fee and shall, if it is not a Lender, deliver to the Administrative Agent an Administrative Questionnaire.

 

Upon such execution, delivery, acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Acceptance, (A) the Eligible Assignee thereunder shall be a party hereto for all purposes and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (B) such assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of such 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 Sections 2.13, 2.14, 9.04 and 9.05 with respect to facts and circumstances occurring prior to the effective date of such assignment.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph 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 paragraph (d) of this Section.

 

(c)           Register.  The Administrative Agent shall maintain at its Applicable Lending Office a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitments of, and principal amount of the Advances owing to, each Lender from time to time (the "Register").  The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and each of the Loan Parties, the Administrative Agent, the Issuing Lender, and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Agreement.  The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.

 

(d)           Participations.  Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the
Borrower or any of any Borrower’s Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Advances (including such Lender’s participations in Letter of Credit Obligations) owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 9.01 that directly affects such Participant.  Subject to the last two sentences
of this paragraph (d), Borrower agrees that each Participant shall be entitled to the benefits of, and be bound by the terms of, Sections 2.12, 2.13, 2.14, 9.04, 9.05 and 9.06 to the same extent as if it

 

 

  

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were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.04 as though it were a Lender, provided such Participant agrees
to be subject to Section 2.11 as though it were a Lender.  A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent.  A Participant that would be a Foreign Lender if
it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14 as though it were a Lender.

 

(e)           Pledge to Federal Reserve Bank.  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
any pledge or assignment to secure obligations to a Federal Reserve Bank or any other central bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(f)           Approved Funds.  Notwithstanding anything to the contrary contained herein, any Lender that is a Approved Fund may create a security interest in all or any portion of the Advances owing to it and
the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities, provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 9.08, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise
any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

 

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

 

Section 9.09                      Confidentiality.  Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its Affiliates’ 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 purporting to have jurisdiction over it (including (i) any self-regulatory
authority, such as the National Association of Insurance Commissioners, and (ii) in connection with any pledge or assignment under Section 9.08(e), any Federal Reserve Bank or other central bank), (c) to the

 

 

  

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extent required by applicable Legal Requirements or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any 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, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent or any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.  For purposes of this Section, "Information" means all information received from any Loan Party relating to any Loan Party or any of their respective businesses including, without limitation, any information obtained from Borrower or any of the Subsidiaries in connection with Borrower's
compliance with Section 5.05 or Section 5.06 of this Agreement, other than any such information that is available to the Administrative Agent or any Lender or any of its Affiliates on a nonconfidential basis prior to disclosure by any Loan Party, provided that, in the case of information received from a Loan Party after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required
to maintain the confidentiality of Information as provided in this Section 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 in accordance with safe and sound banking practices.

 

Section 9.10                      Counterparts; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Except as provided in Section 3.01, 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 that, when taken together, bear the signatures of each of the other parties hereto.  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 9.11                      Survival of Representations, etc.  All representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Advance,
and shall continue in full force and effect as long as any Advance or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

 

Section 9.12                      Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable,
(a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents

 

 

  

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shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision
in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 9.13                      Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid
or agreed to be paid under the Loan Documents shall not exceed the Maximum Rate.  If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Advances or, if it exceeds such unpaid principal, refunded to the Borrower.  In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent
permitted by applicable Legal Requirement, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

Section 9.14                      Governing Law.  This Agreement and each of the other Loan Documents shall be governed by and construed in accordance with
the laws of the State of New York and the applicable laws of the United States of America.

 

Section 9.15                      Submission to Jurisdiction; Waiver of Venue; Service of Process.

 

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

 

(b)           WAIVER OF VENUE.  EACH OF THE BORROWER, THE LENDERS AND THE OTHER PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF THIS SECTION.  EACH OF THE PARTIES

 

 

  

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hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)           Service of Process.  Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 9.02 other than by electronic mail.  Nothing in this Agreement
will affect the right of any party hereto to serve process in any other manner permitted by applicable law.

 

Section 9.16                      WAIVER OF JURY TRIAL.  EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.  EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

Section 9.17                      USA Patriot Act; OFAC.  Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for
itself and not on behalf of any 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, each person in the Company Group and each shareholder of the Borrower holding 10% or more of the outstanding common shares, which information includes the name and address of the Borrower and other information that will allow
such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act. In addition, Borrower agrees to (a) ensure that no Person who owns a controlling interest in or otherwise controls Borrower or any Subsidiary of Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the OFAC, the Department of the Treasury or included in any Executive Order, (b) not to use or permit the use of proceeds
of the Obligations to violate any of the foreign asset control regulations of the OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, or cause its Subsidiaries to comply, with the applicable laws.

 

Section 9.18                      Amendment and Restatement. This Agreement amends and restates each of the Existing Agreements in its entirety.  Borrower
hereby agrees that (a) the Debt outstanding under each of the Existing Agreements and the Loan Documents (as defined in each of the

 

 

 

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Existing Agreements; together with each of the Existing Agreements, the "Existing Credit Documents") and all accrued and unpaid interest thereon and (b) all accrued and unpaid fees under the Existing Credit Documents, shall be deemed to be outstanding under and governed by
this Agreement.  Borrower hereby acknowledges, warrants, represents and agrees that this Agreement is not intended to be, and shall not be deemed or construed to be, a novation or release of the Existing Credit Documents. Each Lender which is a Lender under the Existing Credit Documents hereby waives any requirements for notice of prepayment, minimum amounts of prepayments of the loans thereunder, ratable reductions of the commitments of Lenders under the Existing Credit Documents and ratable payments
on account of the principal or interest of any loan under the Existing Credit Documents to the extent that any such prepayment, reductions or payments are required to ensure that, upon the effectiveness of this Agreement, the loans of the Lenders shall be outstanding on a ratable basis in accordance with their respective Pro Rata Share.  Each Lender hereby authorizes Administrative Agent and Borrower to request Borrowings from Lenders, to make prepayment of the loans under the Existing Credit Documents
and to reduce the commitments under the Existing Credit Documents among Lenders in order to ensure that, upon the effectiveness of this Agreement, the loans of Lenders shall be outstanding on a ratable basis in accordance with their respective Pro Rata Share.

 

Section 9.19                      Integration.  This Agreement and the other Loan Documents represent the final agreement among the parties and may not
be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties.  There are no unwritten oral agreements among the parties.

 

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