Document:

star_ex1061.htm

EXHIBIT 10.6.1

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (the “Agreement”) dated March 29, 2013 (the “Effective Date”), between Starboard Resources, Inc., a Delaware corporation (the “Borrower”), and SOSventures, LLC, a Delaware limited liability company, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

 

RECITALS

 

WHEREAS, the Borrower is in the oil and gas business and desires a credit facility from the Lender; and

 

WHEREAS, the Borrower and the Lenders have agreed to an extension of credit by the Lenders in the form of second lien term loans in the aggregate amount of Ten Million & 00/100 Dollars ($10,000,000.00);

 

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Administrative Agent and the Lenders hereby agree as follows:

DEFINITIONS

1. Definitions. As used in this Agreement, the terms “Administrative Agent”, “Agreement”, “Effective Date” and “Borrower” shall have the meanings set forth above and each of the following terms shall have the meaning assigned thereto in this Section, unless the context otherwise requires:

“Affiliate” means any Person directly or indirectly controlling, or under common control with, the Borrower and includes any affiliate of the Borrower within the meaning of the regulations promulgated pursuant to the Securities Act of 1933, as amended, with control, as used in this definition, meaning possession, directly or indirectly, of the power to direct or cause the direction of management, policies or action through ownership of voting securities, contract, voting trust, membership in management or in the group appointing or electing management or otherwise through formal or informal arrangements or business relationships.

“Business Day” means a day other than a Saturday, Sunday, or other day on which commercial banks in San Antonio, Texas are required or authorized to be closed.

“Borrowing” shall mean Loans made on the same date.

“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.4.

“Capital Expenditures” means, in respect of any Person, for any period, the aggregate (determined without duplication) of all exploration and development expenditures (including the costs of acquiring the Oil and Gas Properties) and costs that should be capitalized in accordance with GAAP and any other expenditures that are capitalized on the balance sheet of such Person in accordance with GAAP.

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

“Casualty Event” means any loss, casualty or other insured damage to any Property of the Borrower or any of its Subsidiaries in an amount greater than $250,000, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of the Borrower or any of its Subsidiaries.

“Closing Date” shall mean the Effective Date of this Agreement.

“Code” shall mean the United States Internal Revenue Code as amended from time to time.

“Collateral” shall mean the Borrower's right, title and interest in all of its Oil and Gas Properties and its personal property, including, without limitation, the following types of property, whether now owned or hereafter acquired, and wherever located, all "accounts," "general intangibles," "chattel paper," "documents," "letters of credit," "instruments," "deposit accounts," "inventory," "farm products," "fixtures," "equipment," and "investment property" as such terms are defined in the Uniform Commercial Code as adopted in the State of Delaware and in effect on the date hereof, and all products, proceeds and insurance proceeds of the foregoing.

  

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“Commitment” means, with respect to each Lender, the commitment of such Lender to make its Loans hereunder and “Commitments” means the aggregate amount of the Commitments of all Lenders. The amount of each Lender’s Commitment is set forth on Annex I.

“Consolidated Net Income” means with respect to the Borrower and the Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and the Consolidated Subsidiaries after allowances for taxes (including extraordinary tax gains or losses) for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which the Borrower or any Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and its Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net income (but not loss) during such period of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) any extraordinary gains or losses during such period and (d) any gains or losses attributable to writeups or writedowns of assets, including ceiling test writedowns; and provided further that if the Borrower or any Consolidated Subsidiary shall acquire or dispose of any Property during such period, then Consolidated Net Income shall be calculated after giving pro forma effect to such acquisition or disposition, as if such acquisition or disposition had occurred on the first day of such period.

 

“Contested in Good Faith” means a matter (a) which is being contested in good faith by or on behalf of any Person, by appropriate and lawful proceedings diligently conducted, satisfactory to the Administrative Agent, and for which a reserve has been established in an amount determined in accordance with GAAP, (b) in which foreclosure, distraint, sale, forfeiture, levy, execution or other similar proceedings have not been initiated or have been stayed and continue to be stayed, and (c) in which a good faith contest will not materially detract from the value of the Collateral, materially jeopardize the rights of the Administrative Agent, the Lenders or the Borrower with respect thereto, materially interfere with the operation by the Borrower of its business, or otherwise have a Material Adverse Effect.

 

“Credit Balance” shall mean, at any time, the combined outstanding principal and interest balance of the Loans at such time.

 

“Credit Agreement Document” shall collectively mean this Agreement, the Note, the Security Instruments to be filed by the Borrower, and all other documents and instruments now or hereafter delivered pursuant to the terms of or in connection with this Agreement, or the Security Instruments, and all renewals and extensions of, or amendments or supplements to, or restatements of any or all of the foregoing from time to time in effect.

“Current Assets” and “Current Liabilities” means, at any time, all assets or liabilities, respectively that should, in accordance with GAAP, be classified as current assets or current liabilities, respectively, on a balance sheet of the Borrower.

 

“Debt” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services that are more than sixty (60) days past the date of invoice other than those which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) all obligations of such Person under Capital Leases; (e) all obligations of such Person under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others; (i) all obligations of such Person to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business; (j) all obligations of such Person to pay for goods or services whether or not such goods or services are actually received or utilized by such Person; (k) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; and (l) the undischarged balance of any production payment created by such Person or for the creation of which such Person received payment. The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

 

  

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“Default” shall mean any event or occurrence that with the lapse of time or the giving of notice, or both, would become an Event of Default.

 

“Discharge of Senior Indebtedness” shall have the meaning assigned such term in the Intercreditor Agreement.

 

“EBITDAX” means, for any period, the sum of Consolidated Net Income for such period plus the following expenses or charges to the extent deducted from Consolidated Net Income in such period: fees paid under this Agreement, expenses and other reasonable costs actually incurred by the Borrower related to the negotiation and execution of this Agreement (including legal and other professional fees), non-cash charges related to Swap Agreements, interest, income taxes, depreciation, depletion, amortization, exploration expenditures and costs and other noncash charges, minus all noncash income added to Consolidated Net Income.

 

“Environmental Complaint” shall mean any written or oral complaint, order, directive, claim, citation, notice of environmental report or investigation or other notice by any Governmental Authority or any other Person with respect to (a) air emissions, (b) spills, releases or discharges to soils or any improvements located thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or disposal systems servicing any Property of Borrower, (c) solid or liquid waste disposal, (d) either the use, generation, storage, transportation or disposal of any Hazardous Substance, or (e) other environmental, health or safety matters affecting any Property of Borrower or the business conducted thereon.

 

“Environmental Laws” shall mean (a) the following federal laws as they may be cited, referenced and amended from time to time: the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Water Pollution Control Act, the Environmental Pesticides Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Endangered Species Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the Hazardous Materials Transportation Act, the Superfund Amendments and Reauthorization Act, and the Toxic Substances Control Act; (b) any and all equivalent environmental statutes of any state in which Property of the Borrower is situated, as they may be cited, referenced and amended from time to time; (c) any so-called federal, state or local “Superfund” or “Superlien” statutes, (d) any rules or regulations promulgated under or adopted pursuant to the above federal and state laws; and (e) any other equivalent federal, state or local statute or any requirement, rule, regulation, code, ordinance or order adopted pursuant thereto, including, without limitation, those relating to the generation, transportation, treatment, storage, recycling, disposal, handling or release of hazardous substances.

 

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

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder and interpretations thereof.

  

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“ERISA Affiliate” means each trade or business (whether or not incorporated) which together with the Borrower or a Subsidiary would be deemed to be a “single employer” within the meaning of Section 4001(b)(1) of ERISA or subsections (b), (c), or (o) of section 414 of the Code.

 

“Events of Default” shall mean any of the events specified in Section 8.

 

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

 

“Financial Statement” shall mean statements of the financial condition of the Borrower at the point in time and for the period indicated and consisting of at least a balance sheet, statement of income, statement of cash flow and related statements of operations, membership units and other equity, all of which shall be prepared in accordance with GAAP consistently applied and when applicable in comparative form with respect to the corresponding period of the preceding fiscal period or as otherwise required by the Administrative Agent.

 

“GAAP” shall mean generally accepted accounting principles established by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants and in effect in the United States from time to time during the term of this Agreement.

 

“Governmental Authority” shall mean any foreign governmental authority, the United States, and any political subdivision of any of them, whether state, provincial, or local, and any agency, department, commission, board, bureau, court or other tribunal, or instrumentality of any of them which now or hereafter has jurisdiction over the Administrative Agent, the Lenders (or any participant herein) or a Borrower or a Borrower’s assets.

 

“Governmental Requirement” means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, rules of common law, authorization or other directive or requirement, whether now or hereinafter in effect, of any Governmental Authority.

 

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

 

“Highest Lawful Rate” shall mean on any day, the maximum nonusurious rate of interest permitted for that day by whichever of applicable federal or Texas law permits the higher interest rate, stated as a rate per annum. On each day, if any, that the Texas Finance Code, as supplemented by art. 1D.003 of the Texas Credit Title, as it may from time to time be amended (the “Texas Credit Code”), establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the “weekly rate ceiling”, as referred to in Section 303.002 of the Texas Finance Code, after application of Section 303.009 of the Texas Finance Code, for that day. Provided, however, that to the extent permitted by applicable law, Administrative Agent reserves the right to change, from time to time by further notice and disclosure to a Borrower, the ceiling on which the Highest Lawful Rate is based under the Texas Finance Code, and, provided further, that the “highest non-usurious rate of interest permitted by applicable law” for purposes of this Agreement shall not be limited to the applicable rate ceiling under the Texas Finance Code if federal laws or other state laws now or hereafter in effect and applicable to this Agreement (and the interest contracted for, charged and collected thereunder) shall permit a higher rate of interest.

 

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

 

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

 

  

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“Indebtedness” shall mean, with respect to any Person, without duplication, (a) all liabilities which would appear on a balance sheet of such Person, prepared in accordance with GAAP (b) all obligations of such Person evidenced by bonds, debentures, promissory notes or such similar evidences of indebtedness, (c) all other indebtedness of such Person for borrowed money, and (d) all obligations of others, to the extent any such obligation is secured by a Lien, except a Permitted Lien, on the assets of such Person (whether or not such Person has assumed or become liable for the obligation secured by such Lien).

 

“Insolvency Proceeding” shall mean application (whether voluntary or instituted by another Person) for, or the consent to, the appointment of a receiver, trustee, conservator, custodian or liquidator of any Person or of all or a substantial part of the Property of such Person, or the filing of a petition (whether voluntary or instituted by another Person) commencing a case under Title 11 of the United States Code, seeking liquidation, reorganization or rearrangement or taking advantage of any bankruptcy, insolvency, debtor’s relief or other similar Law of the United States, the State of Texas or any other jurisdiction.

 

“Intercreditor Agreement” shall mean that certain intercreditor agreement of even date herewith, among the Borrower, the other Obligors (as such term is defined therein), Mutual of Omaha Bank as administrative agent for the lenders, and SOSventures, LLC, as administrative agent for the Lenders herein.

 

“Law(s)” shall mean all applicable statutes, laws, ordinances, rules, rulings, interpretations, regulations, judgments, requirements, governmental authorizations (including licenses, permits, franchises and other governmental consents necessary for the ownership or operation of Property), orders, writs, injunctions or decrees (or interpretations of any of the foregoing) of any governmental authority or Tribunal.

 

“Lenders” means each Person listed on Annex I and any Person that shall have become a party hereto pursuant to an assignment made in accordance with Section 9, other than any such Person that ceases to be a party hereto pursuant to such assignment.

 

“Lien” shall mean any lien, mortgage, security interest, tax lien, pledge, conditional sale or title retention arrangement, or any other interest in or encumbrance upon, property, which is designed to secure the repayment of Indebtedness, whether arising by agreement, under any Law or otherwise.

 

“Litigation” shall mean any proceeding, claim, lawsuit, and/or investigation conducted or threatened by or before any Tribunal.

 

“Loan Documents” means this Agreement, the Notes, if any, the Intercreditor Agreement and the Security Instruments.

 

“Loan(s)” shall mean the loan(s) made by the Lenders in favor of the Borrower contemplated by this Agreement as provided for in Section 2.

 

“Material Adverse Effect” shall mean any set of circumstances or events which (a) would have an adverse effect upon the validity or enforceability of any of the Credit Agreement Documents, (b) is or could reasonably be expected to become material and adverse to the business, condition (financial or otherwise), operations or prospects of the Borrower, (c) could reasonably be expected to materially impair the Borrower’s ability to fulfill its obligations under the terms of the Credit Agreement Documents, or (d) constitutes a Default or an Event of Default.

 

 “Mortgaged Properties” shall mean all of the interest of Borrower in its leased properties and any Property of the Borrower or its Subsidiaries, rights associated therewith, as-extracted collateral, and all related equipment located thereon, and proceeds and products of the foregoing which is subject to the Liens existing and to exist under the terms of the Security Instruments.

 

“Mutual of Omaha Bank’s Administrative Agent” shall mean Mutual of Omaha Bank in its capacity as administrative agent for the lenders party to the Mutual of Omaha Bank’s Credit Agreement.

 

“Mutual of Omaha Bank’s Credit Agreement” shall mean that certain credit agreement, its promissory note, exhibits and schedules attached thereto, and dated as of July 26, 2012, among the Borrower, Mutual of Omaha Bank as administrative agent for the lenders and the lenders party thereto.

 

  

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“Mutual of Omaha Bank’s Security Interest” shall mean Mutual of Omaha Bank’s security interest as created pursuant to Mutual of Omaha Bank’s Credit Agreement.

 

“Note” shall mean a note in the form set forth in Exhibit A to each Lender, together with any and all renewals, extensions for any period, increases and rearrangements thereof.

 

“Obligations” shall mean, without duplication, any and all Indebtedness evidenced by the Loan(s) and any and all interest, fees, late fees, attorney fees and costs, obligations, liabilities, indebtedness, charges and expenses, in connection therewith or in connection with any Credit Agreement Document, and with respect to all of the foregoing to the extent that any of the same includes or refers to the payment of amounts deemed or constituting interest, only so much thereof as shall have accrued, been earned and remains unpaid at each relevant time of determination.

 

“Oil and Gas Properties” shall mean the presently existing Hydrocarbons, undeveloped oil, gas and mineral properties and the proved developed producing oil, gas and mineral properties mortgaged to the Administrative Agent pursuant to the terms hereof, including, without limitation, overriding royalty and royalty interests, leasehold estate interests, net profits interests, production payment interests and mineral fee interests, together with contracts executed in connection therewith and all tenements, hereditaments, appurtenances and properties appertaining, belonging, affixed or incidental thereto and the related personal properties located thereon.

 

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

 

“Permitted Liens” shall mean (a) liens for Taxes incurred in the course of business (which are not yet due or are being Contested in Good Faith); (b) liens in connection with workers’ compensation, unemployment insurance or other social security (other than Liens created by Section 4068 of ERISA) old-age pension or public liability obligations which are not yet due or are being Contested in Good Faith; (c) other Liens existing as of the Closing Date as disclosed through the course of the Administrative Agent’s due diligence; (d) liens created in favor of the Administrative Agent for the benefit of the Lenders and other Liens expressly permitted under the Security Instruments; (e) liens arising in the ordinary course of business from pledges or deposits to secure public or statutory obligations, or deposits to secure (or in lieu of) surety, stay, appeal or customs bonds; encumbrances consisting of easements, zoning restrictions, of other restrictions on the use of Property, provided that such encumbrances do not materially impair the use of such Property for the purposes intended, and none of which are violated by existing or proposed structure or land use, and such other material encumbrances as have been disclosed to and approved by the Administrative Agent in writing; (f) good faith deposits in connection with bids, tenders, contracts or leases, performance or other similar bonds; (g) liens arising from services or materials provided in the ordinary course of business that are being contested in good faith; and (h) the Mutual of Omaha Bank’s Security Interest.

 

“Person” shall mean an individual, corporation, partnership, limited liability company, trust, unincorporated organization or a government or any agency or political subdivision thereof.

 

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

 

“Principal Office” shall mean the principal office of the Administrative Agent in Austin, Texas presently located at 6800 West Gate Blvd, Ste 132 PMB#123 Austin, TX 78745 with a mailing address of Penrose Wharf 2nd Floor, Alfred Street, Cork, Ireland.

 

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

 

“Release of Hazardous Substances” shall mean any emission, spill, release, disposal or discharge, except in accordance with a valid permit, license, certificate or approval of the relevant Governmental Authority, and notice of which is required to be given thereof by the person responsible for such emission, spill, release, disposal or discharge to a Governmental Authority of any Hazardous Substance into or upon (a) the air, (b) soils or any improvements located thereon, (c) surface water or groundwater, or (d) the sewer, septic system or waste treatment, storage or disposal system servicing any Mortgaged Property of the Borrower.

 

  

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“Requirement of Law” shall mean, as to any Person, the certificate or articles of incorporation and by-laws or other organizational or governing documents of such Person, and any applicable law, treaty, ordinance, order, judgment, rule, decree or regulation or determination of any tribunal or other Governmental Authority, including, without limitation, rules, regulations and orders and requirements for permits, licenses, registrations, approvals or authorizations, in each case as such now exist or may be hereafter amended and are applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

“Reserve Report” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of each January 1st or July 1st the oil and gas reserves attributable to the Oil and Gas Properties of the Borrower and the Subsidiaries, together with a projection of the rate of production and future net income, taxes, operating expenses and Capital Expenditures with respect thereto as of such date, based upon the economic assumptions consistent with the Administrative Agent’s lending requirements at the time.

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

 

“Security Instruments” shall mean the security instruments executed and delivered in satisfaction of the conditions set forth in Section 3, 3.1, 3.2 and 3.5, and all other documents and instruments at any time executed as security for all or any portion of the Obligations, as the same may be amended from time to time.

 

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

“Subsidiary” means: (a) any Person of which at least a majority of the outstanding Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or managers or other governing body of such Person (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by the Borrower or one or more of its Subsidiaries or by the

Borrower and one or more of its Subsidiaries and (b) any partnership of which the Borrower or any of its Subsidiaries is a general partner. Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the Borrower.

 

“Taxes” shall mean all taxes, assessments, filing or other fees, levies, imposts, duties, deductions, withholdings, stamp taxes, interest equalization taxes, capital transaction taxes, foreign exchange taxes or charges, or other charges of any nature whatsoever from time to time or at any time imposed by any Law or Tribunal.

 

“Termination Date” shall mean February 1, 2016.

 

“Tribunal” shall mean any court, governmental department or authority, commission, board, bureau, agency, arbitrator or instrumentality of any state, political subdivision, commonwealth, nation, territory, county, parish, or municipality, whether now or hereafter existing, having jurisdiction over the Administrative Agent, the Lenders, the Borrower or its Property.

  

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AMOUNT AND TERMS OF CREDIT

2. Loans. Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties made by the Borrower herein, each Lender agrees to make Loans to the Borrower in a principal amount equal to such Lender’s Commitment. The aggregate principal amount of all Commitments on the Effective Date is Ten Million and 00/100 Dollars ($10,000,000.00). The Commitments are not revolving and amounts repaid or prepaid may not be re-borrowed under any circumstance. Each Lender hereby agrees to make Loans to the Borrower to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to the account designated by the Borrower in a Borrowing Request

2.1. Minimum Amounts; Limitation on Number of Borrowings. At the time that each is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $100,000; provided that a Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Commitments.

2.2. Termination. The Commitments will expire on the Termination Date unless sooner terminated by the Lender upon the occurrence of an Event of Default as defined in paragraph 8 hereof.

2.3. Interest Rate. Interest shall accrue on the outstanding unpaid principal balance, and other amounts due and payable under each Note from time to time, commencing on the Effective Date until the first anniversary of the Effective Date at the rate of seventeen percent (17%) simple interest per annum, calculated on the basis of actual days elapsed and compounding annually. Following the first anniversary of the Effective Date, interest shall accrue on the outstanding unpaid principal balance, and other amounts due and payable under each Note from time to time, until the outstanding unpaid principal balance has been repaid at the increased rate of twenty-two percent (22%) simple interest per annum, calculated on the basis of actual days elapsed and compounding annually.

2.4.  Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone not later than 12:00 noon, San Antonio, Texas time, one (1) Business Day before the date of the proposed Borrowing. Such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, email or telecopy to the Lender of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower’s presiding Chief Executive Officer (“CEO”), currently Michael J. Pawelek. Each such telephonic and written Borrowing Request shall specify the following information in compliance:

	
i.  

	
the aggregate amount of the requested Borrowing;

	
ii.  

	
the date of such Borrowing, which shall be a Business Day; and

	
iii.  

	
the location and number of the Borrower’s account to which funds are to be disbursed.

Following receipt of a Borrowing Request in accordance with this Section 2.4, the Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so requested to an account of the Borrower and designated by the Borrower in the applicable Borrowing Request.

2.5. Payment of Interest. Accrued and unpaid interest on the principal of the Loans shall be due and payable on a quarterly basis, with the first payment commencing on or about March 7, 2014, with each subsequent payment due on the same day of each quarter after that, provided that any payment of interest may only be made if the requirements of prepayment set forth below in Section 2.8 are met. All interest payments shall be made in cash.

2.6. Repayment. All payments (including prepayments) made by a Borrower on account of the Loans shall be made to Administrative Agent at its address set forth in this Agreement (or otherwise designated by the Administrative Agent) in federal or other immediately available funds before 1:00 p.m., San Antonio, Texas time, on the date such payment is required to be made. Any payment received and accepted by Administrative Agent after such time shall be considered for all purposes (including the calculation of interest, to the extent permitted by law) as having been made on the next following Business Day. If any payment under the Loans shall be due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

  

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2.7. Maximum Lawful Interest. It is not the intention of the Administrative Agent, the Lenders or the Borrower to violate the laws of any applicable jurisdiction relating to usury or other restrictions on the maximum lawful interest rate. The Credit Agreement Documents and all other agreements between the Borrower and the Administrative Agent and/or the Lenders, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no event shall the interest paid or agreed to be paid to the Lenders for use, forbearance or detention of money loaned, or for the payment or performance of any covenant or obligation contained herein or in any other Credit Agreement Document exceed the maximum amount permissible under applicable law. If from any circumstances the Lenders shall ever receive anything of value deemed interest under applicable law which would exceed interest at the Highest Lawful Rate, such excessive interest shall be applied to the reduction of the principal amount owing hereunder, and not to the payment of interest, or if such excessive interest exceeds any unpaid balance of principal, such excess shall be refunded to the Borrower. All sums paid or agreed to be paid to the Lenders for the use, forbearance or detention of the Loan evidenced by a Note shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the affected note until payment in full, so that the rate of interest on account of such Note is uniform throughout the term thereof.

2.8. Prepayment. No prepayments, including interest payments, may be made for a period of twelve (12) months from the Effective Date of this Agreement, and thereafter may only be made within five (5) days of the receipt by the Borrower of a New Borrowing Base Notice (as such term is defined in the Mutual of Omaha bank’s Credit Agreement) in an amount not to exceed (x) $2,500,000 at any one time and (y) $5,000,000 during any 12 consecutive month period, if after giving effect to such payment:

 

(a) No Default or Event of Default exists or would result therefrom under the Mutual of Omaha Bank’s Credit Agreement;

 

(b) The Borrower would have at least twenty-five percent (25%) of unused availability under the then existing Borrowing Base under the Mutual of Omaha Bank’s Credit Agreement (as such term is defined therein);

 

(c) An officer of the Borrower certifies in a certificate that after giving effect to such payment the sum of unused availability under the then existing Borrowing Base and unrestricted cash and cash equivalents of the Borrower and its Subsidiaries, would be greater than or equal to the amount necessary to support Capital Expenditures (as such term is defined in the Mutual of Omaha Bank’s Credit Agreement) of the Borrower and its Subsidiaries for the next twelve (12) months while allowing the Borrower to concurrently maintain at least 15% of unused availability under the then existing Borrowing Base; and

 

(d) The Borrower’s:

(i) ratio of EBITDAX for the four fiscal quarters ending on the most recent date for which financials are available to Interest Expense for such four fiscal quarters is greater than 3.5 to 1.0;

 

(ii) ratio of Debt for the fiscal quarter ending on the most recent date for which financials are available to EBITDAX for the four fiscal quarters ending on such date is less than 3.5 to 1.0; and

 

(iii) ratio of (A) consolidated current assets (excluding non-cash assets under FAS 133) for the fiscal quarter ending on the most recent date for which financials are available to (B) consolidated current liabilities (excluding non-cash obligations under FAS 133 and current maturities under this Agreement) for such fiscal quarter is greater than 1.5 to 1.0.

 

Provided, however, that prepayments may be made at any time after the Discharge of Senior Indebtedness. No such prepayment shall, until all Obligations are fully paid and satisfied, excuse the payment as it becomes due of any payment provided for herein. All prepayments made pursuant to this Section 2.8 shall be applied first to accrued and unpaid interest and then to the principal balance. Borrower agrees not to send the Administrative Agent or the Lenders payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such payment, the Administrative Agent or the Lenders, as applicable, may accept it without losing any of their rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to the Administrative Agent and the Lenders.

  

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2.9. Use of Proceeds. The proceeds of the Notes shall be used exclusively for funding the Borrower’s oil drilling projects; primarily the $15 million dollar oil drilling capital campaign outlined to the Borrower’s Board of Directors during its February 2013 board meeting and in the “Value Credit Enhancement” presentation provided to the Lenders. The Borrower shall not, without the prior written consent of the Lenders, use the proceeds of the Notes for making and/or securing any acquisitions.

COLLATERAL AND SECURITY

3. Oil and Gas Properties. To secure the performance by the Borrower of its obligations hereunder, and under the Notes and Security Instruments, whether matured or unmatured, direct or contingent, including extensions, modifications, renewals and increases thereof, and substitutions therefor, contemporaneously with or prior to the execution of this Agreement and the Notes, the Borrower shall, subject to the terms of the Intercreditor Agreement, grant, assign and maintain in favor of the Administrative Agent for the benefit of the Lenders at all times until each of the Obligations hereunder, including the Notes, are paid and satisfied in full, valid mortgage liens and perfected security interests in and to all of the right, title and interest in the Mortgaged Properties. In order to provide the Administrative Agent with such valid mortgage liens and perfected security interests, the Borrower shall execute and deliver to the Administrative Agent at Closing any and all instruments mortgaging the Mortgaged Properties.

3.1. Company Assets/Collateral. To secure the performance by the Borrower of its obligations hereunder, and under the Notes and Security Instruments, whether matured or unmatured, direct or contingent, including extensions, modifications, renewals and increases thereof, and substitutions therefor, contemporaneously with or prior to the execution of this Agreement and the Notes, the Borrower shall, subject to the terms of the Intercreditor Agreement, grant, assign and maintain in favor of the Administrative Agent for the benefit of the Lenders at all times until each of the Obligations hereunder, including the Notes, are paid and satisfied in full, valid perfected security interests in the Collateral.

3.2. Consent to UCC-1 Filing. Borrower hereby consents to the filing by or on behalf of Administrative Agent of such financing statements on Form UCC-1 as the Administrative Agent may determine to be needed to perfect the security interest granted herein.

3.3. Collateral. The Administrative Agent has, and will at all times continue to have, a perfected security interest in all of the Collateral. Borrower will immediately advise Administrative Agent in writing of any material loss or damage to the Collateral.

3.4. Further Assurances. Borrower will cause to be executed and delivered to the Administrative Agent, in the future, additional Security Instruments, if Administrative Agent reasonably deems such are necessary, to insure perfection or maintenance of the Administrative Agent’s security interests and Liens in the Collateral or any part thereof and in Collateral as it is acquired in the future.

3.5.  Subordination. Administrative Agent’s security interest in the foregoing items, including but not limited to the Oil and Gas Properties, the Mortgaged Properties, Company Assets and Collateral, shall be subordinate to Mutual of Omaha Bank’s Security Interest in the same foregoing items, if any.

3.6. Unless a similar amendment, supplement or modification to Mutual of Omaha Bank’s Credit Agreement has been, or is concurrently being made, without the prior written consent of Mutual of Omaha Bank’s Administrative Agent no Credit Agreement Document may be amended, supplemented or otherwise modified or entered into to the extent of such amendment, supplement or modification, or the terms of any new Credit Agreement Document.

The Borrower agrees that each Security Instrument shall include the following language (or language to similar effect approved by the Mutual of Omaha Bank’s Administrative Agent):

 

  

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“Notwithstanding anything herein to the contrary, the lien and security interest granted to the Term Administrative Agent pursuant to this Agreement and the exercise of any right or remedy by the Term Administrative Agent hereunder are subject to the provisions of the Intercreditor Agreement among Borrower, Mutual of Omaha Bank, as Senior Indebtedness Representative, SOSventures, LLC, as Term Administrative Agent, and certain other persons party or that may become party thereto from time to time.”

 

CONDITIONS

4. The obligations of the Administrative Agent and the Lenders to enter into this Agreement and to make the Loan are subject to the satisfaction of the following conditions precedent unless waived in writing by the Administrative Agent:

4.1. Receipt of Credit Agreement Documents and Other Items. The Administrative Agent and the Lenders shall have no obligation under this Agreement unless and until all matters incident to the consummation of the transactions contemplated herein, including, without limitation, the receipt, review and approval by the Administrative Agent and the Lenders of the following documents and other items, appropriately executed when necessary and, where applicable, acknowledged, all in form and substance satisfactory in the good faith judgment of the Administrative Agent and the Lenders and dated, where applicable, of even date herewith or a date prior thereto (unless specifically noted below to the contrary) and acceptable in the good faith judgment of the Administrative Agent and the Lenders:

b) Multiple original counterparts of this Agreement, as reasonably requested by the Administrative Agent;

c) The Note of each Lender executed by the Borrower;

d) Copies of the Articles of Organization and the Operating Agreement of Borrower;

e) Copy of authorizing resolution approving the borrowing, the Credit Agreement Documents and authorizing the transactions contemplated herein and therein, duly adopted by the Board of Directors of the Borrower, accompanied by a certificate of the respective secretary or an assistant secretary of the Borrower, to the effect that such copy is a true and correct copy of resolutions duly adopted at a meeting or by majority consent of the Board of Directors of the Borrower and that such resolution constitutes the resolution adopted with respect to such transactions, has not been amended, modified, or revoked in any respect, and is in full force and effect as of the date of such certificate;

f) Mortgages and security agreements from the Borrower transferring, creating, evidencing, perfecting and otherwise establishing, as applicable, a security interest in the Collateral in favor of the Administrative Agent for the benefit of the Lenders each executed by the Borrower;

 

g) Results of searches of the UCC records of the States of Delaware and of Texas and of the real estate records of any State where the Oil & Gas Properties are located from a source acceptable to the Administrative Agent and reflecting no Liens, other than Permitted Liens, against any of the Collateral as to which perfection of a Lien is accomplished by the filing of a financing statement;

h) Certificates evidencing the insurance maintained by the Borrower in compliance with applicable provisions of this Agreement;

i) Such other agreements, documents, items, instruments, opinions, certificates, waivers, consents and evidence as the Administrative Agent may reasonably request.

4.2. Representations and Warranties. The representations and warranties of the Borrower under this Agreement are true and correct in all material respects as of such date, as if then made.

  

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4.3. No Event of Default. No Event of Default shall have occurred and be continuing nor shall any event have occurred or failed to occur which, with the passage of time or service of notice or both, would constitute an Event of Default.

REPRESENTATIONS AND WARRANTIES

5. To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loan, the Borrower represents and warrants to the Administrative Agent and the Lenders (which representations and warranties shall survive the delivery of the Credit Agreement Documents) that:

5.1. Due Authorization and Existence. The execution and delivery by the Borrower of this Agreement and borrowings hereunder; the execution and delivery by the Borrower of the Credit Agreement Documents; the repayment of the Loan and interest and fees provided for in the Credit Agreement Documents and this Agreement; the execution and delivery of the Security Instruments by the Borrower; the performance of all obligations of the Borrower under the Credit Agreement Documents are within the power of the Borrower and have been duly authorized by all necessary action of the Borrower. The Borrower is a corporation legally existing and in good standing under the laws of the State of Delaware and is duly qualified and is in good standing in all states in which it is doing business, except where failure to be qualified will not have a Material Adverse Effect.

5.2. Consents, Conflicts and Creation of Liens. The execution and delivery by the Borrower of the Credit Agreement Documents and the performance (except upon the occurrence of an Event of Default) of the obligations of the Borrower thereunder do not and will not (a) require the consent of any Governmental Authority, (b) contravene or conflict with any Requirement of Law which contravention or conflict would have a Material Adverse Effect, (c) contravene or conflict with any indenture, instrument or other agreement to which the Borrower is a party or by which any Property of the Borrower may be presently bound or encumbered, or (d) result in or require the creation or imposition of any Lien in, upon or of any Property of the Borrower under any such indenture, instrument or other agreement, other than the Credit Agreement Documents.

 

5.3. Valid and Binding Obligations. All of the Credit Agreement Documents, when duly executed and delivered by the Borrower, will be the legal, valid and binding obligations of the Borrower enforceable against the Borrower by the Administrative Agent and the Lenders in accordance with their respective terms, except as limited by equitable principles and applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or similar laws from time-to-time affecting the rights of creditors generally.

5.4. Title to Collateral. Title to the Collateral is held in the name of Starboard Resources, Inc., and/or its Subsidiaries. All of the Collateral is free and clear of all Liens, except the Mutual of Omaha Bank’s Security Interest and Permitted Liens, and the Borrower has good and indefeasible title to such Collateral.

5.5. Subsidiaries. With exception to the following Subsidiaries, Impetro Resources, LLC and Impetro Operating, LLC, the Borrower has no Subsidiaries and the Borrower has no Foreign Subsidiaries.

5.6. Liabilities, Litigation, and Restrictions. Other than as disclosed during the course of the Administrative Agent’s due diligence, the Borrower has no liabilities, direct or contingent, which may materially and adversely affect its business and operations or ownership of the Collateral. No Litigation of any nature affecting the Borrower is pending before any tribunal or, to the best knowledge of the Borrower, threatened against or affecting the Borrower which might reasonably be expected to result in any material impairment of its ownership of any Collateral or to have a Material Adverse Effect. No unusual or unduly burdensome restriction, restraint or hazard exists by contract, Requirement of Law, or otherwise relative to the business or operations of the Borrower or the ownership of a material portion of the Collateral other than such as relates generally to Persons engaged in business activities similar to those conducted by the Borrower.

 

5.7. Authorizations and Consents. No authorization, consent, approval, exemption, franchise, permit or license of, or filing with, any Governmental Authority, tribunal or any other Person is required to authorize, or is otherwise required in connection with, the valid execution and delivery by the Borrower of the Credit Agreement Documents, or any instrument contemplated hereby or thereby, the repayment by the Borrower of the Notes and the interest and fees provided in the Credit Agreement Documents and this Agreement, or the performance (except in the Event of Default) by the Borrower of the Obligations.

  

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5.8. Compliance with Laws. The Borrower and their Properties are in compliance in all material respects with all applicable law, rule, regulation, order or decree, including, without limitation, Environmental Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA.

 

5.9. Proper Filing of Tax Returns and Payment of Taxes Due. The Borrower has duly and properly filed all United States income tax returns and all other tax returns which are required to be filed by the Borrower, have paid all taxes due except such as are being Contested in Good Faith and as to which adequate provisions and disclosures have been made. The charges and reserves of the Borrower with respect to taxes and other governmental charges are adequate, and the Borrower has no knowledge of any deficiency or additional assessment in a material amount in connection with taxes, assessments, or charges not provided for on its books.

 

5.10. Environmental Law. As disclosed during the course of the Administrative Agent’s due diligence, the Borrower and has not received notice or otherwise learned of (A) any Environmental Liability which could individually or in the aggregate have a Material Adverse Effect arising in connection with (i) any non-compliance with or violation of the requirements of any Environmental Law or (ii) the release or threatened release of any toxic or hazardous waste into the environment, (B) any threatened or actual liability in connection with the release or threatened release of any toxic or hazardous waste into the environment which could individually or in the aggregate have a Material Adverse Effect or (C) any federal or state investigation evaluating whether any remedial action is needed to respond to a release or threatened release of any toxic or hazardous waste into the environment for which the Borrower is or may be liable.

5.11. No Material Misstatements. No information, exhibit, statement or report furnished before, after or during the course of due diligence to the Administrative Agent by or at the direction of the Borrower in connection with this Agreement contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein not misleading as of the date made or deemed made.

 

5.12. Location of Business and Office. The principal place of business and chief executive office of the Borrower is located at 300 E. Sonterra Blvd., Suite 1220, San Antonio, Texas, 78258, or at such other location as the Borrower may have, by proper written notice hereunder, advised the Administrative Agent.

 

5.13. Security Instruments. The provisions of the Security Instruments are effective to create in favor of the Administrative Agent for the benefit of the Lenders legal, valid and enforceable Liens, except as limited by equitable principles and applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or similar laws from time-to-time affecting the rights of creditors generally, in all right, title and interest of the Borrower in the Collateral described therein, which Liens, assuming the accomplishment of recording and filing in accordance with applicable Laws prior to the intervention of rights of other Persons, shall constitute fully perfected Liens on all right, title and interest of the Borrower in the Collateral described therein, subject to Permitted Liens.

 

5.14. Defaults. The Borrower is not in default and no event or circumstance has occurred which, but for the passage of time or the giving of notice or both, would constitute a default under any loan or credit agreement, indenture, mortgage, deed of trust, security agreement or other agreement or instrument to which the Borrower is a party in any respect. No Event of Default hereunder has occurred and is continuing.

 

5.15. Liens/Debt. The Borrower has no other debt other than Mutual of Omaha Bank’s Credit Agreement and the Notes to be issued by the Borrower pursuant to the terms of this Agreement.

AFFIRMATIVE COVENANTS

6. Unless agreed in writing by the Lenders holding a majority of the Loans to the contrary, so long as any Obligation remains outstanding or unpaid:

  

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6.1. Financial Statements of Borrower; Other Information. The Borrower will furnish to the Administrative Agent:

a) Annual Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than 120 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by an independent public accountant of recognized national standing or any other independent public accountant reasonably acceptable to the Administrative Agent (in each instance without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated bases in accordance with GAAP consistently applied.

 

b) Quarterly Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.

 

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

 

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

 

e) Notices Under Material Instruments. Promptly after the furnishing thereof, copies of any financial statement, report or notice furnished to or by any Person pursuant to the terms of any preferred stock designation, indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Administrative Agent pursuant to any other provision of this Section 6.1.

 

f) Notice of Sales of Oil and Gas Properties. In the event the Borrower or any Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil or Gas Properties or any Equity Interests in any Subsidiary in accordance with Section 7.6, prior written notice of such disposition, the price thereof and the anticipated date of closing and any other details thereof requested by the Administrative Agent.

 

g) Notice of Casualty Events. Prompt written notice, and in any event within three (3) Business Days of the occurrence of any Casualty Event.

 

h) Information Regarding Borrowers. Prompt written notice (and in any event within ten Business Days prior thereto) of any change (i) in the Borrower or any Subsidiaries name, (ii) in the location of the Borrower or any Subsidiaries’ chief executive office or principal place of business, (iii) in the Borrower or any Subsidiaries’ identity or organizational structure or in the jurisdiction in which such Person is organized or formed, (iv) in the Borrower or any Subsidiaries’ jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in the Borrower or any Subsidiaries’ federal taxpayer identification number.

 

  

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i) Other Reports. The Borrower shall prepare and provide the Administrative Agent the following reports:

 

(i) on a monthly basis by the 60th day following each calendar month, a report setting forth, for such calendar month, the volume of production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) for each such calendar month from the Oil and Gas Properties described in the most recent Reserve Report, and setting forth the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month; and

 

(ii) such other information as the Administrative Agent may reasonably request, including, but not limited to, an unaudited income statement, a consolidated balance sheet and a statement of cash flow (with such statement to show any variations from the budget previously delivered), copies of the Borrower’s bank account statements, statement of expenses for the preceding month, notice of any material changes with regard to oil and gas prices received, contracts or production expenses or any material litigation affecting the operation of the Oil and Gas Properties of the Borrower.

 

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

 

k) Notice of Purchase of Oil and Gas Properties. In the event the Borrower or any Subsidiary acquires additional Oil and Gas Properties, the Borrower shall deliver promptly, but in any event within 30 days after the end of each calendar quarter in which such acquisition occurred, to the Administrative Agent a list of all newly acquired Oil and Gas Properties of the Borrower and its Subsidiaries setting forth a description of each newly acquired Oil and Gas Property and the cost of each such acquisition.

 

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

 

6.2. Take or Pay Agreements. The Borrower will, and will cause each Subsidiary to, deliver to the Administrative Agent contracts or other agreements concerning take or pay, prepayment, and gas balancing liabilities of the Borrower that could have a Material Adverse Effect.

6.3. Reports. The Borrower will, and will cause each Subsidiary to deliver to the Administrative Agent reports on its facilities and property inspection and management access rights.

6.4. Additional Information. The Borrower will, and will cause each Subsidiary to furnish to the Administrative Agent, promptly upon the reasonable request of the Administrative Agent, such additional financial or other information concerning the assets, liabilities, operations and transactions of the Borrower as the Administrative Agent may from time to time reasonably request; and notify the Administrative Agent not less than ten (10) Business Days prior to the occurrence of any condition or event that may change the proper location for the filing of any financing statement or other public notice or recording for the purpose of perfecting a Lien in any Collateral, including, without limitation, any change in the state of organization.

 

6.5. Notices of Certain Events. Deliver to the Administrative Agent, immediately upon the Borrower’s presiding CEO, having knowledge of the occurrence of any of the following events or circumstances, a written statement with respect thereto, signed by the CEO and setting forth the relevant event or circumstance and the steps being taken with respect to such event or circumstance:

a) Any declaration or payment of any dividend or other distribution of cash, securities, or other assets prior to the Borrower fully satisfying its obligations under this Agreement and the other Loan Documents;

 

b) Any material changes in the nature of the Borrower’s business;

 

  

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c) Any Default or Event of Default;

 

d) Any default or event of default under any material contractual obligation of the Borrower, or any material Litigation affecting the Borrower before any Governmental Authority or Tribunal;

 

e) Any Litigation involving the Borrower as a defendant or in which any Property of the Borrower is subject to a claim (i) in which the amount involved is $100,000 or more and which is not covered by insurance, (ii) in which, together with any other outstanding litigation or proceeding (whether or not previously disclosed hereunder), the aggregate amount involved in all such litigation is $100,000 or more and which is not covered by insurance, or (iii) in which injunctive or similar relief is sought which affects a Property having a fair market value (net to the Borrower’s interest therein) of more than $100,000 or could reasonably be expected to result in an expenditure by the Borrower of more than $100,000.00;

 

f) Any existing or asserted Lien on any of the properties of the Borrower, personal or real, tangible or intangible, including, without limitation, the Collateral, excluding the Mutual of Omaha Bank’s Security Interest and Permitted Liens;

 

g) The receipt by the Borrower of any Environmental Complaint or any formal request from any Governmental Authority or other Person for information (other than requirements for compliance reports) regarding any Release of Hazardous Substances by the Borrower from, affecting or related to any Property of the Borrower or adjacent to any Property of the Borrower which Environmental Complaint or request could reasonably be expected to have a Material Adverse Effect;

 

h) Any actual, proposed or threatened testing or other investigation by any Governmental Authority or other Person concerning the environmental condition of, or relating to, any Property of the Borrower or adjacent to any Property of the Borrower following any allegation of a violation of any Environmental Law which testing or investigation could reasonably be expected to have a Material Adverse Effect;

 

i) Any Release of Hazardous Substances by the Borrower from, affecting or related to any Property of the Borrower or adjacent to any Property of the Borrower or Mortgagors except in accordance with applicable Environmental Law or the terms of a valid permit, license, certificate or approval of the relevant Governmental Authority, or the violation of any Environmental Law, or the revocation, suspension or forfeiture of or failure to renew, any permit, license, registration, approval or authorization, which release, violation, revocation, suspension, forfeiture or failure could reasonably be expected to have a Material Adverse Effect; and

 

j) Any change in the Borrower’s accounting practices and procedures, including a change in the Borrower’s fiscal year;

 

k) Any other event or condition that could reasonably be expected to have a Material Adverse Effect.

 

6.6. Compliance with Law. The Borrower will, and will cause each Subsidiary to comply with all applicable laws, rules, regulations, and all orders of any court or tribunal applicable to the Borrower or any of its property, business operations or transactions, the resulting non-compliance of which could have a Material Adverse Effect. Notwithstanding the reasonable efforts of the Borrower to comply with its obligations under this Section 6.6, should any non-compliance with any Requirement of Law cause or could reasonably be expected to cause a Material Adverse Effect, the Administrative Agent shall be notified of such event pursuant to Section 6.6 and the Administrative Agent and the Lenders shall be entitled to exercise their rights and remedies pursuant to Section 8.1.

 

6.7. Payment of Assessments and Charges. The Borrower will, and will cause each Subsidiary to pay all taxes, assessments, governmental charges, rent, and other Indebtedness that, if unpaid, might become a Lien, other than a Permitted Lien, against the Collateral of the Borrower, except any of the foregoing being Contested in Good Faith.

 

  

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6.8. Hazardous Substances Indemnification. The Borrower shall indemnify and hold the Administrative Agent and the Lenders harmless from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial actions, requirements and enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including, without limitation, reasonable attorneys’ fees and expenses), arising directly or indirectly, in whole or in part, from (a) the presence of any Hazardous Substances on, under or from an, Property of the Borrower, whether prior to or during the term hereof, (b) any activity carried on or undertaken on or off any Property of the Borrower, whether prior to or during the term hereof, and whether by the Borrower, or any predecessor in title, employee, agent, contractor or subcontractor of the Borrower, or any other Person at any time occupying or present on such Property, in connection with the handling, treatment, removal, storage, decontamination, cleanup, transportation or disposal of any Hazardous Substances at any time located or present on or under such Property, (c) any residual contamination on or under any Property of the Borrower, or (d) any contamination of any Property or natural resources of the Borrower arising in connection with the generation, use, handling, storage, transportation or disposal of any Hazardous Substances by the Borrower, or any employee, agent, contractor or subcontractor of the Borrower, while such Persons are acting within the scope of their relationship with the Borrower, irrespective of whether any of such activities were or will be undertaken in accordance with applicable Requirements of Law, including, without limitation, any of the foregoing arising from negligence, whether sole or concurrent, on the part of the Administrative Agent and/or the Lenders; with the foregoing indemnity surviving satisfaction of all Obligations and the termination of this Agreement, unless all such Obligations have been satisfied wholly in cash from the Borrower and not by way of realization against any Collateral or the conveyance of any Property in lieu thereof, provided that such indemnity shall not extend to any of the foregoing resulting from the the Administrative Agent’s or any Lender’s gross negligence or willful conduct or any act or omission by the Administrative Agent or any such Lender with respect to any Property subsequent to the Administrative Agent and/or such Lender becoming the owner of such Property and with respect to which Property such claim, loss, damage, liability, fine, penalty, charge, proceeding, order, judgment, action or requirement arises subsequent to the acquisition of title thereto by the Administrative Agent and/or such Lender.

 

6.9. Maintenance of Existence and Good Standing. The Borrower will, and will cause each Subsidiary to take all necessary actions to preserve its existence or qualification and good standing in all states in which it is doing business; to obtain and retain all material approvals, consents, permits, licenses and certificates from all applicable governmental authorities; to comply with all valid and applicable statutes, rules and regulations; and to continue to conduct its business in substantially the same manner as such business is now conducted.

 

6.10. Further Assurances. The Borrower will, and will cause each Subsidiary to promptly cure any defects in the execution and delivery of any of the Credit Agreement Documents and all agreements contemplated thereby, and execute, acknowledge and deliver such other assurances and instruments as shall, in the good faith and reasonable opinion of the Administrative Agent, be necessary to fulfill the terms of the Credit Agreement Documents.

 

6.11. Brokers and/or Finders Fees. The Borrower is responsible for any payments to brokers and finders associated with this Agreement. Neither the Administrative nor any Lender has utilized any other broker or finder to which it owes fees or payments.

 

6.12. Subsequent Fees and Expenses. The Borrower shall promptly reimburse the Administrative Agent and/or any Lender (after the Borrower’s receipt of the Administrative Agent’s or such Lender’s request for reimbursement) for all reasonable amounts expended, advanced or incurred by the Administrative Agent or such Lender necessary to protect the Administrative Agent’s or such Lender’s interest, together with interest thereon as provided in this Section 6.12 (i) to satisfy any of the Obligations, (ii) to protect or enforce the Administrative Agent’s or such Lender’s rights under any of the Credit Agreement Documents, (iii) to amend any of the Credit Agreement Documents, or (iv) to protect the Collateral or business of the Borrower; provided, however, if an uncured Event of Default does not exist, the Administrative Agent or such Lender must obtain the Borrower’s contemporaneous written consent prior to making any such expenditure or Advance, or incurring such reimbursable amount.

 

6.13. Maintenance and Inspection of Tangible Properties. The Borrower will, and will cause each Subsidiary to maintain all of its material tangible Properties in good repair and condition, ordinary wear and tear excepted; make all necessary replacements thereof and operate, if operated by the Borrower, such Properties in a good and workmanlike manner; and permit any authorized representative or representatives of the Administrative Agent or the Lenders to reasonably visit and inspect any tangible Property of the Borrower.

 

  

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6.14. Maintenance of Insurance and Evidence Thereto. The Borrower shall, and shall cause its Subsidiaries, to continue to maintain, or continue to be maintained, insurance with respect to its Properties and businesses against such liabilities, casualties, risks and contingencies as is customary in the relevant industry and sufficient to prevent a Material Adverse Effect, all such insurance to be in amounts and from insurers reasonably acceptable to the Administrative Agent, and, on the Closing Date or upon any renewal of any such insurance and at other times upon the reasonable request by the Administrative Agent, furnish to the Administrative Agent evidence, satisfactory in the good faith judgment of the Administrative Agent of the maintenance of such insurance.

 

6.15. Payment of Note and Performance of Obligations. Borrower shall pay the Note according to the reading, tenor and effect thereof, and do and perform every act and discharge all of the Obligations provided to be performed and discharged by the Borrower under the Credit Agreement Documents, at the time or times and in the manner specified.

 

6.16. Existing Business. The Borrower will, and will cause each Subsidiary to maintain its business as engaged in as of the Closing Date unless otherwise consented to by Lenders holding at least a majority of the Loans in writing.

 

6.17. Maintenance and Access to Records. The Borrower will, and will cause each Subsidiary to keep adequate records of all transactions so that at any time, and from time to time, true and complete financial conditions may be readily determined, and, promptly following the reasonable request of the Administrative Agent, make such records available during Borrower’s customary business hours for inspection by the Administrative Agent and, at the expense of the Borrower, as applicable, allow the Administrative Agent to make copies thereof at the Borrower’s premises and take same to Administrative Agent’s place of business.

 

6.18. Financing Statements and Other Actions: Defense of Title. Borrower hereby authorizes the Administrative Agent to file any financing statements, continuation statements, lien entry forms or other similar documents which Administrative Agent deems necessary in order to protect, preserve, continue, perfect, extend or maintain a valid security interest in the Collateral to secure payment of the Obligations. Borrower will take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of the Administrative Agent in the Collateral and the priority thereof against any Lien not expressly permitted hereunder.

 

6.19. ERISA Compliance. The Borrower will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent (i) promptly after the filing thereof with the United States Secretary of Labor or the Internal Revenue Service, copies of each annual and other report with respect to each Plan or any trust created thereunder, and (ii) immediately upon becoming aware of the occurrence of any “prohibited transaction,” as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by the President or the principal Financial Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service or the Department of Labor with respect thereto.

 

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

 

NEGATIVE COVENANTS

 

7. Unless agreed upon in writing by the Lenders holding not less than a majority of the Loans to the contrary, which agreement will not be unreasonably withheld, so long as any Obligation remains outstanding or unpaid or any Commitment exists the Borrower covenants and agrees with the Lenders that:

 

  

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7.1. Financial Covenants.

 

a) Interest Coverage Ratio. The Borrower will not, as of the last day of any fiscal quarter, permit its ratio of EBITDAX for the four fiscal quarters ending on such date to Interest Expense for such four fiscal quarters to be less than 3.0 to 1.0; provided that for purposes of this Section 9.01(a), EBITDAX for (i) the four fiscal quarters ending September 30, 2012 shall equal EBITDAX for the three fiscal quarters ending on such date multiplied by four and divided by three.

 

b) Ratio of Debt to EBITDAX. The Borrower will not, at any time, permit its ratio of Debt as of such time to EBITDAX for the most recent four fiscal quarters for which financial statements are available to be greater than 4.0 to 1.0; provided that for purposes of this Section 9.01(b), EBITDAX for (i) the four fiscal quarters ending September 30, 2012 shall equal EBITDAX for the three fiscal quarters ending on such date multiplied by four and divided by three.

 

c) Current Ratio. The Borrower will not permit, as of the last day of any fiscal quarter, its ratio of (i) consolidated current assets (excluding non-cash assets under FAS 133) to (ii) consolidated current liabilities (excluding non-cash obligations under FAS 133 and current maturities under this Agreement) to be less than 1.0 to 1.0.

 

7.2. Indebtedness. The Borrower will not, and will not permit any Subsidiary to, further create, incur, assume or suffer to exist any Indebtedness to any bank or lender, whether by way of loan or otherwise without the prior written consent of the Lenders; provided however, the foregoing restrictions shall not apply to Mutual of Omaha Bank’s Credit Agreement, which may be increased, amended and/or modified at the Borrower’s request.

 

7.3. Contingent Obligations. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any contingent obligation on or after the Closing Date; provided however, the foregoing restriction shall not apply to (a) performance guarantees and performance surety or other bonds provided in the ordinary course of business, or (b) trade credit incurred in the ordinary course of business.

 

7.4. Lien. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Lien on any of the Collateral or any other Property of the Borrower whether now owned or hereafter acquired without the written consent of the Lenders holding a majority of the Loans, provided however, the foregoing restrictions shall not apply to the Mutual of Omaha Bank’s Security Interest and Permitted Liens.

 

7.5. Restricted Payments. Unless otherwise agreed by the Lenders holding a majority of the Loans, the Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital to its stockholders or make any distribution of its Property to its Equity Interest holders, except (i) the Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional shares of its Equity Interests, (ii) Subsidiaries may declare and pay dividends and make distributions to the Borrower with respect to their Equity Interests, and (iii) the Borrower may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and its Subsidiaries.

 

7.6. Sales of Assets. Except for sales permitted by the Mutual of Omaha Bank’s Credit Agreement, the Borrower shall not, and shall not permit any Subsidiary, to sell, transfer or otherwise dispose of all or a substantial portion of its assets, now owned or hereafter acquired, whether pursuant to a single transaction or a series of transactions. Notwithstanding the foregoing, the Borrower may collect its accounts and dispose of or consume its inventory, supplies and materials in the ordinary course of the Borrower’s business.

 

7.7. Loans, Advances or Guarantees. The Borrower shall not, and shall not permit any Subsidiary, to make or agree to make or allow to remain outstanding any loans, advances or guarantees to any Person or Affiliate; provided however, the foregoing restrictions shall not apply to (a) existing loans and credit agreements, other than to the Lenders, as disclosed during the course of Administrative Agent’s due diligence and any renewals, refinancings, or extensions of such loan; (b) advances or extensions of credit in the form of accounts payable incurred in the ordinary course of business and upon terms common in the industry for such accounts payable.

 

  

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7.8. Cancellation of Insurance. The Borrower shall not allow any insurance policy required to be carried hereunder to be terminated or lapse or expire without provision for adequate renewal or comparable substitution.

 

7.9. Mergers and Consolidations; Chances in Corporate Structure. Unless otherwise agreed to by the Lenders holding a majority of the Loans, the Borrower shall not (i) merge or consolidate with any Person, or permit any such merger or Consolidation; (ii) form, acquire or become a shareholder, partner or joint venturer in any corporation, partnership, joint venture or other business entity; (iii) discontinue business; (iv) make any material change in the nature of or manner in which it conducts its business; (v) form any Plan which is subject to Title IV of ERISA; or (vi) liquidate, wind-up or dissolve; provided that any Subsidiary may participate in a consolidation with (a) the Borrower so long as the Borrower shall be the continuing or surviving entity or (b) any other Subsidiary (provided that if one of such Subsidiaries is a wholly-owned Subsidiary, then the surviving Person shall be a wholly-owned Subsidiary).

 

7.10. Transactions with Affiliates and/or Related Parties. The Borrower shall not, and shall not permit any Subsidiary, directly or indirectly, to enter into any sale, lease or exchange of Property or any contract for the rendering of goods or services with any Affiliate or related party, other than upon fair and reasonable terms no less favorable than could be obtained in an arm’s length transaction with a Person which was not an Affiliate or related party if such transaction would have a Material Adverse Effect without the prior written consent of the Lenders holding a majority of the Loans.

 

7.11. Organization or Acquisition of Subsidiaries. The Borrower shall not organize or acquire any subsidiary in addition to those existing as of the Closing Date, if any such organization or acquisition would have a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

7.13. Environmental Matters. The Borrower will not, and will not permit any Subsidiary to, cause or permit any of its Property to be in violation of, or do anything or permit anything to be done which will subject any such Property to a release or threatened release of Hazardous Substances, exposure to any Hazardous Substances, or to any remedial action under any Environmental Laws, assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to such Property where such violations, Release or threatened Release, exposure, or remedial action could reasonably be expected to have a Material Adverse Effect.

 

7.14. Material Agreements. The Borrower will not, and will not permit any Subsidiary to, enter into or amend or otherwise modify any contract or other agreement that involves an individual commitment from such Person of more than $100,000 in the aggregate in any twelve (12) month period.

 

7.15. Subsidiaries. The Borrower will not, and will not permit any Subsidiary to, create any additional Subsidiary unless the Borrower gives written notice to the Administrative Agent of such creation and complies with Section 8.14(b). The Borrower shall not, and shall not permit any Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any Subsidiary. Neither the Borrower nor any Subsidiary shall have any Foreign Subsidiaries.

 

  

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7.16. Negative Pledge Agreements; Dividend Restrictions. Except for the Mutual of Omaha Bank’s Credit Agreement and the other Loan Documents (as defined in the Mutual of Omaha Bank’s Credit Agreement), the Borrower will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any contract, agreement or understanding (other than this Agreement 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 in favor of the Administrative Agent and the Lenders or restricts any Subsidiary from paying dividends or making distributions to the Borrower, or which requires the consent of or notice to other Persons in connection therewith.

 

EVENTS OF DEFAULT

 

8. Events of Default. Any of the following events shall constitute an Event of Default as that term is used herein:

 

a) Payment Default. Borrower fails to make any payment when due under this Agreement or the other Loan Documents;

 

b) An Event of Default as defined in any Credit Agreement Document shall have occurred;

 

c) Default shall be made by the Borrower in the due observance or performance of any of its obligations, covenants or agreements contained in any of the Credit Agreement Documents;

 

d) Any representation or warranty made by the Borrower in any of the Credit Agreement Documents proves to have been untrue in any material respect or any representation, statement (including Financial Statements), certificate or data furnished or made to the Administrative Agent and the Lenders in connection herewith proves to have been untrue in any material respect as of the date the facts therein set forth were stated or certified;

 

e) Default shall be made by the Borrower (as principal or guarantor or other surety) in the payment or performance of any bond, debenture, note or other evidence of indebtedness or under any credit agreement, loan agreement, indenture, promissory note or similar agreement or instrument executed in connection with any of the foregoing, and such default shall remain unremedied beyond the applicable grace period, if any, with respect thereto and such default is not being contested in good faith by the Borrower;

 

f) The Borrower shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of it or all or a substantial part of its assets, (ii) file a voluntary petition commencing an Insolvency Proceeding concerning Borrower, (iii) make a general assignment for the benefit of creditors, (iv) be unable, or admit in writing its inability, to pay its debts generally as they become due, or (v) file an answer admitting the material allegations of a petition filed against it in any Insolvency Proceeding;

 

g) An order, judgment or decree shall be entered against the Borrower by any court of competent jurisdiction or by any other duly authorized authority, on the petition of a creditor or otherwise, granting relief in any Insolvency Proceeding or approving a petition seeking reorganization or an arrangement of its debts or appointing a receiver, trustee, conservator, custodian or liquidator of it or all or any substantial part of its assets and such order, judgment or decree shall not be dismissed or stayed within 30 days after the issuance and entry thereof;

 

h) The levy against any significant portion of the Property of the Borrower or any execution, garnishment, attachment, sequestration or other writ or similar proceeding which is not permanently dismissed or discharged within 30 days after the levy and which could reasonably be expected to have a Material Adverse Effect;

 

i) A final and non-appealable order, judgment or decree shall be entered against the Borrower for money damages and/or Indebtedness due in an amount in excess of $100,000 which is not otherwise covered by insurance for 100% of the judgment in excess of $100,000 and such order, judgment or decree shall not be dismissed or the execution thereof stayed within 30 days;

 

j) The Borrower shall have (i) concealed, removed or diverted, or permitted to be concealed, removed or diverted, any part of its Property, with intent to hinder, delay or defraud its creditors or any of them; (ii) made or suffered a transfer of any of its Property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar Law; (iii) made any transfer of its Property to or for the benefit of a creditor at a time when other creditors, similarly situated have not been paid with the intent to hinder, delay or defraud its creditors or any of them; or (iv) shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its Property through legal proceedings or distraint which is not vacated within 30 days from the date thereof;

 

  

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k) Any Security Instrument shall for any reason not, or cease to, create valid and perfected Liens against the Collateral purportedly covered thereby; or

 

l) The good faith determination by the Lenders holding a majority of the Loans that a Material Adverse Effect has occurred or will occur or that the value of the Collateral has, or will be, materially decreased; or

 

m) The dissolution or loss of legal existence of the Borrower.

 

8.1. Remedies/Right to Cure.

 

a) Upon the occurrence of an Event of Default specified in Subsection 8(a) or under the terms of the Note, and subject to the terms of the Intercreditor Agreement, upon ten (10) days’ written notice, all Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of protest, default or dishonor, notice of intent to accelerate maturity, notice of acceleration of maturity or other notice of any kind, except as may be provided to the contrary elsewhere herein, all of which are hereby expressly waived by the Borrower. Nothing contained in this Section 8.1 shall be construed to limit or amend in any way the Events of Default enumerated in any other Credit Agreement Documents executed in connection with the transaction contemplated herein.

 

b) If any default, other than a default in payment is curable and if Borrower has not been given notice of a breach of the same provision of this Agreement within the preceding two (2) months, it may be cured if Borrower, after receiving written notice from Administrative Agent demanding cure of such default: (1) cures the default within ten (10) days; or (2) if the cure requires more than ten (10) days, immediately initiates steps which Lenders holding a majority of the Loans in their sole discretion deem to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonable practical.

 

c) Subject to the provisions of this Agreement, upon the occurrence of any Event of Default, Lender’s remedies shall be exercised in accordance with, or subject to, the terms of the Intercreditor Agreement. After the Discharge of Senior Indebtedness and upon the occurrence of an Event of Default the Lenders may, in addition to the foregoing, exercise any or all of its rights and remedies provided by law or pursuant to the Credit Agreement Documents.

MISCELLANEOUS

 

9. Transfers and Participations. Any Lender may, at any time, sell, transfer, assign or grant participations in the Obligations or any portion thereof; and such Lender may forward to each transferee and each prospective transferee all documents and information relating to such obligations, whether furnished by the Borrower or otherwise obtained, as such Lender determines necessary or desirable. The Borrower agrees that each transferee, regardless of the nature of any transfer to it, may exercise all rights (including, without limitation, rights of set-off) with respect to the Obligations held by it as fully as if such transferee were the direct holder thereof, subject to any agreements between such transferee and the transferor to such transferee. Each Lender agrees that each such transferee shall assume all of the obligations of the assigning Lender pursuant to the Credit Agreement Documents.

 

9.1. Survival of Representations Warranties and Covenants. All representations and warranties of the Borrower and all covenants and agreements herein made shall survive the execution and delivery of this Agreement, the Note and the Security Instruments and shall remain in force and effect so long as any Obligation is outstanding.

 

9.2. Notices and Other Communications. Except as to verbal notices expressly authorized herein, which verbal notices shall be confirmed in writing, all notices, requests and communications hereunder shall be in writing (including by telegraph or telecopy). Unless otherwise expressly provided herein, any such notice, request, demand or other communication shall be deemed to have been duly given or made when delivered by hand, or, in the case of delivery by mail, deposited in the mail, certified mail, return receipt requested, postage prepaid, or, in the case of telegraphic notice, when delivered to the telegraph company, or, in the case of telecopy notice, when receipt thereof is addressed as follows:

 

  

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(a) If to the Administrative Agent, to:

SOSventures, Investments Ltd

Penrose Wharf

2nd Floor

Alfred Street

Cork, Ireland.

 (b) If to the Borrower, to:

Starboard Resources, Inc.

300 E. Sonterra Blvd., Suite 1220

San Antonio, Texas, 78258

 

Any party may, by proper written notice hereunder to the other, change the individuals or addresses to which such notices to it shall thereafter be sent.

 

9.3. Parties in Interest. Subject to applicable restrictions contained herein, all covenants and agreements herein contained by or on behalf of the Borrower, the Administrative Agent or any Lender shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent or such Lender, as the case may be, and their respective heirs, legal representatives, successors and assigns.

 

9.4. Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of the Administrative Agent, the Lenders and the Borrower. No other Person shall, have any right, benefit, priority or interest hereunder or as a result hereof or have standing to require satisfaction of provisions hereof in accordance with their terms, and any or all of such provisions may be freely waived in whole or in part by the Administrative Agent or the Lenders at any time if in their sole discretion they deem it advisable to do so.

 

9.5. Articles and Sections. This Agreement, for convenience only, has been divided into Articles and Sections and it is understood that the rights and other legal relations of the parties hereto shall be determined from this instrument as an entirety and without regard to the aforesaid division into Articles and Sections and without regard to headings prefixed to such Articles or Sections.

 

9.6. Renewals and Extensions. All provisions of this Agreement relating to the Note shall apply with equal force and effect to each promissory note hereafter executed or issued which in whole or in part represents a renewal or extension of any part of the Indebtedness of the Borrower under this Agreement, the Note, or any other Credit Agreement Document.

 

9.7. No Waiver; Rights Cumulative. No course of dealing on the part of the Administrative Agent, the Lenders, their officers or employees, nor any failure or delay by the Administrative Agent or the Lenders with respect to exercising any of their rights under any Credit Agreement Document shall operate as a waiver thereof. The rights of the Administrative Agent and the Lenders under the Credit Agreement Documents shall be cumulative and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.

 

9.8. Survival Upon Unenforceability. In the event any one or more of the provisions contained in any of the Credit Agreement Documents or in any other instrument referred to herein or executed in connection with the Obligations shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of any Credit Agreement Document or of any other instrument referred to herein or executed in connection with such Obligations.

 

9.9. Amendments or Modifications. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

  

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9.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all counterparts together shall constitute but one and the same instrument.

 

9.11. Controlling Provision Upon Conflict. In the event of a conflict between the provisions of this Agreement and those of any other Credit Agreement Document, the provisions of this Agreement shall control.

 

9.12. Time of Essence. Time is of the essence of this Agreement and of each provision hereof.

 

9.13. Disposition of Collateral. Notwithstanding any term or provision, express or implied, in any of the Security Instruments, the realization, liquidation, foreclosure or any other disposition on or of any or all of the Collateral shall be in the order and manner and determined in the sole discretion of the Lenders holding a majority of the Loans; provided however, that in no event shall the Lenders or the Administrative Agent violate applicable Law or exercise rights and remedies other than those provided in such Security Instruments or otherwise existing at law or in equity.

 

9.14. GOVERNING LAW. THIS AGREEMENT AND THE CREDIT AGREEMENT DOCUMENTS SHALL BE DEEMED TO BE MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE STATE OF TEXAS AND THE SUBSTANTIVE LAWS OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA IN THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THIS AGREEMENT AND THE CREDIT AGREEMENT DOCUMENTS, EXCEPT TO THE EXTENT THAT THE LAWS OF ANY JURISDICTION WHERE COLLATERAL IS LOCATED REQUIRE APPLICATION OF SUCH LAWS WITH RESPECT TO SUCH COLLATERAL.

 

9.15. JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR ANY OTHER CREDIT AGREEMENT DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDERS HOLDING A MAJORITY OF THE LOANS, IN THE FEDERAL AND STATE COURTS IN TEXAS. THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN TEXAS WITH RESPECT TO ANY LEGAL PROCEEDINGS OR DISPUTES IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE LENDERS IN ACCORDANCE WITH THIS SECTION.

 

9.16. NO DAMAGES. NEITHER THE ADMINISTRATIVE AGENT NOR THE LENDERS BE LIABLE TO THE BORROWER (WHETHER IN CONTRACT, TORT, OR OTHERWISE) FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES, HOWEVER ARISING, FOR ANY OTHER ACTION TAKEN OR OMITTED WITH RESPECT TO THIS AGREEMENT.

 

9.17. WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF THIS AGREEMENT OR ANY OTHER CREDIT AGREEMENT DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.

 

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

 

  

24

  

 

9.19. Construction of Agreement. Neither party nor any legal counsel shall be construed to be the drafter or primary drafter of this Agreement and in the event of any dispute regarding the construction of this Agreement or any of its provisions, ambiguities or question of interpretation shall not be construed more in favor of one party than the other; rather questions of interpretation shall be construed equally to each party.

 

9.20. Entire Agreement. This Agreement constitutes the entire Agreement among the parties hereto with respect to the parties hereof and shall supersede any prior agreement between the parties hereto, whether written or oral, relating to the subject hereof. Furthermore, in this regard, this written Agreement and the other written Credit Agreement Documents represent, collectively, the final agreement between 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 between the parties.

 

{Signature Page To Follow}

 

 

{The Remainder Of This Page Has Been Intentionally Left Blank}

 

  

25

  

 

IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the date first above written.

 

	
BORROWER:

	
Starboard Resources, Inc.

	 
	  	  	  	 
	  	
By:

	  	 
	  	  	
Michael J. Pawelek

CEO, Starboard Resources, Inc.

	 
	  	  	 
	
ADMINISTRATIVE AGENT AND LENDER:

	
SOSventures, LLC

	 
	  	  	  	 
	  	
By:

	  	 
	  	  	
Sean O’Sullivan

Managing Director, SOSventures, LLC

	 

  

26

  

 

EXHIBIT A

FORM OF PROMISSORY NOTE

  

27

  

 

EXHIBIT A

FORM OF NOTE

 

	$[     ]	February 1, 2016

 

FOR VALUE RECEIVED, STARBOARD RESOURCES, INC., a Delaware corporation (the “Borrower”) hereby promises to pay to [     ] (the “Lender”), or its registered assigns, at the principal office of SOSVENTURES, LLC (the “Administrative Agent”), at [_______________], [_____________], the principal sum of [_______________] Dollars ($[____________]) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the Lender to the Borrower under the Credit Agreement, as hereinafter defined), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement.

 

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

 

This Note is one of the Notes referred to in the Credit Agreement dated as of March 29, 2013 among the Borrower, the Administrative Agent and other lenders signatory thereto (including the Lender), and evidences Loans made by the Lender thereunder (such Credit Agreement as the same may be amended, supplemented or restated from time to time, the “Credit Agreement”). Capitalized terms used in this Note have the respective meanings assigned to them in the Credit Agreement.

 

This Note is a registered Note and, as provided in the Credit Agreement, upon surrender of this Note for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or such holder’s attorney duly authorized in writing), a new Note for a like aggregate principal amount will be issued to, and registered in the name of, the transferee. Prior to the due presentment for registration and transfer, the Borrower may treat the Person in whose name this Note is registered as the holder and the owner of this Note for the purpose of receiving payment and for all other purposes of this Note and the Credit Agreement. Notwithstanding anything to the contrary herein, the right to receive payments of interest and principal under this Note shall be transferable only upon surrender for cancellation of this Note, and the issuance of a new Note registered in the name of the transferee. In addition, the Administrative Agent, acting as agent for the Borrower, shall maintain a register in which it shall record the name of the holder or any transferee, and no transfer shall be valid unless so registered.

 

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

 

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

 

	 	STARBOARD RESOURCES, INC.	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	 	 
	 	Title:	 	 

 

  

28

  

 

EXHIBIT B

 

FORM OF BORROWING REQUEST

February __, 2013

STARBOARD RESOURCES, INC., a Delaware corporation (the “Borrower”), pursuant to Section 2.4 of the Credit Agreement dated as of February __, 2013 (together with all amendments, restatements, supplements or other modifications thereto, the “Credit Agreement”) among the Borrower and SOSventures LLC, a Delaware limited liability company (the “Lender”) which are or become parties thereto (unless otherwise defined herein, each capitalized term used herein is defined in the Credit Agreement), hereby requests a Borrowing as follows:

	
(i)  

	
Aggregated amount of the requested Borrowing is $________________;

	
(ii)  

	
Date of such Borrowing is ____________ _, 2013; and

	
(iii)  

	
Location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.4 of the Credit Agreement, is as follows:

Location: Wells Fargo Bank, N.A.

Account number: 280-6151953

 

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

 

	 	STARBOARD RESOURCES, INC.	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name:	Michael Pawelek	 
	 	Title:	CEO	 

 

  

29

  

 

ANNEX I

	
Name of Lender

	
Applicable Percentage

	
Commitment

	
SOSventures, LLC

	
100.00%

	
$10,000,000

	
TOTAL

	
100.00%

	
$10,000,000

 

 

 

 

 

30star_ex1062.htm

EXHIBIT 10.6.2

 

INTERCREDITOR AGREEMENT

 

 

BY AND AMONG

 

 

MUTUAL OF OMAHA BANK,

as Senior Indebtedness Representative,

 

SOSVENTURES, LLC,

as Term Administrative Agent

and

STARBOARD RESOURCES, INC.

AND THE OTHER SIGNATORIES HERETO,

as the Obligors

 

  

  

  

 

TABLE OF CONTENTS

 

	 	 	 	Page	 
	 	 	 	 	 
	
ARTICLE I

	 
	
DEFINITIONS

	 	 	2	 
	 	 	 	 	 
	
Section 1.1.

	
Defined Terms

	 	 	2	 
	
Section 1.2.

	
Terms Generally

	 	 	7	 
	
ARTICLE II

	 
	
LIEN PRIORITIES

	 	 	7	 
	 	 	 	 	 
	
Section 2.1.

	
Relative Priorities

	 	 	7	 
	
Section 2.2.

	
Prohibition on Contesting Liens

	 	 	8	 
	
Section 2.3.

	
No New Liens

	 	 	8	 
	
Section 2.4.

	
Similar Liens and Agreements

	 	 	8	 
	
ARTICLE III

	 
	
ENFORCEMENT

	 	 	9	 
	 	 	 	 	 
	
Section 3.1.

	
Exercise of Remedies

	 	 	9	 
	
Section 3.2.

	
Cooperation

	 	 	11	 
	
Section 3.3.

	
Coordination of Enforcement Efforts

	 	 	11	 
	
ARTICLE IV

	 
	
PAYMENTS

	 	 	12	 
	 	 	 	 	 
	
Section 4.1.

	
Application of Proceeds

	 	 	12	 
	
Section 4.2.

	
Payments Over

	 	 	12	 
	
Section 4.3.

	
Scheduled Payments of Second Lien Obligations

	 	 	12	 
	
ARTICLE V

	 
	
OTHER AGREEMENTS

	 	 	12	 
	 	 	 	 	 
	
Section 5.1.

	
Releases

	 	 	12	 
	
Section 5.2.

	
Insurance

	 	 	13	 
	
Section 5.3.

	
Amendments to Credit Documents

	 	 	14	 
	
Section 5.4.

	
Rights as an Unsecured Creditor

	 	 	15	 
	
Section 5.5.

	
Bailee for Perfection

	 	 	15	 
	
Section 5.6.

	
Purchase Option

	 	 	16	 
	
ARTICLE VI

	 
	
INSOLVENCY OR LIQUIDATION PROCEEDINGS

	 	 	17	 
	 	 	 	 	 
	
Section 6.1.

	
Filing of Claims; Finance and Sale Issues

	 	 	17	 
	
Section 6.2.

	
Relief from the Automatic Stay

	 	 	17	 
	
Section 6.3.

	
Adequate Protection

	 	 	17	 

 

  

i

  

 

	
Section 6.4.

	
No Waiver

	 	 	18	 
	
Section 6.5.

	
Avoidance Issues

	 	 	18	 
	
Section 6.6.

	
Reorganization Securities

	 	 	19	 
	
Section 6.7.

	
Post-Petition Interest

	 	 	19	 
	
Section 6.8.

	
Waiver

	 	 	19	 
	
Section 6.9.

	
Asset Dispositions in an Insolvency or Liquidation Proceeding

	 	 	19	 
	
Section 6.10.

	
Separate Grants of Security and Separate Classification

	 	 	20	 
	
Section 6.11.

	
Effectiveness in Insolvency or Liquidation Proceedings

	 	 	20	 
	
ARTICLE VII

	 
	
RELIANCE; WAIVERS; ETC.

	 	 	20	 
	 	 	 	 	 
	
Section 7.1.

	
Reliance

	 	 	20	 
	
Section 7.2.

	
No Warranties or Liability

	 	 	21	 
	
Section 7.3.

	
No Waiver of Lien Priorities

	 	 	21	 
	
ARTICLE VIII

	 
	
MISCELLANEOUS

	 	 	23	 
	 	 	 	 	 
	
Section 8.1.

	
Conflicts

	 	 	23	 
	
Section 8.2.

	
Effectiveness; Continuing Nature of this Agreement; Severability

	 	 	24	 
	
Section 8.3.

	
Amendments; Waivers

	 	 	24	 
	
Section 8.4.

	
Information Concerning Financial Condition of the Borrower and its Subsidiaries

	 	 	24	 
	
Section 8.5.

	
Subrogation

	 	 	25	 
	
Section 8.6.

	
SUBMISSION TO JURISDICTION; WAIVERS

	 	 	25	 
	
Section 8.7.

	
Notices

	 	 	26	 
	
Section 8.8.

	
Identity of Term Lenders for Notice Purposes

	 	 	26	 
	
Section 8.9.

	
Further Assurances

	 	 	27	 
	
Section 8.10.

	
APPLICABLE LAW

	 	 	27	 
	
Section 8.11.

	
Binding on Successors and Assigns

	 	 	27	 
	
Section 8.12.

	
Specific Performance

	 	 	27	 
	
Section 8.13.

	
Headings

	 	 	27	 
	
Section 8.14.

	
Counterparts; Effectiveness

	 	 	27	 
	
Section 8.15.

	
Authorization

	 	 	28	 
	
Section 8.16.

	
No Third Party Beneficiaries

	 	 	28	 
	
Section 8.17.

	
Provisions Solely to Define Relative Rights

	 	 	28	 

 

  

ii

  

 

INTERCREDITOR AGREEMENT

 

This INTERCREDITOR AGREEMENT is dated as of March 29, 2013, and entered into among Starboard Resources, Inc., a Delaware corporation (“Borrower”), the other parties hereto as Guarantors (together with the Borrower, the “Obligors”), Mutual of Omaha Bank, in its capacity as administrative agent for the Senior Indebtedness (including its successors and assigns from time to time, the “Senior Indebtedness Representative”), and SOSventures LLC, in its capacity as administrative agent for the Second Lien Obligations (including its successors and assigns from time to time, the “Term Administrative Agent”). The Senior Indebtedness Representative and the Term Administrative Agent are collectively referred to herein as the “Lender Representatives.”

 

RECITALS

 

WHEREAS, the Borrower, the Senior Indebtedness Representative, as administrative agent, and the Senior Revolving Lenders, have entered into that certain Credit Agreement dated as of July 26, 2012 providing for a revolving credit facility of up to $25 million (as amended, restated, supplemented, modified or Refinanced from time to time in accordance with the terms of this Agreement, the “Senior Revolving Credit Agreement”);

 

WHEREAS, the Borrower, the Term Administrative Agent, as administrative agent, and the Term Lenders, are entering into that certain Second Lien Term Loan Agreement dated as of even date herewith providing for a $10 million term loan (as amended, restated, supplemented, modified or Refinanced from time to time in accordance with the terms of this Agreement, the “Second Lien Term Loan Agreement”);

 

WHEREAS, the obligations of the Borrower under the Senior Revolving Credit Agreement and any Eligible Swap Agreements will be secured by all of the equity interests in each Guarantor and substantially all the assets of the Borrower and each Guarantor, pursuant to the terms of the Senior Revolving Collateral Documents;

 

WHEREAS, the obligations of the Borrower under the Second Lien Term Loan Agreement and the other Second Lien Obligations will be secured by all of the equity interests in each Guarantor and substantially all the assets of the Borrower and each Guarantor, pursuant to the terms of the Term Collateral Documents;

 

WHEREAS, the Senior Revolving Credit Documents and the Term Credit Documents provide, among other things, that the parties thereto shall set forth in this Agreement their respective rights and remedies with respect to the Collateral; and

 

WHEREAS, in order to induce the Senior Indebtedness Representative and the Senior Revolving Claimholders to consent to the incurring of the Second Lien Obligations and to induce the Senior Revolving Claimholders to extend credit and other financial accommodations and lend monies to or for the benefit of the Borrower, the Term Administrative Agent on behalf of the Term Claimholders has agreed to the Lien and payment subordination, intercreditor and other provisions set forth in this Agreement.

 

  

1

  

 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and obligations herein set forth and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1. Defined Terms. Terms defined above shall have the meanings ascribed them. Unless otherwise indicated, capitalized terms used but not defined herein shall have the meanings given such terms in the Senior Revolving Credit Agreement as in effect on the date hereof or as amended in accordance with this Agreement; if not defined therein, such terms shall have the meaning given such terms in the Second Lien Term Loan Agreement as in effect on the date hereof or as amended in accordance with this Agreement. As used in the Agreement, the following terms shall have the following meanings:

 

“Agreement” means this Intercreditor Agreement, as amended, renewed, extended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute.

 

“Bankruptcy Law” means the Bankruptcy Code and any similar federal, state or foreign law for the relief of debtors.

 

“Business Day” means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or the State of Texas or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

 

“Collateral” means all of the assets and property of any Obligor, whether real, personal or mixed, constituting both Senior Revolving Collateral and Term Collateral.

 

“DIP Financing” has the meaning ascribed such term in Section 6.1.

 

“Discharge of Second Lien Obligations” means (a) satisfaction by payment in full in cash of the principal of and interest (including allowed interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding), expenses (including, without limitation, all legal fees) and premium, if any, on all Indebtedness outstanding under the Term Credit Documents and termination of the Commitments (as defined in the Second Lien Term Loan Agreement), and (b) satisfaction by payment in full in cash or otherwise of all other Second Lien Obligations that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid.

 

“Discharge of Senior Indebtedness” means (a) satisfaction by payment in full in cash of the principal of and interest (including allowed interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding), expenses (including, without limitation, all legal fees) and premium, if any, on all Indebtedness outstanding under the Senior Revolving Credit Documents and termination of the Commitments, (b) satisfaction by payment in full in cash or otherwise of all other Senior Indebtedness that is due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid (including, for the avoidance of doubt, the termination and settlement of all Eligible Swap Agreements) and (c) termination or cash collateralization of letters of credit, or the issuance of back-to-back letters of credit from an issuing bank acceptable to the Senior Revolving Claimholders in their sole discretion, consistent with all other Loan Documents of all letters of credit issued and outstanding under the Senior Revolving Credit Documents.

 

  

2

  

 

“Eligible Swap Agreement” means any present or future Swap Agreement between the Borrower or any Subsidiary that is a Guarantor and any Approved Counterparty.

 

“Enforcement Action” means, with respect to any Second Lien Obligations or the Senior Indebtedness (as applicable): (a) any action by any Person to foreclose on the Lien of such Person in any Collateral, (b) any action to take possession or control of, or sell or otherwise realize upon the Collateral (including, without limitation, the exercise of any right under any lockbox agreement, account control agreement, letter-in-lieu, bailee’s letter or similar agreement or arrangement to which the Term Administrative Agent or any Term Lender may be a party), or (c) the commencement of (or join with any other Person in commencing) any legal proceedings or actions against any Collateral to facilitate the actions described in clauses (a) and (b) above.

 

“Exigent Circumstances” means an event or circumstance that materially and imminently threatens the ability of Senior Indebtedness Representative to realize upon all or any material portion of the Collateral, such as, without limitation, fraudulent or intentional removal, concealment, or abscondment thereof, destruction or material waste thereof, or the diversion of funds in violation of the Senior Revolving Credit Documents.

 

“Guarantors” means each Subsidiary of the Borrower required to guarantee the Indebtedness under either the Senior Revolving Credit Agreement or the Second Lien Term Loan Agreement, as applicable.

 

“Hedging Obligation” means any obligation of the Borrower or any other Obligor pursuant to any Eligible Swap Agreements.

 

“Indebtedness” means and includes all Obligations that constitute “Indebtedness” within the meaning of the Senior Revolving Credit Agreement or the Second Lien Term Loan Agreement, as applicable, in each case as amended, restated, supplemented, modified or Refinanced from time to time as permitted pursuant to the terms of this Agreement.

 

“Insolvency or Liquidation Proceeding” means (a) any voluntary or involuntary case or proceeding under the Bankruptcy Code with respect to any Obligor, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to any Obligor or with respect to a material portion of their respective assets, (c) any liquidation, dissolution, reorganization or winding up of any Obligor whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of any Obligor.

 

  

3

  

 

“Lenders” means the Senior Revolving Lenders and the Term Lenders.

 

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

 

“Obligations” means any and all obligations with respect to the payment of (a) any principal of or interest or premium on any Indebtedness, including any reimbursement obligation in respect of any letter of credit, or any other liability, including, without limitation, interest accruing after the filing of a petition initiating any proceeding under the Bankruptcy Code, (b) any fees, indemnification obligations, expense reimbursement obligations or other liabilities payable under the documentation governing any Indebtedness, (c) any obligation to post cash collateral in respect of Letters of Credit or any other obligations constituting Indebtedness and (d) any Hedging Obligations.

 

“Obligors” has the meaning set forth in the preamble hereof.

 

“Pledged Collateral” has the meaning set forth in Section 5.5(a) hereof.

 

“Purchase Notice” has the meaning set forth in Section 5.6(a) hereof.

 

“Purchase Period” has the meaning set forth in Section 5.6(b) hereof.

 

“Recovery” has the meaning set forth in Section 6.5 hereof.

 

“Refinance” means any refinancing of the outstanding Indebtedness under the Senior Revolving Credit Documents or the Term Credit Documents provided that the financing documentation entered into by the Obligors in connection with such Refinancing constitute Refinancing Documents. “Refinanced” and “Refinancing” shall have correlative meanings.

 

“Refinancing Documents” means any financing documentation which amends, restates, supplements or otherwise replaces the Senior Revolving Credit Documents or the Term Credit Documents and pursuant to which the outstanding Indebtedness (including continuing Liens to secure directly or indirectly Eligible Swap Agreements) under the Senior Revolving Credit Documents or the Term Credit Documents are refinanced in their entirety, as such financing documentation may be amended, supplemented, restated, refinanced or otherwise modified from time to time in compliance with this Agreement.

 

“Second Lien Obligations” means all Obligations outstanding under the Second Lien Term Loan Agreement and the other Term Credit Documents. To the extent any payment with respect to the Second Lien Obligations (whether by or on behalf of any Obligor, as proceeds of security, enforcement of any right of set off or otherwise) is declared to be fraudulent or preferential in any respect, set aside or required to be paid to a debtor in possession, trustee, receiver or similar Person, then the Obligation or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. “Second Lien Obligations” shall include all interest accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation Proceeding, accrue) after commencement of an Insolvency or Liquidation Proceeding in accordance with the rate specified in the relevant Term Credit Document whether or not the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding.

 

  

4

  

 

“Second Lien Term Loan Agreement” has the meaning set forth in the Recitals hereto.

 

“Senior Indebtedness” means all Obligations outstanding under the Senior Revolving Credit Agreement and the other Senior Revolving Credit Documents, including, without limitation, Eligible Swap Agreements. To the extent any payment with respect to the Senior Indebtedness (whether by or on behalf of any Obligor, as proceeds of security, enforcement of any right of set off or otherwise) is declared to be fraudulent or preferential in any respect, set aside or required to be paid to a debtor in possession, trustee, receiver or similar Person, then the Obligation or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. “Senior Indebtedness” shall include all interest accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation Proceeding, accrue) after commencement of an Insolvency or Liquidation Proceeding in accordance with the rate specified in the relevant Senior Revolving Credit Document whether or not the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding.

 

“Senior Indebtedness Representative” has the meaning set forth in the Recitals hereto.

 

“Senior Revolving Claimholders” means, at any relevant time, the holders of Senior Indebtedness at such time, including without limitation the Senior Revolving Lenders and the agents under the Senior Revolving Credit Agreement and Approved Counterparties counterparty to Eligible Swap Agreements.

 

“Senior Revolving Collateral” means all of the assets and property of any Obligor, whether real, personal or mixed, with respect to which a Lien is granted as security for any Senior Indebtedness.

 

“Senior Revolving Collateral Documents” means the Security Instruments and any other agreement, document or instrument pursuant to which a Lien is granted securing any Senior Indebtedness or under which rights or remedies with respect to such Liens are governed.

 

“Senior Revolving Credit Agreement” has the meaning set forth in the Recitals hereto.

 

“Senior Revolving Credit Documents” means the Senior Revolving Credit Agreement and the Loan Documents and each of the other agreements, documents and instruments providing for or evidencing any other Senior Indebtedness, and any other document or instrument executed or delivered at any time in connection with any Senior Indebtedness, including any intercreditor or joinder agreement among holders of Senior Indebtedness, to the extent such are effective at the relevant time, as each may be modified from time to time in accordance with the terms of this Agreement.

 

  

5

  

 

“Senior Revolving Lenders” means the “Lenders” under and as defined in the Senior Revolving Credit Agreement.

 

“Senior Revolving Mortgages” means a collective reference to each mortgage, deed of trust and any other document or instrument under which any Lien on real property owned by any Obligor is granted to secure any Senior Indebtedness or under which rights or remedies with respect to any such Liens are governed.

 

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

 

“Term Administrative Agent” has the meaning set forth in the preamble hereof.

 

“Term Claimholders” means, at any relevant time, the holders of Second Lien Obligations at such time, including without limitation the Term Lenders and the agents under the Second Lien Term Loan Agreement.

 

“Term Collateral” means all of the assets and property of any Obligor, whether real, personal or mixed, with respect to which a Lien is granted as security for any Second Lien Obligations.

 

“Term Collateral Documents” means the Security Instruments (as defined in the Second Lien Term Loan Agreement) and any other agreement, document or instrument pursuant to which a Lien is granted securing any Second Lien Obligations or under which rights or remedies with respect to such Liens are governed.

 

“Term Credit Documents” means the Second Lien Term Loan Agreement and the Loan Documents (as defined in the Second Lien Term Loan Agreement) and each of the other agreements, documents and instruments providing for or evidencing any other Second Lien Obligation, and any other document or instrument executed or delivered at any time in connection with any Second Lien Obligations, as the same may be modified from time to time in accordance with the terms of this Agreement.

 

“Term Lenders” means the “Lenders” under and as defined in the Second Lien Term Loan Agreement.

 

“Term Mortgages” means a collective reference to each mortgage, deed of trust and any other document or instrument, if any, under which any Lien on real property owned by any Obligor is granted to secure any Second Lien Obligations or under which rights or remedies with respect to any such Liens are governed.

 

  

6

  

 

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

 

Section 1.2. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified, (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 Sections shall be construed to refer to Sections of this Agreement and (e) 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

LIEN PRIORITIES

 

Section 2.1. Relative Priorities. Notwithstanding the date, manner or order of grant, attachment or perfection of any Liens securing the Second Lien Obligations granted on the Collateral or of any Liens securing the Senior Indebtedness granted on the Collateral and notwithstanding any provision of the UCC, or any applicable law or the Term Credit Documents or any other circumstance whatsoever, the Term Administrative Agent, on behalf of itself and the Term Claimholders, and the Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders, hereby agree that: (a) any Lien on the Collateral securing any Senior Indebtedness now or hereafter held by or on behalf of the Senior Indebtedness Representative, any Senior Revolving Claimholders or any agent or trustee therefor, regardless of how acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be senior in all respects and prior to any Lien on the Collateral securing any of the Second Lien Obligations; and (b) any Lien on the Collateral now or hereafter held by or on behalf of the Term Administrative Agent, any Term Claimholders or any agent or trustee therefor regardless of how acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be junior and subordinate in all respects to all Liens on the Collateral securing any Senior Indebtedness. All Liens on the Collateral securing any Senior Indebtedness shall, to the extent provided herein, be and remain senior in all respects and prior to all Liens on the Collateral securing any Second Lien Obligations for all purposes, whether or not such Liens securing any Senior Indebtedness are subordinated to any Lien securing any other obligations of the Borrower, any other Obligor or any other Person. The foregoing provisions of this Section 2.1 and the other provisions of this Agreement shall not be interpreted or construed to suggest or imply any intent of any party or either the Senior Revolving Claimholders or the Term Claimholders to subordinate their Liens to any Liens other than as set forth in Section 2.1.

 

  

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Section 2.2. Prohibition on Contesting Liens. Each of the Term Administrative Agent, for itself and on behalf of each Term Claimholder, and the Senior Indebtedness Representative, for itself and on behalf of each Senior Revolving Claimholder, agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding), the priority, validity or enforceability of a Lien held by or on behalf of any of the Senior Revolving Claimholders in the Senior Revolving Collateral or by or on behalf of any of the Term Claimholders in the Term Collateral, as the case may be; provided that nothing in this Agreement (a) shall be construed to prevent or impair the rights of the Senior Indebtedness Representative or any Senior Revolving Claimholder to enforce this Agreement, including the priority of the Liens securing the Senior Indebtedness as provided in Sections 2.1 and 3.1, or vote on a plan of reorganization in an Insolvency or Liquidation Proceeding; or (b) shall be construed to prevent or impair the rights of the Term Administrative Agent or any Term Claimholder to enforce this Agreement, including the priority of the Liens securing the Second Lien Obligations as provided in Sections 2.1 and 3.1, or vote on a plan of reorganization in an Insolvency or Liquidation Proceeding.

 

Section 2.3. No New Liens. So long as the Discharge of Senior Indebtedness has not occurred, (a) the Term Administrative Agent, on behalf of the Term Claimholders, hereby agrees that neither the Term Administrative Agent nor any Term Claimholder will accept or receive from the Borrower or any Guarantor any additional Liens on any asset or property to secure any Second Lien Obligation unless the Borrower or such Guarantor has granted a senior Lien on such asset or property to secure the Senior Indebtedness, and (b) the Senior Indebtedness Representative, on behalf of the Senior Revolving Claimholders, hereby agrees that neither the Senior Indebtedness Representative nor any Senior Revolving Claimholder will accept or receive from the Borrower or any Guarantor any additional Liens on any asset or property to secure any Senior Indebtedness unless the Borrower or such Guarantor has granted a junior Lien on such asset or property to secure the Second Lien Obligations. Any such Lien referred to in the first sentence of this Section 2.3 shall be subject to the provisions of Section 2.1 and Section 3.1. To the extent that the foregoing provisions are not complied with for any reason, without limiting any other rights and remedies available to the Senior Indebtedness Representative, the Senior Revolving Claimholders, the Term Administrative Agent and/or the Term Claimholders, each of the Senior Indebtedness Representative, on behalf of the Senior Revolving Claimholders, and the Term Administrative Agent, on behalf of Term Claimholders, hereby agrees that any amounts received by or distributed to any of them pursuant to or as a result of Liens granted in contravention of this Section 2.3 shall be subject to Section 4.2.

 

Section 2.4. Similar Liens and Agreements. The Lender Representatives agree that it is their intention that the Senior Revolving Collateral and the Term Collateral be identical. To the extent that, notwithstanding this Section 2.4, the Senior Revolving Collateral and Term Collateral are not identical, (i) the Term Administrative Agent, on behalf of Term Claimholders, agrees that any amounts received by or distributed to any of them after an Enforcement Action pursuant to or as a result of Liens on Term Collateral that is not Senior Revolving Collateral, shall be subject to Section 4.2, and (ii) the Senior Indebtedness Representative, on behalf of the Senior Revolving Claimholders, agrees that any amounts received by or distributed to any of them after an Enforcement Action pursuant to or as a result of Liens on Senior Revolving Collateral that is not Term Collateral, shall, to the extent such amounts are in excess of the amount necessary to result in the Discharge of Senior Indebtedness, be subject to Section 4.2. In furtherance of the foregoing and of Section 8.9, the Lender Representatives agree, subject to the other provisions of this Agreement:

 

  

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(a) upon request by the Senior Indebtedness Representative or the Term Administrative Agent, to cooperate in good faith (and to direct their counsel to cooperate in good faith) from time to time in order to determine the specific items included in the Senior Revolving Collateral and the Term Collateral and the steps taken to perfect their respective Liens thereon and the identity of the respective parties obligated under the Senior Revolving Credit Documents and the Term Credit Documents; and

 

(b) that the documents and agreements creating or evidencing the Senior Revolving Collateral and the Term Collateral and guarantees for the Senior Indebtedness and the Second Lien Obligations shall be in all material respects the same forms of documents other than with respect to the first Lien and the second Lien nature of the Obligations and Collateral thereunder.

 

ARTICLE III

ENFORCEMENT

 

Section 3.1. Exercise of Remedies.

 

(a) So long as the Discharge of Senior Indebtedness has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Borrower or any other Obligor:

 

(i) the Term Administrative Agent and the Term Claimholders:

 

	
(A)  

	
will not exercise or seek to exercise any rights or remedies (including setoff) with respect to any Collateral (including, without limitation, the exercise of any right under any lockbox agreement, account control agreement, letter in-lieu, bailee’s letter or similar agreement or arrangement to which the Term Administrative Agent or any Term Claimholder is a party), or institute any action or proceeding with respect to such rights or remedies against the Collateral (including any action of foreclosure);

 

	
(B)  

	
will not contest, protest or object to any foreclosure proceeding or action brought by the Senior Indebtedness Representative or any Senior Revolving Claimholder or any other exercise by the Senior Indebtedness Representative or any Senior Revolving Claimholder, of any rights and remedies relating to the Collateral under the Senior Revolving Credit Documents or otherwise so long as such proceedings or action or other exercise is not prohibited by the terms of this Agreement; and

 

	
(C)  

	
will not object to the forbearance by the Senior Indebtedness Representative or the Senior Revolving Claimholders from bringing or pursuing any foreclosure proceeding or action or any other exercise of any rights or remedies relating to the Collateral, in each case so long as the respective interests of the Term Claimholders attach to the proceeds thereof subject to the relative priorities described in Section 2 hereof; and

 

  

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(ii) the Senior Indebtedness Representative and the Senior Revolving Claimholders shall have the right to enforce rights, exercise remedies (including set off and the right to credit bid their debt) and make determinations regarding the release, disposition, or restrictions with respect to the Collateral as provided for under the Senior Revolving Credit Documents without any consultation with or the consent of the Term Administrative Agent or any Term Claimholder (but in no event shall the Senior Indebtedness Representative and the Senior Revolving Claimholders have the right to require the Term Administrative Agent or any Term Claimholder to release their Liens except as expressly provided in this Agreement);

 

provided, that (A) in any Insolvency or Liquidation Proceeding commenced by or against the Borrower or any other Obligor, the Term Administrative Agent may file a claim or statement of interest with respect to the Second Lien Obligations, (B) the Term Administrative Agent may accelerate the Second Lien Obligations and take any action (not adverse to the prior Liens on the Collateral securing the Senior Indebtedness, or the rights of the Senior Indebtedness Representative or any Senior Revolving Claimholder to exercise remedies in respect thereof) in order to preserve or protect its Lien on the Collateral, (C) the Term Claimholders shall be entitled to file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any person objecting to or otherwise seeking the disallowance of the claims of the Term Claimholders, including without limitation any claims secured by the Collateral, if any, in each case in accordance with the terms of this Agreement, (D) the Term Claimholders shall be entitled to file any pleadings, objections, motions or agreements which assert rights or interests available to unsecured creditors of the Obligors arising under either the Bankruptcy Law or applicable non-bankruptcy law, in each case in accordance with the terms of this Agreement, (E) the Term Claimholders shall be entitled to file any proof of claim and other filings and make any arguments and motions that are, in each case, in accordance with the terms of this Agreement, with respect to the Second Lien Obligations and the Collateral, and (F) the Term Administrative Agent and the Term Claimholders may charge default interest pursuant to the terms of the Second Lien Term Loan Agreement. In exercising rights and remedies with respect to the Collateral, the Senior Indebtedness Representative and the Senior Revolving Claimholders may enforce the provisions of the Senior Revolving Credit Documents, and the Term Administrative Agent and the Term Claimholders may enforce the provisions of the Term Credit Documents, in each case, as applicable, and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to sell or otherwise dispose of Collateral upon foreclosure, to incur reasonable expenses (including, without limitation, all reasonable legal fees) in connection with such sale or disposition, and to exercise all the rights and remedies of a secured creditor under the Uniform Commercial Code of any applicable jurisdiction and of a secured creditor under Bankruptcy Laws of any applicable jurisdiction.

 

  

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(b) The Term Administrative Agent, on behalf of itself and the Term Claimholders, agrees that, it will not take or receive any Collateral or any proceeds of Collateral in connection with an Enforcement Action in violation of this Agreement.

 

(c) Subject to Section 3.1(a) of this Agreement, (i) the Term Administrative Agent, for itself and on behalf of the Term Claimholders, agrees that the Term Administrative Agent and the Term Claimholders will not take any action that would hinder any exercise of remedies under the Senior Revolving Credit Documents or is otherwise prohibited hereunder, including any sale, lease, exchange, transfer or other disposition of the Collateral, whether by foreclosure or otherwise, and (ii) the Term Administrative Agent, for itself and on behalf of the Term Claimholders, hereby waives any and all rights it or the Term Claimholders may have as a junior lien creditor or otherwise to object to the manner in which the Senior Indebtedness Representative or the Senior Revolving Claimholders seek to enforce or collect the Senior Indebtedness or the Liens granted in any of the Senior Revolving Collateral, regardless of whether any action or failure to act by or on behalf of the Senior Indebtedness Representative or Senior Revolving Claimholders is adverse to the interest of the Term Administrative Agent or Term Claimholders.

 

Section 3.2. Cooperation. Subject to Section 3.1(a) of this Agreement, the Term Administrative Agent, on behalf of itself and the Term Claimholders, agrees that, unless and until the Discharge of Senior Indebtedness has occurred, it will not commence, or join with any Person in commencing, any enforcement, collection, execution, levy or foreclosure action or proceeding (including, without limitation, any Insolvency or Liquidation Proceeding) with respect to any Lien held by it under the Term Collateral Documents or any other Term Credit Document or otherwise.

 

Section 3.3. Coordination of Enforcement Efforts. Without providing any rights or benefits to the Borrower or any Obligor, the Senior Indebtedness Representative, for itself and on behalf of the Senior Revolving Claimholders, and the Term Administrative Agent, for itself and on behalf of the Term Claimholders, agree that in the event enforcement proceedings are necessary, such parties shall reasonably discuss the possibility of undertaking a coordinated enforcement process, including an effort to attempt to sell the Collateral for fair market value as a going concern and to reasonably enter into arrangements between themselves so as to permit the ongoing operation of the business of the Borrower and the other Obligors. Failure to enter into such discussions shall in no way affect the rights and/or obligations of any party as set forth in this Agreement. In addition, the Term Administrative Agent and the Term Claimholders may join in (but not control) any judicial foreclosure proceeding or other judicial lien enforcement proceeding with respect to the Collateral initiated by the Senior Indebtedness Representative or any Senior Revolving Claimholder, to the extent that any such action could not reasonably be expected, in any material respect, to restrain, hinder, limit, delay for any material period or otherwise interfere with the exercise of such remedy or remedies by the Senior Indebtedness Representative or such Senior Revolving Claimholder.

 

  

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ARTICLE IV

PAYMENTS

 

Section 4.1. Application of Proceeds. So long as the Discharge of Senior Indebtedness has not occurred, any proceeds of Collateral received by the Senior Indebtedness Representative or any Senior Revolving Claimholders in connection with the sale or other disposition of, or collection on, such Collateral upon the exercise of remedies, shall be applied by the Senior Indebtedness Representative to the Senior Indebtedness in such order as specified in the Senior Revolving Credit Agreement. Upon the Discharge of Senior Indebtedness, the Senior Indebtedness Representative shall deliver to the Term Administrative Agent any proceeds of Collateral held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct to be applied by the Term Administrative Agent to the Second Lien Obligations in such order as specified in the Term Collateral Documents.

 

Section 4.2. Payments Over. So long as the Discharge of Senior Indebtedness has not occurred, any Collateral or proceeds thereof (together with assets or proceeds subject to Liens referred to in the final sentence of Section 2.3) received by the Term Administrative Agent or any Term Claimholders in connection with the exercise of any right or remedy (including set off) with respect to the Collateral shall be segregated and held in trust and forthwith paid over to the Senior Indebtedness Representative for the benefit of the Senior Revolving Claimholders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. The Senior Indebtedness Representative is hereby authorized to make any such endorsements as agent for the Term Administrative Agent or any such Term Claimholders. This authorization is limited to the specific matters described in the preceding sentence and is coupled with an interest and is irrevocable until such time as this Agreement is terminated in accordance with its terms. After the Discharge of Senior Indebtedness has occurred, any amount received by or distributed to the Senior Indebtedness Representative or any Senior Revolving Claimholder after an Enforcement Action pursuant to or as a result of Liens on Collateral shall be segregated and held in trust and forthwith paid over to the Term Administrative Agent for the benefit of the Term Claimholders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. The Term Administrative Agent is hereby authorized to make any such endorsements as agent for the Senior Indebtedness Representative or any such Senior Revolving Claimholder. This authorization is limited to the specific matters described in the preceding sentence and is coupled with an interest and is irrevocable until such time as this Agreement is terminated in accordance with its terms.

 

Section 4.3. Scheduled Payments of Second Lien Obligations. The parties hereto agree that nothing in this Agreement shall be construed to prohibit, restrict or otherwise limit the ability of the Borrower or any Guarantor to pay, and the ability of the Term Lenders to receive, scheduled principal and other interest payments in accordance with the Second Lien Term Loan Agreement and the other Term Credit Documents; provided that any such payment is permitted by the Senior Revolving Credit Agreement.

 

Section 5.1. Releases.

 

  

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ARTICLE V

OTHER AGREEMENTS

 

(a) If, in connection with:

 

(i) any sale of any Collateral permitted under the Second Lien Term Loan Agreement to cure a Borrowing Base Deficiency under the Senior Revolving Credit Agreement; or

 

(ii) any sale, lease, exchange, transfer or other disposition of any Collateral permitted under the terms of both the Senior Revolving Credit Agreement and the Second Lien Term Loan Agreement,

 

the Senior Indebtedness Representative, for itself or on behalf of any of the Senior Revolving Claimholders, releases any of its Liens on any part of the Collateral, or releases any Obligor from its obligations under its guaranty of the Senior Indebtedness, in each case other than in connection with the Discharge of Senior Indebtedness, then the Term Administrative Agent, for itself or for the benefit of the Term Claimholders, shall release the Liens (if any) of the Term Administrative Agent on such Collateral, and the obligations of such Obligor under its guaranty of the Second Lien Obligations, shall be automatically, unconditionally and simultaneously be released and the Term Administrative Agent, for itself or on behalf of any such Term Claimholders, promptly shall execute and deliver to the Senior Indebtedness Representative or such Obligor such termination statements, releases and other documents as may be reasonably necessary to effectively confirm such release.

 

(b) Until the Discharge of Senior Indebtedness occurs, the Term Administrative Agent, for itself and on behalf of the Term Claimholders, hereby irrevocably constitutes and appoints the Senior Indebtedness Representative and any officer or agent of the Senior Indebtedness Representative, with full power of substitution, as its true and lawful attorney in fact with full irrevocable power and authority in the place and stead of the Term Administrative Agent or such holder or in the Senior Indebtedness Representative’s own name, from time to time in the Senior Indebtedness Representative’s discretion, for the purpose of carrying out the terms of this Section 5.1, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary to accomplish the purposes of this Section 5.1, including any endorsements or other instruments of transfer or release.

 

(c) Until the Discharge of Senior Indebtedness occurs, to the extent that the Senior Revolving Claimholders (i) have released any Lien on Collateral or any Obligor from its obligation under its guaranty and any such Liens or guaranty are later reinstated or (ii) obtain any new first priority Liens or additional guaranties from Obligors, then the Term Claimholders shall be immediately granted a second priority lien on any such Collateral and an additional guaranty, as the case may be.

 

Section 5.2. Insurance. The Senior Indebtedness Representative and the Senior Revolving Claimholders shall have the sole and exclusive right, subject to the rights of the Obligors under the Senior Revolving Credit Documents, to adjust settlement for any insurance policy covering the Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding (or any deed in lieu of condemnation) affecting the Collateral until the earliest to occur of (a) the Discharge of Senior Indebtedness or (b) the Senior Indebtedness Representative, in a written instrument, waives or otherwise confers such right to the Term Administrative Agent or a Term Claimholder. Subject to the rights of the Obligors under the Senior Revolving Collateral Documents, all proceeds of any such policy and any such award (or any payments with respect to a deed in lieu of condemnation) if in respect to the Collateral shall be paid (i) until the Discharge of Senior Indebtedness has occurred, to the Senior Indebtedness Representative for the benefit of the Senior Revolving Claimholders pursuant to the terms of the Senior Revolving Credit Documents (including, without limitation, for purposes of cash collateralization of Letters of Credit and Eligible Swap Agreements); (ii) after the Discharge of Senior Indebtedness has occurred, subject to the rights of the Obligors under the Term Collateral Documents, to the Term Administrative Agent for the benefit of the Term Claimholders to the extent required under the Term Collateral Documents, and (iii) thereafter, to the owner of the subject property, such other Person as may be entitled thereto or as a court of competent jurisdiction may otherwise direct. Until the Discharge of Senior Indebtedness has occurred, if the Term Administrative Agent or any Term Claimholders shall, at any time, receive any proceeds of any such insurance policy or any such award or payment in contravention of this Agreement, it shall pay such proceeds over to the Senior Indebtedness Representative in accordance with the terms of Section 4.2 of this Agreement.

 

  

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Section 5.3. Amendments to Credit Documents.

 

(a) Unless a similar amendment, supplement or modification to the applicable Senior Revolving Credit Document(s) has been, or is concurrently being, made, without the prior written consent of the Senior Indebtedness Representative, no Term Credit Document may be amended, supplemented or otherwise modified or entered into to the extent such amendment, supplement or modification, or the terms of any new Term Credit Document.

 

The Borrower agrees that each Term Collateral Document shall include the following language (or language to similar effect approved by the Senior Indebtedness Representative):

 

“Notwithstanding anything herein to the contrary, the lien and security interest granted to the Term Administrative Agent pursuant to this Agreement and the exercise of any right or remedy by the Term Administrative Agent hereunder are subject to the provisions of the Intercreditor Agreement, dated as of March 29, 2013 as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among Borrower, Mutual of Omaha Bank, as Senior Indebtedness Representative, SOSventures, LLC, as Term Administrative Agent, and certain other persons party or that may become party thereto from time to time.”

 

(b) The Senior Revolving Credit Documents and any agreements relating to Eligible Swap Agreements constituting Senior Indebtedness may be amended, supplemented, waived or otherwise modified in accordance with their terms, and the Senior Revolving Credit Agreement may be Refinanced, in each case, without the consent of the Term Administrative Agent or the Term Lenders.

 

  

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Section 5.4. Rights as an Unsecured Creditor. Notwithstanding anything to the contrary contained in this Agreement or any Senior Revolving Credit Document, the Term Administrative Agent and the Term Lenders may exercise all rights and remedies available to unsecured creditors in accordance with the terms of the Second Lien Term Loan Agreement, the Term Credit Documents and applicable law, and nothing in this Agreement shall prohibit the acceleration of the Second Lien Obligations or the receipt of the Term Administrative Agent or the Term Lenders of the required payments of principal and interest and other amounts, so long as such receipt is not the direct or indirect result of (a) the exercise of the Term Administrative Agent or any Term Lenders of an Enforcement Action in contravention of this Agreement or (b) in contravention of the Senior Revolving Credit Agreement. Except as expressly set forth herein, nothing in this Agreement impairs or otherwise adversely affects any rights or remedies the Senior Indebtedness Representative or the Senior Revolving Claimholders may have with respect to the Senior Revolving Collateral.

 

Section 5.5. Bailee for Perfection.

 

(a) The Senior Indebtedness Representative agrees to hold that part of the Collateral that is in its possession or control (or in the possession or control of its agents or bailees) to the extent that possession or control thereof is taken to perfect a Lien thereon under the Uniform Commercial Code (such Collateral being the “Pledged Collateral”) as collateral agent for the Senior Revolving Claimholders and as bailee for the Term Administrative Agent and any assignee solely for the purpose of perfecting the security interest granted under the Senior Revolving Credit Documents and the Term Credit Documents, respectively, subject to the terms and conditions of this Section 5.5.

 

(b) Subject to the terms of this Agreement, until the Discharge of Senior Indebtedness has occurred, the Senior Indebtedness Representative shall be entitled to deal with the Pledged Collateral in accordance with the terms of the Senior Revolving Credit Documents as if the Liens of the Term Administrative Agent under the Term Collateral Documents did not exist. The rights of the Term Administrative Agent shall at all times be subject to the terms of this Agreement.

 

(c) The Senior Indebtedness Representative shall have no obligation whatsoever to the Senior Revolving Claimholders and the Term Administrative Agent or any Term Claimholder to ensure that the Pledged Collateral is genuine or owned by any of the Obligors or to preserve rights or benefits of any Person except as expressly set forth in this Section 5.5. The duties or responsibilities of the Senior Indebtedness Representative under this Section 5.5 shall be limited solely to holding the Pledged Collateral as bailee in accordance with this Section 5.5.

 

(d) The Senior Indebtedness Representative acting pursuant to this Section 5.5 shall not have by reason of the Senior Revolving Collateral Documents, the Term Collateral Documents, this Agreement or any other document a fiduciary relationship in respect of the Senior Revolving Claimholders, the Term Administrative Agent or any Term Claimholder.

 

(e) Upon the Discharge of Senior Indebtedness under the Senior Revolving Credit Documents to which the Senior Indebtedness Representative is a party, the Senior Indebtedness Representative shall deliver the remaining Pledged Collateral (if any) together with any necessary endorsements, to the Term Administrative Agent to the extent Second Lien Obligations remain outstanding, and the Senior Indebtedness Representative further agrees to take all other action reasonably requested by the Term Administrative Agent in connection with it obtaining a first priority interest in the Collateral in such a situation.

 

  

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Section 5.6. Purchase Option.

 

(a) The Senior Indebtedness Representative, on behalf of itself and the holders of Senior Indebtedness, agrees that if (i) an Event of Default under the Senior Revolving Credit Documents has occurred and is continuing, and as a result of such Event of Default under the Senior Revolving Credit Documents (A) the Senior Indebtedness has been accelerated and/or (B) the Required Lenders are pursuing remedies of foreclosure against the Collateral (the “Trigger Event”), or (ii) an Insolvency or Liquidation Proceeding is commenced by or against the Borrower or any other Obligor, then the Term Claimholders shall have the right and option to purchase the entire aggregate amount of outstanding Senior Indebtedness (including unfunded commitments), at a price of not less than par, plus all accrued and unpaid interest and fees, together with cash collateral for all outstanding letters of credit in an amount equal to 105% of the undrawn and available amount consistent with all other Senior Revolving Credit Documents of all letters of credit outstanding under the Senior Revolving Credit Documents, and a payment for all then outstanding Eligible Swap Agreements at a price equal to the sum of any unpaid amounts then due in respect of such Eligible Swap Agreements plus or minus a net amount quoted by the Senior Revolving Claimholder party to such Eligible Swap Agreement that would be paid to assign or novate each such Eligible Swap Agreement in the ordinary course of its business. Such sale shall be without warranty or representation or recourse other than as provided in standard LSTA documentation for par trades. To exercise the option following a Trigger Event, the Term Administrative Agent shall deliver a written notice to the Senior Indebtedness Representative and the Senior Revolving Lenders, which notice shall be deemed an irrevocable offer to the Senior Revolving Claimholders to purchase the Senior Indebtedness on the terms set forth in this Section (the “Purchase Notice”).

 

(b) Upon receipt of a Purchase Notice the parties to such purchase shall endeavor to close within twenty (20) days after such acceptance (such entire period referred to as the “Purchase Period”). Neither the Senior Indebtedness Representative nor the Senior Revolving Claimholders shall commence any Enforcement Action during the Purchase Period; provided, however, if, upon expiration of the Purchase Period, the parties to such purchase have not closed the transaction, then the Senior Indebtedness Representative and the holders of Senior Indebtedness shall have no further obligations pursuant to this Section and may commence any Enforcement Action in their sole discretion in accordance with the Senior Revolving Credit Documents and this Agreement; provided that if during the Purchase Period, a Senior Revolving Claimholder determines Exigent Circumstances exist, (A) it may or may direct the Senior Indebtedness Representative to take appropriate Enforcement Actions to preserve the value of the Collateral or the amount which could reasonably be expected to be recovered thereon and (B) nothing shall prevent the early termination of a Swap Agreement and the netting of amounts due in respect thereof.

 

  

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ARTICLE VI

INSOLVENCY OR LIQUIDATION PROCEEDINGS

 

Section 6.1. Filing of Claims; Finance and Sale Issues. If no proof of claim is filed in any Insolvency or Liquidation Proceeding with respect to any Second Lien Obligations by the third (3rd) day prior to the bar date for any such proof of claim, the Senior Indebtedness Representative may, after notice to the Term Lenders or the Term Administrative Agent or other representative, file such a proof of claim on behalf of the Term Lenders, and each Term Lender hereby irrevocably appoints the Senior Indebtedness Representative as its agent and attorney-in-fact for such limited purpose; provided, that the foregoing shall not confer to the holder of any Senior Indebtedness the right to vote on behalf of the Term Lenders in any Insolvency or Liquidation Proceedings or any other right. Until the Discharge of Senior Indebtedness has occurred, if the Borrower or any other Obligor shall be subject to any Insolvency or Liquidation Proceeding and the Senior Indebtedness Representative shall desire to permit the use of cash collateral on which the Senior Indebtedness Representative or any other creditor has a Lien or to permit the Borrower or any other Obligor to obtain financing from the Senior Revolving Claimholders under Section 363 or Section 364 of Title 11 of the United States Code or any similar Bankruptcy Law (each, a “DIP Financing”), then the Term Administrative Agent, on behalf of itself and the Term Claimholders, agrees that it will raise no objection to such use of cash collateral or DIP Financing and will not request adequate protection or any other relief in connection therewith (except as expressly agreed by the Senior Indebtedness Representative or to the extent permitted by Section 6.3) and, to the extent the Liens securing the Senior Indebtedness are subordinated or pari passu with such DIP Financing, the Term Administrative Agent will subordinate its Liens in the Collateral to the Liens securing such DIP Financing (and all Obligations relating thereto); provided, however, that the foregoing shall not prevent the Term Lenders from (a) objecting to any DIP Financing relating to any provision or content of a plan of reorganization, (b) proposing any other DIP Financing to the Borrower or the bankruptcy court, (c) objecting to any term of the DIP Financing requiring the liquidation of the Collateral before a default under the DIP Financing exists, or (d) asserting any objection to the DIP Financing available to an unsecured creditor. The Term Administrative Agent on behalf of the Term Claimholders, agrees that it will raise no objection or oppose a sale or other disposition of any Collateral free and clear of its Liens or other claims under Section 363 of the Bankruptcy Code if the Senior Revolving Claimholders have consented to such sale or disposition of such assets.

 

Section 6.2. Relief from the Automatic Stay. Until the Discharge of Senior Indebtedness has occurred, the Term Administrative Agent, on behalf of itself and the Term Claimholders, agrees that none of them shall seek relief from the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of the Collateral, without the prior written consent of the Senior Indebtedness Representative.

 

Section 6.3. Adequate Protection. The Term Administrative Agent, on behalf of itself and the Term Claimholders, agrees that none of them shall contest (or support any other person contesting) (a) any request by the Senior Indebtedness Representative or the Senior Revolving Claimholders for adequate protection or (b) any objection by the Senior Indebtedness Representative or the Senior Revolving Claimholders to any motion, relief, action or proceeding based on the Senior Indebtedness Representative or the Senior Revolving Claimholders claiming a lack of adequate protection. Notwithstanding the foregoing provisions in Section 6.1 or this Section 6.3, in any Insolvency or Liquidation Proceeding, (i) if the Senior Revolving Claimholders (or any subset thereof) are granted adequate protection in the form of additional collateral in connection with any DIP Financing, then the Term Administrative Agent, on behalf of itself or any of the Term Claimholders, may seek or request adequate protection in the form of a Lien on such additional collateral, which Lien will be subordinated to the Liens securing the Senior Indebtedness and such DIP Financing (and all Obligations relating thereto) on the same basis as the other Liens securing the Second Lien Obligations are so subordinated to the Senior Indebtedness under this Agreement, and (ii) in the event the Term Administrative Agent, on behalf of itself and the Term Claimholders, seeks or requests adequate protection in respect of Second Lien Obligations and such adequate protection is granted in the form of additional collateral, then the Term Administrative Agent, on behalf of itself or any of the Term Claimholders, agrees that the Senior Indebtedness Representative shall also be granted a senior Lien on such additional collateral as security for the Senior Indebtedness and for any such DIP Financing provided by the Senior Revolving Claimholders and that any Lien on such additional collateral securing the Second Lien Obligations shall be subordinated to the Liens on such collateral securing the Senior Indebtedness and any such DIP Financing provided by the Senior Revolving Claimholders (and all Obligations relating thereto) and to any other Liens granted to the Senior Revolving Claimholders as adequate protection on the same basis as the other Liens securing the Second Lien Obligations are so subordinated to such Senior Indebtedness under this Agreement. Except as set forth above, the Term Administrative Agent shall not be limited from seeking adequate protection with respect to its rights in the Collateral in any Insolvency or Liquidation Proceeding (including, without limitation, adequate protection in the form of cash payments of interest or otherwise).

 

  

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Section 6.4. No Waiver. Subject to Section 3.1(a) of this Agreement and other actions expressly permitted hereunder, nothing contained herein shall prohibit or in any way limit the Senior Indebtedness Representative or any Senior Revolving Claimholder from objecting in any Insolvency or Liquidation Proceeding or otherwise to any action taken by the Term Administrative Agent or any of the Term Claimholders, including the seeking by the Term Administrative Agent or any Term Claimholders of adequate protection or the asserting by the Term Administrative Agent or any Term Claimholders of any of its rights and remedies under the Term Credit Documents or otherwise. If in any Insolvency or Liquidation Proceeding, the Term Administrative Agent or any Term Lender receives a secured claim in lieu of a set-off, then such Person shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with this Agreement.

 

Section 6.5. Avoidance Issues. If any Senior Revolving Claimholder is required in any Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower or any other Obligor any amount (a “Recovery”), then such Senior Revolving Claimholders shall be entitled to a reinstatement of Senior Indebtedness with respect to all such recovered amounts; provided that the terms of this Agreement as between the parties shall not apply to any such Liens as reinstated to the extent the court ordering such Recovery determines such Recovery is due as the result of fraud, bad faith or the intentional misconduct of such Senior Revolving Claimholder. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto from such date of reinstatement unless the court ordering such Recovery determines such Recovery is due as the result of fraud, bad faith or the intentional misconduct of such Senior Revolving Claimholder.

 

  

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Section 6.6. Reorganization Securities. If, in any Insolvency or Liquidation Proceeding, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed, pursuant to a plan of reorganization or similar dispositive restructuring plan, both on account of Senior Indebtedness and on account of Second Lien Obligations, then, to the extent the debt obligations distributed on account of the Senior Indebtedness and on account of the Second Lien Obligations are secured by Liens upon the same property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations.

 

Section 6.7. Post-Petition Interest.

 

(a) Neither the Term Administrative Agent nor any Term Claimholder shall oppose or seek to challenge any claim by the Senior Indebtedness Representative or any Senior Revolving Claimholder for allowance in any Insolvency or Liquidation Proceeding of Senior Indebtedness consisting of post-petition interest, fees or expenses to the extent of the value of the Senior Revolving Claimholder’s Lien, without regard to the existence of the Lien of the Term Administrative Agent on behalf of the Term Claimholders on the Collateral.

 

(b) Neither the Senior Indebtedness Representative nor any other Senior Revolving Claimholder shall oppose or seek to challenge any claim by the Term Administrative Agent or any Term Claimholder for allowance in any Insolvency or Liquidation Proceeding of Second Lien Obligations consisting of post-petition interest, fees or expenses to the extent of the value of the Lien of the Term Administrative Agent on behalf of the Term Claimholders on the Collateral (after taking into account the Lien of the Senior Indebtedness Representative on behalf of the Senior Revolving Claimholders on the Collateral).

 

Section 6.8. Waiver. The Term Administrative Agent, for itself and on behalf of the Term Claimholders, waives any claim it may hereafter have against any Senior Revolving Claimholder arising out of the election of any Senior Revolving Claimholder of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or out of any cash collateral or financing arrangement or out of any grant of a security interest in connection with the Collateral in any Insolvency or Liquidation Proceeding. The Senior Indebtedness Representative, for itself and on behalf of the Senior Revolving Claimholders, waives any claim it may hereafter have against any Term Claimholder arising out of the election of any Term Claimholder of the application of Section 1111(b)(2) of the Bankruptcy Code (which is not in contravention of this Agreement), and/or out of any cash collateral or financing arrangement (which is not in contravention of this Agreement) or out of any grant of a security interest of the appropriate priority (which is not in contravention of this Agreement) in connection with the Collateral in any Insolvency or Liquidation Proceeding.

 

Section 6.9. Asset Dispositions in an Insolvency or Liquidation Proceeding. Neither the Term Administrative Agent nor any other Term Lender shall, in an Insolvency or Liquidation Proceeding or otherwise, oppose any sale or disposition of any Property of any Obligor under Section 363 of the Bankruptcy Code that is supported by the Senior Revolving Claimholders, and the Term Administrative Agent and each other Term Lender will be deemed to have consented under Section 363 of the Bankruptcy Code to any such sale supported by the Senior Revolving Claimholders; provided in any case, the cash proceeds of such sale are used to permanently repay Senior Indebtedness and/or other permitted senior claims (i.e. “Excepted Liens”) on the assets subject of such sale. Neither the Term Administrative Agent nor any other Term Lender shall, in an Insolvency or Liquidation Proceeding or otherwise, assert in connection with any sale or disposition of any Property of any Obligor under Section 363 of the Bankruptcy Code any rights under Section 363(k) of the Bankruptcy Code or otherwise credit bid any of the Second Lien Obligations unless such credit bid includes a cash portion for any amounts with respect to the Senior Indebtedness.

 

  

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Section 6.10. Separate Grants of Security and Separate Classification. Each Term Lender acknowledges and agrees that (a) the grants of Liens pursuant to the Senior Revolving Credit Documents and the Term Credit Documents constitute two separate and distinct grants of Liens and (b) because of, among other things, their differing rights in the Collateral, the Second Lien Obligations are fundamentally different from the Senior Indebtedness and must be separately classified in any plan of reorganization proposed or adopted in an Insolvency or Liquidation Proceeding. To further effectuate the intent of the Term Lenders as provided in the immediately preceding sentence, if it is held that the claims against the Senior Revolving Claimholders and Term Lenders in respect of the Collateral constitute only one secured claim (rather than separate classes of senior and junior secured claims), then the Term Lenders hereby acknowledge and agree that all distributions shall be made as if there were separate classes of senior and junior secured claims against the Borrower and/or other Obligors in respect of the Collateral with the effect being that (i) to the extent that the aggregate value of the Collateral is sufficient (for this purpose ignoring all claims held by the Term Lenders), the Senior Revolving Claimholders shall be entitled to receive pre-petition interest and other claims owing in respect thereof, all amounts owing in respect of post-petition interest owing in respect thereof before any distribution is made in respect of the claims held by the Term Lenders and (ii) the Term Lenders hereby acknowledge and agree to turn over to the Senior Revolving Claimholders amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the claim or recovery of the Term Lenders.

 

Section 6.11. Effectiveness in Insolvency or Liquidation Proceedings. This Agreement shall be effective both before and after the commencement of an Insolvency or Liquidation Proceeding. All references in this Agreement to any Obligor shall include such Obligor as a debtor-in-possession and any receiver or trustee for such Obligor in any Insolvency or Liquidation Proceeding.

 

ARTICLE VII

RELIANCE; WAIVERS; ETC.

 

Section 7.1. Reliance. Other than any reliance on the terms of this Agreement, the Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders under its Senior Revolving Credit Documents, acknowledges that it and such Senior Revolving Claimholders have, independently and without reliance on the Term Administrative Agent or any Term Claimholders, and based on documents and information deemed by them appropriate, made their own credit analysis and decision to enter into such Senior Revolving Credit Documents and be bound by the terms of this Agreement and they will continue to make their own credit decision in taking or not taking any action under the Senior Revolving Credit Documents or this Agreement. The Term Administrative Agent, on behalf of itself and the Term Claimholders under its Term Credit Documents, acknowledges that it and such Term Claimholders have, independently and without reliance on the Senior Indebtedness Representative or any Senior Revolving Claimholder, and based on documents and information deemed by them appropriate, made their own credit analysis and decision to enter into each of the Term Credit Documents and be bound by the terms of this Agreement and they will continue to make their own credit decision in taking or not taking any action under the Term Credit Documents or this Agreement.

 

  

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Section 7.2. No Warranties or Liability. The Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders under its Senior Revolving Credit Documents, acknowledges and agrees that each of the Term Administrative Agent and the Term Claimholders have made no express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the Term Credit Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon. The Term Claimholders will be entitled to manage and supervise their respective loans and extensions of credit under the Term Credit Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate. The Term Administrative Agent, on behalf of itself and the Term Claimholders under its Term Credit Documents, acknowledges and agrees that each of the Senior Indebtedness Representative and the Senior Revolving Claimholders have made no express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the Senior Revolving Credit Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon. The Senior Revolving Claimholders will be entitled to manage and supervise their respective loans and extensions of credit under their respective Senior Revolving Credit Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate. The Term Administrative Agent and the Term Claimholders shall have no duty to the Senior Indebtedness Representative or any of the Senior Revolving Claimholders, and the Senior Indebtedness Representative and the Senior Revolving Claimholders shall have no duty to the Term Administrative Agent or any of the Term Claimholders, to act or refrain from acting in a manner which allows, or results in, the occurrence or continuance of an event of default or default under any agreements with the Borrower or any other Obligor (including the Senior Revolving Credit Documents and the Term Credit Documents), regardless of any knowledge thereof which they may have or be charged with.

 

Section 7.3. No Waiver of Lien Priorities.

 

(a) No right of the Senior Revolving Claimholders, the Senior Indebtedness Representative or any of them to enforce any provision of this Agreement or any Senior Revolving Credit Document shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Borrower or any other Obligor or by any act or failure to act by any Senior Revolving Claimholder or the Senior Indebtedness Representative, or by any noncompliance by any Person with the terms, provisions and covenants of this Agreement, any of the Senior Revolving Credit Documents or any of the Term Credit Documents, regardless of any knowledge thereof which the Senior Indebtedness Representative or the Senior Revolving Claimholders, or any of them, may have or be otherwise charged with.

 

  

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(b) Without in any way limiting the generality of the foregoing paragraph (but subject to the rights of the Borrower and the other Obligors under the Senior Revolving Credit Documents and subject to the provisions of Section 5.3(a), Section 5.3(b) and Section 8.4), the Senior Revolving Claimholders, the Senior Indebtedness Representative and any of them may, at any time and from time to time in accordance with the Senior Revolving Credit Documents and/or applicable law, without the consent of, or notice to, the Term Administrative Agent or any Term Claimholders, without incurring any liabilities to the Term Administrative Agent or any Term Claimholders and without impairing or releasing the Lien priorities and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of the Term Administrative Agent or any Term Claimholders is affected, impaired or extinguished thereby) do any one or more of the following:

 

(i) change the manner, place or terms of payment or change or extend the time of payment of, or amend, renew, exchange, increase or alter, the terms of any of the Senior Indebtedness or any Lien on any Senior Revolving Collateral or guaranty thereof or any liability of the Borrower or any other Obligor, or any liability incurred directly or indirectly in respect thereof (including any increase in or extension of the Senior Indebtedness, without any restriction as to the amount, tenor or terms of any such increase or extension) or otherwise amend, renew, exchange, extend, modify or supplement in any manner any Liens held by the Senior Indebtedness Representative or any of the Senior Revolving Claimholders, the Senior Indebtedness or any of the Senior Revolving Credit Documents;

 

(ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any part of the Senior Revolving Collateral or any liability of the Borrower or any other Obligor to the Senior Revolving Claimholders or the Senior Indebtedness Representative, or any liability incurred directly or indirectly in respect thereof;

 

(iii) settle or compromise any Senior Indebtedness or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to payment of the Senior Indebtedness; and

 

(iv) exercise or delay in or refrain from exercising any right or remedy against the Borrower or any security or any other Obligor or any other Person, elect any remedy and otherwise deal freely with the Borrower, any other Obligor or any Senior Revolving Collateral and any security and any guarantor or any liability of the Borrower or any other Obligor to the Senior Revolving Claimholders or any liability incurred directly or indirectly in respect thereof.

 

(c) The Term Administrative Agent, on behalf of itself and the Term Claimholders, also agrees that the Senior Revolving Claimholders and the Senior Indebtedness Representative shall have no liability to the Term Administrative Agent or any Term Claimholders for actions taken in compliance with the terms of this Agreement (excluding actions constituting the gross negligence or willful misconduct of the Senior Indebtedness Representative or any Senior Revolving Claimholder), and the Term Administrative Agent, on behalf of itself and the Term Claimholders, hereby waives any such claim against any Senior Revolving Claimholder or the Senior Indebtedness Representative, arising out of any and all actions which the Senior Revolving Claimholders or the Senior Indebtedness Representative may take or permit or omit to take in accordance with the terms of this Agreement (excluding actions or inactions constituting the gross negligence or willful misconduct of the Senior Indebtedness Representative or any Senior Revolving Claimholder) with respect to: (i) the Senior Revolving Credit Documents, (ii) the collection of the Senior Indebtedness or (iii) the foreclosure upon, or sale, liquidation or other disposition of, any Senior Revolving Collateral. The Term Administrative Agent, on behalf of itself and the Term Claimholders, agrees that, except as expressly provided herein, the Senior Revolving Claimholders and the Senior Indebtedness Representative have no duty to them in respect of the maintenance or preservation of the Senior Revolving Collateral, the Senior Indebtedness or otherwise.

 

  

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(d) The Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders, also agrees that the Term Claimholders and the Term Administrative Agent shall have no liability to the Senior Indebtedness Representative or any Senior Revolving Claimholders for actions taken in compliance with the terms of this Agreement (excluding actions constituting the gross negligence or willful misconduct of the Term Administrative Agent or any Term Claimholder), and the Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders, hereby waives any such claim against any Term Claimholder or the Term Administrative Agent, arising out of any and all actions which the Term Claimholders or the Term Administrative Agent may take or permit or omit to take in accordance with the terms of this Agreement (excluding actions or inactions constituting the gross negligence or willful misconduct of the Term Administrative Agent or any Term Claimholder) with respect to: (i) the Term Credit Documents, (ii) the collection of the Second Lien Obligations or (iii) the foreclosure upon, or sale, liquidation or other disposition of, any Term Collateral. Except as otherwise provided herein, the Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders, agrees that the Term Claimholders and the Term Administrative Agent have no duty to them in respect of the maintenance or preservation of the Term Collateral, the Second Lien Obligations or otherwise.

 

(e) The Term Administrative Agent, on behalf of itself and the Term Claimholders, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the Collateral or any other similar rights a junior secured creditor may have under applicable law.

 

ARTICLE VIII

MISCELLANEOUS

 

Section 8.1. Conflicts. With respect solely to the relative rights and obligations of the Senior Indebtedness Representative and the Senior Revolving Claimholders, on one hand, and the Term Administrative Agent and the Term Claimholders, on the other hand, and not with respect to any right or obligation of the Borrower or any Guarantor or Obligor under any Senior Revolving Credit Document or Term Credit Document, in the event of any conflict between the provisions of this Agreement and the provisions of the Senior Revolving Credit Documents or the Term Credit Documents, the provisions of this Agreement shall govern and control.

 

  

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Section 8.2. Effectiveness; Continuing Nature of this Agreement; Severability. This Agreement shall become effective when executed and delivered by the parties hereto. Except as set forth herein, this is a continuing agreement of lien subordination and the Senior Revolving Claimholders may continue, at any time and without notice to the Term Administrative Agent or any Term Claimholder subject to the Term Credit Documents, to extend credit and other financial accommodations and lend monies to or for the benefit of the Borrower or any Obligor constituting Senior Indebtedness in reliance hereof. The Term Administrative Agent, on behalf of itself and the Term Claimholders, hereby waives any right it may have under applicable law to revoke this Agreement or any of the provisions of this Agreement absent fraud or material misrepresentation by any other party hereto with respect to the transactions contemplated hereby. The terms of this Agreement shall survive, and shall continue in full force and effect, in any Insolvency or Liquidation Proceeding. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. All references to the Borrower or any other Obligor shall include the Borrower or such Obligor as debtor and debtor in possession and any receiver or trustee for the Borrower or any other Obligor (as the case may be) in any Insolvency or Liquidation Proceeding. This Agreement shall terminate and be of no further force and effect, (a) with respect to the Term Administrative Agent, the Term Claimholders and the Second Lien Obligations, upon the later of (i) the date upon which the obligations under the Second Lien Term Loan Agreement terminate if there are no other Second Lien Obligations outstanding on such date and (ii) if there are other Second Lien Obligations outstanding on such date, the date upon which such Second Lien Obligations terminate and (b) with respect to the Senior Indebtedness Representative, the Senior Revolving Claimholders and the Senior Indebtedness, the date on which the Senior Indebtedness is paid in full in cash and all of the Commitments of the Senior Revolving Claimholders have expired or been terminated, subject to the rights of the Senior Revolving Claimholders under Section 6.5.

 

Section 8.3. Amendments; Waivers. No amendment, modification, supplement or waiver of any provision of this Agreement by the Term Administrative Agent or the Senior Indebtedness Representative shall be deemed to be made unless the same shall be in writing signed on behalf of each party hereto or its authorized agent and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time. Notwithstanding the foregoing, no Obligor shall have any right to consent to or approve any amendment, modification or waiver of any provision of this Agreement except to the extent its rights are directly affected (which includes, but is not limited to any amendment to the Obligors’ ability to cause additional obligations to constitute Senior Indebtedness or Second Lien Obligations as the Borrower may designate).

 

Section 8.4. Information Concerning Financial Condition of the Borrower and its Subsidiaries. The Senior Indebtedness Representative and the Senior Revolving Claimholders, on the one hand, and the Term Claimholders and the Term Administrative Agent, on the other hand, shall each be responsible for keeping themselves informed of (a) the financial condition of the Borrower and its Subsidiaries and all endorsers and/or guarantors of the Senior Indebtedness or the Second Lien Obligations and (b) all other circumstances bearing upon the risk of nonpayment of the Senior Indebtedness or the Second Lien Obligations. The Senior Indebtedness Representative and the Senior Revolving Claimholders shall have no duty to advise the Term Administrative Agent or any Term Claimholder of information known to it or them regarding such condition or any such circumstances or otherwise. In the event the Senior Indebtedness Representative or any of the Senior Revolving Claimholders, in its or their sole discretion, undertakes at any time or from time to time to provide any such information to the Term Administrative Agent or any Term Claimholder, it or they shall be under no obligation (w) to make, and the Senior Indebtedness Representative and the Senior Revolving Claimholders shall not make, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of any such information so provided, (x) to provide any additional information or to provide any such information on any subsequent occasion, (y) to undertake any investigation or (z) to disclose any information which, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential or is otherwise required to maintain confidential. In addition, each of the Senior Indebtedness Representative and the Term Administrative Agent shall promptly provide the other with copies of any amendments or waivers to any of the Senior Revolving Credit Documents or Term Credit Documents, as applicable and, upon request, information regarding the amounts owing by the Borrower and the other Obligors thereunder, and the Borrower hereby consents to all such disclosures on behalf of itself and each other Obligor.

 

  

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Section 8.5. Subrogation. The Term Administrative Agent, on behalf of itself and the Term Claimholders, hereby waives any rights of subrogation it may acquire as a result of any payment hereunder until the Discharge of Senior Indebtedness has occurred.

 

Section 8.6. SUBMISSION TO JURISDICTION; WAIVERS.

 

(a) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY ARISING OUT OF OR RELATING HERETO MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE SOUTHERN DISTRICT OF TEXAS. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (i) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (ii) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 8.7; AND (iv) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (iii) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.

 

  

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(b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER HEREOF, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 8.6(b) AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

Section 8.7. Notices. All notices to the Term Claimholders and the Senior Revolving Claimholders permitted or required under this Agreement shall also be sent to the Term Administrative Agent and the Senior Indebtedness Representative, respectively. Unless otherwise specifically provided herein, any notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile (and confirmed by telephone) or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile (and confirmed by telephone) or telex, or three (3) Business Days after depositing it in the United States mail with postage prepaid and properly addressed. For the purposes hereof, the addresses of each party hereto shall be as set forth under such party’s name on the signature pages hereof, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties.

 

Section 8.8. Identity of Term Lenders for Notice Purposes.

 

(a) For purposes of any notice required or permitted to be given hereunder by the holders of the Senior Indebtedness or the Senior Indebtedness Representative to the Term Lenders, or any of them, the holders of the Senior Indebtedness and the Senior Indebtedness Representative shall be entitled to rely, conclusively, on the identity and address of each Term Lender as set forth in the Second Lien Term Loan Agreement or as otherwise set forth in the most recent notice received by the Senior Indebtedness Representative from a Term Lender referring to the Second Lien Term Loan Agreement for purposes of providing the identity and address of each Term Lender. The Term Lenders agree that any notices required to be given to the Term Lenders shall be effective if such notice is given to the Term Administrative Agent or other representative of the Term Lenders. For so long as the Second Lien Obligations are outstanding, the Term Lenders agree to designate and maintain an agent or other representative for such purposes.

 

  

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(b) For purposes of any notice required or permitted to be given hereunder by the holders of the Second Lien Obligations or the Term Administrative Agent to the holders of the Senior Indebtedness or the Senior Indebtedness Representative, the Term Administrative Agent shall be entitled to rely, conclusively, on the identity and address of the Senior Indebtedness Representative as set forth in the Senior Revolving Credit Agreement or as otherwise set forth in the most recent notice received from the Senior Indebtedness Representative. The Senior Indebtedness Representative and the Senior Revolving Lenders agree that any notices required to be given to the Senior Revolving Lenders shall be effective if such notice is given to the Senior Indebtedness Representative or other representative of the Senior Revolving Lenders.

 

Section 8.9. Further Assurances. The Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders under its Senior Revolving Credit Documents, and the Term Administrative Agent, on behalf of itself and the Term Claimholders under its Term Credit Documents, and the Borrower, agrees that each of them shall take such further action and shall execute and deliver such additional documents and instruments (in recordable form, if requested) as the Senior Indebtedness Representative or the Term Administrative Agent may reasonably request to effectuate the terms of and the lien priorities contemplated by this Agreement.

 

Section 8.10. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

 

Section 8.11. Binding on Successors and Assigns. This Agreement shall be binding upon the Senior Indebtedness Representative, the Senior Revolving Claimholders, the Term Administrative Agent, the Term Claimholders, the Borrower, and their respective successors and permitted assigns.

 

Section 8.12. Specific Performance. Each of the Senior Indebtedness Representative and the Term Administrative Agent may demand specific performance of this Agreement. The Senior Indebtedness Representative, on behalf of itself and the Senior Revolving Claimholders under its Senior Revolving Credit Documents, and the Term Administrative Agent, on behalf of itself and the Term Claimholders, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense which might be asserted to bar the remedy of specific performance in any action which may be brought by any Senior Indebtedness Representative or the Term Administrative Agent, as the case may be.

 

Section 8.13. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

 

Section 8.14. Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by the Borrower, the Senior Indebtedness Representative and the Term Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

 

  

27

  

 

Section 8.15. Authorization. By its signature, each Person executing this Agreement on behalf of a party hereto represents and warrants to the other parties hereto that it is duly authorized to execute this Agreement.

 

Section 8.16. No Third Party Beneficiaries. This Agreement and the rights and benefits hereof shall inure to the benefit of each of the parties hereto and its respective successors and assigns and shall inure to the benefit of each of the Senior Revolving Claimholders and the Term Claimholders. No other Person shall have or be entitled to assert rights or benefits hereunder.

 

Section 8.17. Provisions Solely to Define Relative Rights. The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Senior Revolving Claimholders on the one hand and the Term Claimholders on the other hand. None of the Borrower, any other Obligor or any other creditor thereof shall have any rights hereunder.

 

  

28

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Intercreditor Agreement as of the date first written above.

 

 

	 	Senior Indebtedness Representative:	 
	 	 	 	 
	 	MUTUAL OF OMAHA BANK, as Senior Indebtedness Representative	 
	 	 	 	 
	 	By:	 	 
	 	Name: 	George E. McKean	 
	 	Title:	Manager – Energy Lending	 
	 	 	 	 
	 	 	 	 
	 	Notice Address:	 
	 	 	 
	 	520 Post Oak Blvd	 
	 	Suite 700	 
	 	Houston, Texas 77027	 
	 	Attention: George McKean	 
	 	Facsimile: 713.405.1580	 
	 	 	 

 

[Intercreditor Agreement Signature Page - 1]

 

  

 

  

 

	 	
Term Administrative Agent:

	 
	 	 	 	 
	 	
SOSVENTURES, LLC

	 
	 	 	 	 
	 	By:	 	 
	 	Name: 	Sean O’Sullivan	 
	 	Title:	Managing Director	 
	 	 	 	 
	 	 	 	 
	 	
Notice Address:

	 
	 	 	 
	 	
Penrose Wharf,

	 
	 	
2nd Floor, Alfred Street

	 
	 	
Cork, Ireland

	 
	 	
Attention: [______________]

	 
	 	
Facsimile: [_____________]

	 
	 	
Email: [_______________]

	 

 

 

[Intercreditor Agreement Signature Page - 2]

 

  

  

  

 

	 	The Borrower	 
	 	 	 
	 	STARBOARD RESOURCES, INC., as Borrower	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	 	 
	 	Title:	 	 
	 	 	 	 
	 	 	 	 
	 	The Other Obligors	 
	 	 	 	 
	 	IMPETRO RESOURCES, LLC	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name:	 	 
	 	Title:	 	 
	 	 	 	 
	 	 	 	 
	 	IMPETRO OPERATING, LLC	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name:	 	 
	 	Title:	 	 
	 	 	 	 
	 	 	 	 
	 	
Notice Address:

	 
	 	 	 
	 	303 E. Sonterra Blvd	 
	 	Suite 1220	 
	 	San Antonio, Texas 78258	 
	 	Attention: Mike Pawelek	 
	 	Fax: [____________]	 

 

 

[Intercreditor Agreement Signature Page - 3]

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