Document:

Exhibit 10.1

	
 
    

 

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

 

Dated as of April 15, 2011

 

among

 

VENOCO, INC.,
 as Borrower,

 

the Guarantors from Time to Time Parties Hereto,

 

The Several Lenders from Time to Time Parties Hereto,

 

BANK OF MONTREAL,
 as Administrative Agent,

 

BMO CAPITAL MARKETS,
 as Lead Arranger,

 

THE BANK OF NOVA SCOTIA
 and
 THE ROYAL BANK OF SCOTLAND PLC,
 as Co-Syndication Agents

 

and

 

KEYBANK NATIONAL ASSOCIATION
 and
 UNION BANK, N.A.
 as Co-Documentation Agents

	
 
    

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I   DEFINITIONS 
    	
2
    
	
1.1
    	
Certain   Defined Terms
    	
2
    
	
1.2
    	
Other   Interpretive Provisions
    	
26
    
	
1.3
    	
Accounting   Principles
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE II THE CREDIT
    	
27
    
	
2.1
    	
Amounts   and Terms of the Commitments
    	
27
    
	
2.2
    	
Procedure   for Borrowing
    	
28
    
	
2.3
    	
Conversion   and Continuation Elections
    	
28
    
	
2.4
    	
Voluntary   Termination or Reduction
    	
29
    
	
2.5
    	
Optional   Prepayments
    	
29
    
	
2.6
    	
Borrowing   Base Determinations, Mandatory Prepayments
    	
30
    
	
2.7
    	
Repayment
    	
34
    
	
2.8
    	
Fees
    	
34
    
	
2.9
    	
Computation   of Fees and Interest
    	
35
    
	
2.10
    	
Payments   by the Company; Borrowings Pro Rata
    	
36
    
	
2.11
    	
Payments   by the Lenders to the Administrative Agent
    	
37
    
	
2.12
    	
Sharing   of Payments, Etc.
    	
37
    
	
2.13
    	
Issuing   the Letters of Credit
    	
38
    
	
2.14
    	
Cash   Collateralization for Defaulting Lenders
    	
41
    
	
 
    	
 
    	
 
    
	
ARTICLE III TAXES, YIELD PROTECTION AND   ILLEGALITY
    	
41
    
	
3.1
    	
Taxes
    	
41
    
	
3.2
    	
Illegality
    	
42
    
	
3.3
    	
Increased   Costs and Reduction of Return
    	
43
    
	
3.4
    	
Funding   Losses
    	
44
    
	
3.5
    	
Inability   to Determine Rates
    	
44
    
	
3.6
    	
Certificates   of Lenders
    	
44
    
	
3.7
    	
Substitution   of Lenders
    	
45
    
	
3.8
    	
Survival
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE IV SECURITY
    	
45
    
	
4.1
    	
The   Security
    	
45
    
	
4.2
    	
Agreement   to Deliver Security Documents
    	
45
    
	
4.3
    	
[Reserved.]
    	
46
    
	
4.4
    	
Offset
    	
46
    
	
4.5
    	
Guaranty
    	
46
    
	
4.6
    	
Production   Proceeds
    	
47
    
	
 
    	
 
    	
 
    
	
ARTICLE V CONDITIONS PRECEDENT
    	
47
    
	
5.1
    	
Conditions   of the Effective Date and Initial Credit Extensions
    	
47
    
	
5.2
    	
Conditions   to All Credit Extensions
    	
50
    
	
 
    	
 
    	
 
    
	
ARTICLE VI REPRESENTATIONS AND WARRANTIES
    	
51
    
	
6.1
    	
Organization,   Existence and Power
    	
51
    
	
6.2
    	
Corporate   Authorization; No Contravention
    	
51
    

 

i

 

	
6.3
    	
Governmental   Authorization
    	
52
    
	
6.4
    	
Binding   Effect
    	
52
    
	
6.5
    	
Litigation
    	
52
    
	
6.6
    	
No   Default
    	
52
    
	
6.7
    	
ERISA   Compliance
    	
52
    
	
6.8
    	
Use   of Proceeds; Margin Regulations
    	
53
    
	
6.9
    	
Title   to Properties
    	
53
    
	
6.10
    	
Oil   and Gas Reserves
    	
53
    
	
6.11
    	
Reserve   Report
    	
54
    
	
6.12
    	
Gas   Imbalances
    	
54
    
	
6.13
    	
Taxes
    	
54
    
	
6.14
    	
Financial   Statements and Condition
    	
54
    
	
6.15
    	
Environmental   Matters
    	
55
    
	
6.16
    	
Regulated   Entities
    	
55
    
	
6.17
    	
No   Burdensome Restrictions
    	
55
    
	
6.18
    	
Copyrights,   Patents, Trademarks and Licenses, Etc.
    	
55
    
	
6.19
    	
Subsidiaries
    	
55
    
	
6.20
    	
Insurance
    	
56
    
	
6.21
    	
Full   Disclosure
    	
56
    
	
6.22
    	
Solvency
    	
56
    
	
6.23
    	
Labor   Matters
    	
56
    
	
6.24
    	
[Reserved.]
    	
56
    
	
6.25
    	
Derivative   Contracts
    	
56
    
	
6.26
    	
Ellwood   Subsidiary
    	
56
    
	
6.27
    	
Senior   Notes Indentures
    	
56
    
	
6.28
    	
Existing   Indebtedness
    	
57
    
	
6.29
    	
Security   Documents
    	
57
    
	
 
    	
 
    	
 
    
	
ARTICLE VII AFFIRMATIVE COVENANTS
    	
57
    
	
7.1
    	
Financial   Statements
    	
58
    
	
7.2
    	
Certificates;   Other Production and Reserve Information
    	
58
    
	
7.3
    	
Notices
    	
59
    
	
7.4
    	
Preservation   of Company Existence, Etc.
    	
60
    
	
7.5
    	
Maintenance   of Property
    	
60
    
	
7.6
    	
Insurance
    	
60
    
	
7.7
    	
Payment   of Obligations
    	
61
    
	
7.8
    	
Compliance   with Laws
    	
61
    
	
7.9
    	
Compliance   with ERISA
    	
61
    
	
7.10
    	
Inspection   of Property and Books and Records
    	
61
    
	
7.11
    	
Environmental   Laws
    	
62
    
	
7.12
    	
New   Subsidiary Guarantors
    	
62
    
	
7.13
    	
Use   of Proceeds
    	
62
    
	
7.14
    	
Further   Assurances
    	
62
    
	
7.15
    	
Agreements   Regarding Unrestricted Subsidiaries
    	
63
    
	
7.16
    	
Title   Opinions
    	
64
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII NEGATIVE COVENANTS
    	
64
    
	
8.1
    	
Limitation   on Liens
    	
64
    

 

ii

 

	
8.2
    	
Disposition   of Assets
    	
65
    
	
8.3
    	
Consolidations   and Mergers
    	
66
    
	
8.4
    	
Loans   and Investments
    	
67
    
	
8.5
    	
Limitation   on Indebtedness
    	
68
    
	
8.6
    	
Transactions   with Affiliates
    	
69
    
	
8.7
    	
Margin   Stock
    	
69
    
	
8.8
    	
[Reserved.]
    	
69
    
	
8.9
    	
Restricted   Payments
    	
69
    
	
8.10
    	
Derivative   Contracts
    	
70
    
	
8.11
    	
Sale   Leasebacks
    	
71
    
	
8.12
    	
Consolidated   Leverage Ratio
    	
71
    
	
8.13
    	
Current   Ratio
    	
71
    
	
8.14
    	
Change   in Business
    	
72
    
	
8.15
    	
Accounting   Changes
    	
72
    
	
8.16
    	
Certain   Contracts; Amendments; Multiemployer Plans
    	
72
    
	
8.17
    	
Senior   Notes
    	
72
    
	
8.18
    	
Forward Sales, Production Payments, Etc.
    	
73
    
	
8.19
    	
Use   of Proceeds
    	
73
    
	
8.20
    	
New   Bank Accounts
    	
73
    
	
 
    	
 
    	
 
    
	
ARTICLE IX EVENTS OF DEFAULT
    	
74
    
	
9.1
    	
Event   of Default
    	
74
    
	
9.2
    	
Remedies
    	
76
    
	
9.3
    	
Application   of Proceeds
    	
77
    
	
9.4
    	
Rights   Not Exclusive
    	
77
    
	
 
    	
 
    	
 
    
	
ARTICLE X THE ADMINISTRATIVE AGENT
    	
77
    
	
10.1
    	
Appointment   and Authorization; Limitation of Agency
    	
77
    
	
10.2
    	
Delegation   of Duties
    	
78
    
	
10.3
    	
Liability   of Administrative Agent
    	
78
    
	
10.4
    	
Reliance   by Administrative Agent
    	
78
    
	
10.5
    	
Notice   of Default
    	
79
    
	
10.6
    	
Credit   Decision
    	
79
    
	
10.7
    	
Indemnification
    	
80
    
	
10.8
    	
Administrative   Agent in Individual Capacity
    	
80
    
	
10.9
    	
Successor   Administrative Agent
    	
81
    
	
10.10
    	
Withholding   Tax
    	
81
    
	
10.11
    	
Arranger; Syndication Agents; Documentation Agents
    	
82
    
	
10.12
    	
Release   of Collateral
    	
82
    
	
 
    	
 
    	
 
    
	
ARTICLE XI MISCELLANEOUS
    	
83
    
	
11.1
    	
Amendments   and Waivers
    	
83
    
	
11.2
    	
Notices
    	
84
    
	
11.3
    	
No   Waiver; Cumulative Remedies
    	
85
    
	
11.4
    	
Costs   and Expenses
    	
85
    
	
11.5
    	
Indemnity
    	
85
    
	
11.6
    	
Payments   Set Aside
    	
86
    
	
11.7
    	
Successors   and Assigns
    	
86
    

 

iii

 

	
11.8
    	
Assignments,   Participations, Confidentiality, etc.
    	
86
    
	
11.9
    	
Interest
    	
89
    
	
11.10
    	
Indemnity   and Subrogation
    	
90
    
	
11.11
    	
Automatic   Debits of Fees
    	
90
    
	
11.12
    	
Notification   of Addresses, Lending Offices, Etc.
    	
90
    
	
11.13
    	
Counterparts
    	
90
    
	
11.14
    	
Severability
    	
91
    
	
11.15
    	
No   Third Parties Benefited
    	
91
    
	
11.16
    	
Governing   Law, Jurisdiction
    	
91
    
	
11.17
    	
Submission   To Jurisdiction; Waivers
    	
91
    
	
11.18
    	
Entire   Agreement
    	
91
    
	
11.19
    	
NO   ORAL AGREEMENTS
    	
92
    
	
11.20
    	
Accounting   Changes
    	
92
    
	
11.21
    	
WAIVER   OF JURY TRIAL, PUNITIVE DAMAGES, ETC.
    	
92
    
	
11.22
    	
Amendment   and Restatement
    	
93
    
	
11.23
    	
USA   PATRIOT Act
    	
94
    
	
11.24
    	
Acknowledgments
    	
94
    
	
11.25
    	
Survival   of Representations and Warranties
    	
94
    
	
11.26
    	
Release   of Collateral and Guarantee Obligations
    	
94
    

 

iv

 

	
SCHEDULES
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Schedule 1.1(a)
    	
 
    	
Commitments and   Pro Rata Shares
    
	
Schedule 6.5
    	
 
    	
Litigation
    
	
Schedule 6.7
    	
 
    	
ERISA Compliance
    
	
Schedule 6.15
    	
 
    	
Environmental   Matters
    
	
Schedule 6.17
    	
 
    	
Burdensome   Restrictions
    
	
Schedule 6.19
    	
 
    	
Subsidiaries and   Minority Interests
    
	
Schedule 6.25
    	
 
    	
Existing   Derivative Contracts
    
	
Schedule 6.29(a)-1
    	
 
    	
Security Agreement   UCC Filing Jurisdictions
    
	
Schedule 6.29(a)-2
    	
 
    	
UCC Financing   Statements to Remain on File
    
	
Schedule 6.29(a)-3
    	
 
    	
UCC Financing   Statements to be Terminated
    
	
Schedule 6.29(b)
    	
 
    	
Mortgage Filing   Jurisdictions
    
	
Schedule 8.1
    	
 
    	
Permitted Liens
    
	
Schedule 8.6
    	
 
    	
Transactions with   Affiliates
    
	
 
    	
 
    	
 
    
	
EXHIBITS
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit A
    	
 
    	
Form of   Notice of Borrowing
    
	
Exhibit B
    	
 
    	
Form of   Notice of Conversion/Continuation
    
	
Exhibit C
    	
 
    	
Form of   Compliance Certificate
    
	
Exhibit D
    	
 
    	
Form of   Assignment and Acceptance
    
	
Exhibit E
    	
 
    	
Form of Note
    

 

v

 

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

 

This FOURTH AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of April 15, 2011, among VENOCO, INC., a Delaware corporation, as borrower (the “Company”), the GUARANTORS (defined below) from time to time party hereto, each of the financial institutions which is or which may from time to time become a party hereto (individually, a “Lender” and collectively, the “Lenders”), BANK OF MONTREAL, a Canadian chartered bank acting through certain of its United States branches and agencies, including its Chicago, Illinois branch, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”), BMO CAPITAL MARKETS, as arranger (in such capacity, the “Arranger”), THE BANK OF NOVA SCOTIA, as Co-Syndication Agent (in such capacity, a “Co-Syndication Agent”), THE ROYAL BANK OF SCOTLAND PLC, as Co-Syndication Agent (in such capacity, a “Co-Syndication Agent”), KEYBANK NATIONAL ASSOCIATION, as Co-Documentation Agent (in such capacity, a “Co-Documentation Agent”), and UNION BANK, N.A., as Co-Documentation Agent (in such capacity, a “Co-Documentation Agent”).

 

RECITALS

 

WHEREAS, the Company, certain Guarantors, the lenders party thereto, and Bank of Montreal, as a Lender and Administrative Agent entered into the Third Amended and Restated Credit Agreement dated December 21, 2009, as amended by the First Amendment and Waiver Related to Third Amended and Restated Credit Agreement dated as of February 4, 2011 (as so amended, the “Existing Credit Agreement”);

 

WHEREAS, the Company has requested that the Existing Credit Agreement be amended and restated to provide for certain amendments on the terms set forth in this Agreement, which Agreement shall be effective upon satisfaction of certain conditions precedent set forth in this Agreement;

 

WHEREAS, the Lenders are willing to amend and restate the Existing Credit Agreement to provide for certain amendments on the terms set forth in this Agreement, which Agreement shall be effective upon satisfaction of certain conditions precedent set forth in this Agreement;

 

WHEREAS, the Company desires to refinance, renew, extend and continue the Existing Revolving Credit Outstandings (defined below), including the Existing Revolving Credit Loans (defined below), with the proceeds of Loans hereunder; and

 

WHEREAS, it is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Loan Documents (defined below) or evidence payment of all or any of such obligations and liabilities; that this Agreement amend and restate in its entirety the Existing Credit Agreement and renew and extend the extensions of credit under the Existing Credit Agreement, as so amended and restated; and that from and after the Effective Time (defined below) the Existing Credit Agreement be of no further force or effect except to evidence the incurrence of the obligations of the Company and its Subsidiaries thereunder prior to the Effective Time.

 

1

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree that the Existing Credit Agreement shall be and hereby is amended and restated in its entirety as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1           Certain Defined Terms.  The following terms have the following meanings:

 

“2017 Senior Notes” means the 11.5% Senior Notes due 2017 originally issued in aggregate principal amount of $150,000,000 under the 2017 Senior Notes Indenture.

 

“2019 Senior Notes” means the 8.875% Senior Notes due 2019 originally issued in aggregate principal amount of $500,000,000 under the 2019 Senior Notes Indenture.

 

“2017 Senior Notes Indenture” means that certain indenture dated as of October 7, 2009 among the Company, certain Guarantors and U.S. Bank Trust National Association, as Trustee.

 

“2019 Senior Notes Indenture” means that certain indenture dated as of February 15, 2011 among the Company, certain Guarantors and U.S. Bank Trust National Association, as Trustee.

 

“Account Control Agreement” means a deposit account control agreement or an account control agreement to be executed and delivered among any Loan Party, the Administrative Agent and a bank at which such Loan Party maintains a bank account, in each case, in the form approved by the Administrative Agent, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Accounting Change” has the meaning assigned to such term in Section 11.20 hereof.

 

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock of a corporation (or similar entity), which stock has ordinary voting power for the election of the members of such entity’s board of directors or persons exercising similar functions (other than stock having such power only by reason of the happening of a contingency), or the acquisition of in excess of 50% of the partnership interests or equity of any Person not a corporation which acquisition gives the acquiring Person the power to direct or cause the direction of the management and policies of such Person, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Company or a Subsidiary of the Company is the surviving entity.

 

“Adjusted Base Rate” means, for any day and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the greatest of (a) the rate of interest most recently announced by Bank of Montreal at its Chicago, Illinois office as its “base rate” for Dollar advances made in the United States, (b) the Federal Funds Rate most recently determined by the

 

2

 

Administrative Agent plus 1/2% (0.50%) per annum and (c) the LIBO Rate for a one-month Interest Period on such day (or if such day is not a Business Day, on the immediately preceding Business Day) plus 1.0%.  The Adjusted Base Rate is not necessarily intended to be the lowest rate of interest determined by Bank of Montreal or any Lender in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans shall be effective from and including the effective date of such change in the Base Rate.  The Administrative Agent will give notice to the Company of changes in the Base Rate due to a change in the rate of interest described in clause (a) of this definition promptly upon receipt of notice of any such change from Bank of Montreal.

 

“Administrative Agent” has the meaning specified in the introductory clause hereto.

 

“Administrative Agent-Related Persons” means Administrative Agent, its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of the Administrative Agent and its Affiliates.

 

“Affected Lender” has the meaning specified in Section 3.7.

 

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise.

 

“Agent Fee Letter” means the letter agreement dated as of April 13, 2011 among the Company, BMO Capital Markets and/or Bank of Montreal, as amended, restated, supplemented or otherwise modified from time to time.

 

“Agent-Related Persons” means with respect to each Agent, such Agent, its Affiliates, and each of the officers, directors, employees, agents and attorneys-in-fact of it and its Affiliates.

 

“Agents” means, collectively, the Administrative Agent, BMO Capital Markets, in its capacity as Arranger, The Bank of Nova Scotia and The Royal Bank of Scotland plc, in their capacities as Co-Syndication Agents, and Key Bank National Association and Union Bank, N.A., in their capacities as Co-Documentation Agents.

 

“Agent’s Payment Office” means the address set forth on the signature pages hereto in relation to the Administrative Agent, or such other address as the Administrative Agent may from time to time specify.

 

“Agreement” means this Fourth Amended and Restated Credit Agreement.

 

“Annual Proposed Borrowing Base” has the meaning specified in Section 2.6(b).

 

“Applicable Margin” means, with respect to any Base Rate Loan or LIBO Rate Loan on any day, an amount equal to the percentage for such day under the Pricing Grid for such type of Loan.

 

3

 

“Applicable Percentage” means eighty percent (80%).

 

“Arranger” has the meaning specified in the introductory clause hereto.

 

“ASC 410” means Accounting Standards Codification 410 (f/k/a FAS 143) promulgated by the Financial Accounting Standards Board.

 

“ASC 505-50” means Accounting Standards Codification 505-50 (f/k/a FAS 123R) promulgated by the Financial Accounting Standards Board.

 

“ASC 718” means Accounting Standards Codification 718 (f/k/a FAS 123R) promulgated by the Financial Accounting Standards Board.

 

“ASC 815” means Accounting Standards Codification 815 (f/k/a FAS 133) promulgated by the Financial Accounting Standards Board.

 

“Assignee” has the meaning specified in Section 11.8(a).

 

“Assignment and Acceptance” has the meaning specified in Section 11.8(a).

 

“Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of reasonable internal legal services and all disbursements of internal counsel.

 

“Audited Financial Statements” means the Company’s consolidated financial statements as of and for the years ended December 31, 2010, 2009 and 2008, together with the unqualified independent auditors’ report and opinion of Ernst and Young LLP thereon, all in form and substance satisfactory to the Administrative Agent.

 

“Available Borrowing Base” means, at the particular time in question, the Borrowing Base in effect at such time minus the applicable Effective Amount at such time.

 

“Bank of Montreal” means Bank of Montreal, a Canadian chartered bank acting through certain of its United States branches and agencies, including its Chicago, Illinois branch.

 

“Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.).

 

“Base Rate Loan” means a Loan that bears interest based at the Adjusted Base Rate plus the Applicable Margin.

 

“Borrowing” means a borrowing hereunder consisting of Loans of the same Interest Rate Type made to the Company on the same day by the Lenders under Article II, and, other than in the case of Base Rate Loans, having the same Interest Period.

 

“Borrowing Base” means at the particular time in question, the amount provided for in Section 2.6.

 

4

 

“Borrowing Base Period” means the period from the Effective Time until November 1, 2011 and each six-month period commencing November 1, 2011 and each subsequent May 1 and November 1 thereafter.

 

“Borrowing Date” means any date on which a Borrowing occurs under Section 2.2 or an Issuance of a Letter of Credit occurs under Section 2.13.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law to close and, if the applicable Business Day relates to any LIBO Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.

 

“Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, including Dodd-Frank/Basel (as defined below), whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

 

“Capital Lease” means, when used with respect to any Person, any lease in respect of which the obligations of such Person constitute Capitalized Lease Obligations.

 

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

 

“Capitalized Lease Obligations” means, when used with respect to any Person, without duplication, all obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) Property, or a combination thereof, which obligations shall have been or should be, in accordance with GAAP as in effect on December 31, 2010, capitalized on the books of such Person.

 

“Cash Dividends” means with respect to the Company, at any time, the distribution of earnings in Dollars to shareholders of the Company, determined in conformity with GAAP.

 

“Cash Equivalents” means:  (a) securities issued or fully guaranteed or insured by the United States government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than twelve (12) months from the date of acquisition; (b) certificates of deposit, time deposits, Eurodollar time deposits, or bankers’ acceptances having in each case a tenor of not more than twelve (12) months from the date of acquisition issued by and demand deposits with any U.S. commercial bank or any branch or agency of a non-U.S. commercial bank licensed to conduct business in the U.S. having combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000) whose long term securities are rated at least A (or then equivalent grade) by S&P or A2 (or then equivalent grade) by Moody’s at the time of acquisition; (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s at the time of acquisition, and in either case having a tenor of not more than twelve (12) months; (d) repurchase agreements with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above; and (e) money market mutual or similar funds having assets in excess of $100,000,000.

 

5

 

“Change of Control” means (a) a purchase or acquisition, directly or indirectly, by any “person” or “group” within the meaning of Section 13(d)(3) and 14(d)(2) of the Exchange Act (a “Group”), other than a Permitted Holder, of “beneficial ownership” (as such term is defined in Rule 13d-3 under the Exchange Act) of securities of the Company which, together with any securities owned beneficially by any “affiliates” or “associates” of such Group (as such terms are defined in Rule 12b-2 under the Exchange Act), shall represent more than thirty percent (30%) of the combined voting power of the Company’s securities which are entitled to vote generally in the election of directors and which are outstanding on the date immediately prior to the date of such purchase or acquisition; provided, however, that no such “Change of Control” shall be deemed to have occurred under this clause (a) if, and for so long as, Permitted Holders have “beneficial ownership” (as such term is defined in Rule 13d-3 under the Exchange Act) of more than fifty percent (50%) of the combined voting power of the Company’s securities which are entitled to vote generally in the election of directors and which are outstanding on the date of determination; (b) a sale of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person or Group, except as permitted by Section 8.3; (c) the liquidation or dissolution of the Company; or (d) the first day on which a majority of the Board of Directors of the Company are not Continuing Directors (as herein defined).  As herein defined, “Continuing Directors” means any member of the Board of Directors of the Company who (x) is a member of such Board of Directors as of the Effective Date or (y) was nominated for election or elected to such Board of Directors with the affirmative vote of two-thirds of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

 

“Co-Documentation Agent” has the meaning specified in the introductory clause hereto.

 

“Co-Syndication Agent” has the meaning specified in the introductory clause hereto.

 

“Code” means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder.

 

“Collateral” means all Property which is subject to a Lien in favor of Administrative Agent or which under the terms of any Security Document is purported to be subject to such Lien.

 

“Commitment” means as to each Lender, such Lender’s obligation to make or continue Loans and to incur or participate in the LC Obligations in an aggregate principal amount at any one time outstanding up to but not exceeding the lesser of (a) the Borrowing Base multiplied by such Lender’s Pro Rata Share and (b) the amount set forth opposite the name of such Lender on Schedule 1.1(a) hereto under the heading “Maximum Loan Amount”, or if such Lender is a party to an Assignment and Acceptance, the amount set forth on the most recent Assignment and Acceptance of such Lender, as that amount may be reduced or terminated pursuant to this Agreement.

 

“Commitment Fee” means the fee payable pursuant to Section 2.8(a).

 

“Company” has the meaning specified in the introductory clause hereto.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit C.

 

6

 

“Consolidated EBITDA” means with respect to the Company and its Restricted Subsidiaries on a consolidated basis for any fiscal period, without duplication, (a) Consolidated Net Income plus (b) depreciation, depletion, amortization, adjustments resulting from the application of ASC 718 and ASC 505-50 and other non-cash items reducing Consolidated Net Income plus (c) Consolidated Interest Expense plus (d) income tax expense minus (e) any non-cash items increasing Consolidated Net Income, all determined in accordance with GAAP.  For purposes of Section 8.12, Consolidated EBITDA shall be calculated to give pro forma effect to Acquisitions and Dispositions as if such Acquisition(s) or Disposition(s) had been consummated on the first day of the period of four consecutive fiscal quarters ending on the relevant date of calculation.

 

“Consolidated Interest Expense” means, with respect to the Company and its Restricted Subsidiaries on a consolidated basis for any fiscal period, total interest expenses (including that portion attributable to Capitalized Lease Obligations and capitalized interest) of the Company and its Restricted Subsidiaries in such fiscal period which are classified as interest expense on the consolidated financial statements of the Company and its Restricted Subsidiaries, all as determined in conformity with GAAP.  Consolidated Interest Expense shall be calculated to give pro forma effect to financing transactions as if such financing had been consummated on the first day of the period of four consecutive fiscal quarters ending on the relevant date of calculation.

 

“Consolidated Leverage Ratio” means as at the last day of any period of four consecutive fiscal quarters of the Company, commencing with the fiscal quarter ended March 31, 2011 as the last quarter in the initial period of four consecutive fiscal quarters contemplated hereby, the ratio of (a) Consolidated Total Debt as of such day to (b) Consolidated EBITDA for such period.

 

“Consolidated Net Income” means, with respect to the Company and its Restricted Subsidiaries on a consolidated basis, for any fiscal period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period determined in accordance with GAAP, but excluding (a) the effects of the application of ASC 815 and ASC 410 and any expensing of capitalized costs required by Rule 4-10 of Regulation S-X promulgated by the SEC as applied to reporting entities employing the full cost method and (b) income resulting from transfers of assets (other than cash) between the Company or any of its Restricted Subsidiaries, on the one hand, and an Unrestricted Subsidiary, on the other hand.

 

“Consolidated Total Debt” means, at any date, the aggregate principal amount of all Indebtedness of the Company and its Restricted Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.

 

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound.

 

“Conversion/Continuation Date” means any date on which, under Section 2.3, the Company (a) converts Loans of one Interest Rate Type to another Interest Rate Type, or (b) continues as Loans of the same Interest Rate Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.

 

7

 

“Credit Extension” means and includes the making, conversion or continuation of any Loan and the Issuance of any Letter of Credit hereunder.

 

“Current Assets” means, for any Person, all assets of such Person that, in accordance with GAAP, would be included as current assets on a balance sheet as of a date of calculation; provided, however, an amount equal to the Available Borrowing Base shall be included as current assets.

 

“Current Liabilities” means, for any Person, all liabilities of such Person that, in accordance with GAAP, would be included as current liabilities on a balance sheet as of the date of calculation; provided, however, the current portion of the Loans which are not past due may be excluded from Current Liabilities.

 

“Deficiency” means, at any time, the amount by which the Effective Amount exceeds the then effective Borrowing Base.

 

“Default” means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default.

 

“Default Rate” has the meaning specified in Section 2.7(b)(iii).

 

“Defaulting Lender” means any Lender, as determined by the Administrative Agent, that has (a) failed to fund any portion of its Loans or participations in Letters of Credit within three Business Days of the date required to be funded by it hereunder, (b) notified the Company, the Administrative Agent, the Issuing Lender or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement, (c) failed, within three Business Days after request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans and participations in then outstanding Letters of Credit, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith dispute, or (e) (i) becomes or is insolvent or has a parent company that has become or is insolvent or (ii) becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided, however, that a Lender shall not become a Defaulting Lender solely as the result of the acquisition or maintenance of an ownership interest in such Lender or Person controlling such Lender or the exercise of control over a Lender or Person controlling such Lender by a Governmental Authority or an instrumentality thereof.

 

“Derivative Contract” means all futures contracts, forward contracts, swap, put, cap or collar contracts, option contracts, hedging contracts or other derivative contracts or similar

 

8

 

agreements covering oil and gas commodities or prices or financial, monetary or interest rate instruments.

 

“Disposition” has the meaning specified in Section 8.2.

 

“Disqualified Stock” means, as to any Person, any Capital Stock of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (including upon the occurrence of an event) requires the payment of dividends (other than dividends payable solely in Capital Stock which does not otherwise constitute Disqualified Stock) or matures or is required to be redeemed (pursuant to any sinking fund obligation or otherwise) or is convertible into or exchangeable for Indebtedness or is redeemable at the option of the holder thereof, in whole or in part, at any time on or prior to the date six (6) months after the Maturity Date.

 

“Dodd-Frank/Basel” means all requests, regulations, rules, guidelines or directives issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States or foreign financial regulatory authorities, in each case pursuant to Basel III, regardless of the date adopted, issued, promulgated or implemented.  For purposes of this Agreement, each of the foregoing are deemed to have been enacted, adopted, issued and gone into effect after the date of this Agreement.

 

“Dollars”, “dollars” and “$” each mean lawful money of the United States.

 

“Effective Amount” means on any date, the aggregate outstanding principal amount of all Loans after giving effect to any prepayments or repayments of such Loans occurring on such date plus the LC Obligations on such date.

 

“Effective Date” means the date on which the Effective Time occurs.

 

“Effective Time” means the time as of which all conditions precedent set forth in Section 5.1 are satisfied or waived by all Lenders.

 

“Eligible Assignee” means (a) a Lender; (b) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (d) a financial institution with a net worth in excess of $100,000,000; and (e) a Person with a combined capital and surplus of at least $100,000,000 that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary.

 

“Ellwood” means Ellwood Pipeline, Inc., a California corporation and a wholly owned Restricted Subsidiary of the Company.

 

9

 

“Environmental Claims” means all material claims by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment.

 

“Environmental Laws” means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, and safety matters.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate (other than pursuant to Section 4041(b) of ERISA), the treatment of a Plan amendment as a termination under Section 4041(c) or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate.

 

“Eurodollar Reserve Percentage” has the meaning specified in the definition of “LIBO Rate”.

 

“Event of Default” means any of the events or circumstances specified in Section 9.1.

 

“Exchange Act” means the Securities and Exchange Act of 1934.

 

“Existing Credit Agreement” has the meaning specified in the recitals hereto.

 

“Existing Loan Documents” means the “Loan Documents” as defined in the Existing Credit Agreement.

 

“Existing Revolving Credit Loans” means the outstanding principal amount of “Loans” as defined in the Existing Credit Agreement outstanding at the Effective Time.

 

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“Existing Revolving Credit Outstandings” means the sum of (a) the Existing Revolving Credit Loans and (b) the “LC Obligation” as defined in the Existing Credit Agreement outstanding at the Effective Time.

 

“Existing Security Agreement” means the “Security Agreement” as defined in the Existing Credit Agreement.

 

“FDIC” means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions.

 

“Federal Funds Rate” means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, “H.15(519)”) on the preceding Business Day opposite the caption “Federal Funds (Effective)”; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York, New York time) on that day by each of three leading brokers of Federal funds transactions in New York, New York selected by the Administrative Agent.

 

“FRB” means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.

 

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“Guarantor” means (i) each of TexCal LP, TexCal GP, TexCal STX and Whittier, and (ii) any Restricted Subsidiary of the Company which is required to execute the Guaranty under Section 7.12 upon the execution and delivery by such entity of the Guaranty.

 

“Guaranty” means the Fourth Amended and Restated Guaranty Agreement dated as of the date hereof executed by each Guarantor in favor of the Administrative Agent and the Lenders, as the same may be amended, supplemented or otherwise modified from time to time pursuant to the terms hereof (including, in the case of any Subsidiary required to execute the Guaranty pursuant to Section 7.12, by execution and delivery of a joinder thereto in the form of Annex 1 thereto).

 

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“Guaranty Obligation” means, as to any Person without duplication, any direct or indirect liability of that Person with or without recourse, with respect to any Indebtedness (including any instrument evidenced thereby), dividend, bonds, letter of credit or other similar obligation (the “primary obligations”) of another Person (the “primary obligor”), including any obligation of that Person (a) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (b) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof.

 

“Hastings Assets” means those assets currently owned by the Company and located in the Hastings Field in Brazoria and Galveston Counties, Texas.

 

“Highest Lawful Rate” means, as of a particular date, the maximum non-usurious interest rate that under applicable federal and state law may then be contracted for, charged or received by the Lenders in connection with the Obligations.

 

“Hydrocarbon Interests” means leasehold and other interests in or under oil, gas and other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests, production payment interests relating to oil, gas or other liquid or gaseous hydrocarbons wherever located including any reserved or residual interest of whatever nature, covering lands in or offshore the continental United States.

 

“Indebtedness” of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of Property or services (other than trade payables entered into in the ordinary course of business and payable in accordance with customary practices and which in any event are no more than 120 days past due, or, if more than 120 days past due, are being contested in good faith); (c) all unreimbursed material reimbursement or payment obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of Property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to Property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such Property) including, without limitation, production payments, net profit interests and other Hydrocarbon Interests subject to repayment out of future Oil and Gas production; (f) all obligations with respect to Capital Leases; (g) all net obligations payable (including any deferred obligation to pay any premiums) with respect to Derivative Contracts except for payables for ordinary course of business settlement payments; (h) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above; and (i) all indebtedness referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon

 

12

 

or in Property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.

 

“Indemnified Liabilities” has the meaning specified in Section 11.5.

 

“Indemnified Person” has the meaning specified in Section 11.5.

 

“Independent Auditor” has the meaning specified in Section 7.1(a).

 

“Independent Engineer” has the meaning specified in Section 7.2(c).

 

“Initial Borrowing Base” has the meaning specified in Section 2.6(a).

 

“Initial Reserve Report” has the meaning specified in Section 6.11.

 

“Insolvency Proceeding” means (a) any case, action or proceeding relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.

 

“Interest Payment Date” (a) as to any Base Rate Loan, means July 1, 2011 and the first Business Day of each calendar quarter thereafter prior to the Termination Date and each date on which such a Base Rate Loan is converted into another Interest Rate Type of Loan, and (b) as to any LIBO Rate Loan, the last day of the Interest Period applicable to such Loan; provided, however, that if any Interest Period for an LIBO Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period is also an Interest Payment Date.

 

“Interest Period” means, as to any LIBO Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which such Loan is converted into or continued as LIBO Rate Loan, and ending on the date one week, or one, two, three or six months thereafter (or such greater number of months as may be requested by the Company and determined to be available by the Administrative Agent and the Lenders) as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided, however, that:  (a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (b) any Interest Period pertaining to any LIBO Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period for any Loan shall extend beyond the Termination Date.

 

“Interest Rate Type” means, with respect to any Loan, the interest rate, being either the Base Rate or the LIBO Rate forming the basis upon which interest is charged against such Loan hereunder.

 

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“IRS” means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code.

 

“ISP” has the meaning specified in Section 2.13(b).

 

“Issue” means with respect to any Letter of Credit, to issue or extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms “Issued,” “Issuing” and “Issuance” have corresponding meanings.

 

“Issuing Lender” means (1) any Affiliate, unit or agency of Bank of Montreal and (2) each lender that agrees to act as an issuer of Letters of Credit hereunder at the request of the Company and as agreed to by the Administrative Agent, in each case in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.13.  Any Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Lender, in which case the term “Issuing Lender” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“LC Application” means an application or agreement for a standby Letter of Credit on terms reasonably acceptable to the Issuing Lender and the Company with appropriate insertions duly executed by the Company pursuant to Section 2.13(a).

 

“LC Collateral” means any amounts, plus interest accrued thereon, held by the Administrative Agent as security for the LC Obligations.

 

“LC Obligations” means, at the time in question, the sum of the Matured LC Obligations plus the aggregate undrawn face amount under all Letters of Credit then outstanding.

 

“LC Related Document” means the Letters of Credit, any LC Application and any other document relating to any Letter of Credit including any of the Issuing Lender’s standard form documents for letter of credit issuances.

 

“Lender Fee Letter” means the letter agreement dated as of April 13, 2011 among the Company, BMO Capital Markets and/or Bank of Montreal, as amended, restated, supplemented or otherwise modified from time to time.

 

“Lenders” has the meaning specified in the introductory clause hereto.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender specified as its “Lending Office” or “Domestic Lending Office” or “Offshore Lending Office,” as the case may be, on the signature pages hereof, or such other office or offices as such Lender may from time to time notify the Company and the Administrative Agent.

 

“Letter of Credit” means any standby letter of credit issued by the Issuing Lender pursuant to this Agreement and upon an LC Application.

 

“LIBO Rate” means, for any Interest Period, with respect to LIBO Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Administrative Agent as follows:

 

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LIBO Rate =
    	
 
    	
LIBOR
    
	
 
    	
 
    	
1.00 - Eurodollar Reserve Percentage
    
	
 
    	
 
    	
 
    
	
where,
    	
 
    	
                “Eurodollar Reserve Percentage”   means for any day for any Interest Period the maximum reserve percentage   (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect   on such day (whether or not applicable to any Lender) under regulations   issued from time to time by the FRB for determining the maximum reserve   requirement (including any emergency, supplemental or other marginal reserve   requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”); and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
“LIBOR”   means relative to any Interest Period for LIBO Rate Loans:
    

 

(a)           the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on Reuters Screen LIBOR01 Page (or any successor thereto or substitute therefor) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

 

(b)           if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

 

(c)           if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Rate Loan being made, continued or converted by Bank of Montreal and with a term equivalent to such Interest Period would be offered by Bank of Montreal’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period.

 

The LIBO Rate shall be adjusted automatically as to all LIBO Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage.

 

“LIBO Rate Loan” means a Loan that bears interest based on the LIBO Rate plus the Applicable Margin.

 

“Lien” means any security interest, mortgage, deed of trust, pledge, hypothecation, collateral assignment, charge, deposit arrangement to secure an obligation, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of

 

15

 

any Property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement and the interest of a lessor under a Capital Lease), or any financing lease having substantially the same economic effect as or other agreement to provide any of the foregoing, but not including (a) the interest of a lessor under a lease on Oil and Gas Properties or (b) the interest of a lessor under an Operating Lease.

 

“Loan Documents” means this Agreement, the Notes, each Guaranty, the Security Documents, any Qualifying Derivative Contracts, each LC Application, each Letter of Credit, the Agent Fee Letter, the Lender Fee Letter, and all other documents delivered to the Administrative Agent or any Lender in connection herewith.

 

“Loans” has the meaning specified in Section 2.1(a).

 

“Loan Parties” means the Company and each Guarantor.

 

“Margin Stock” means “margin stock” as such term is defined in Regulation U or X of the FRB.

 

“Material Adverse Effect” means (a) a material adverse change in or a material adverse effect, as applicable, upon the operations, business, properties or financial condition of the Company and its Subsidiaries, taken as a whole; (b) a material impairment of the ability of the Company or any Restricted Subsidiary to perform under any material Loan Document and to avoid any Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company or any Restricted Subsidiary of any material Loan Document.

 

“Matured LC Obligations” means the aggregate amount of payments theretofore made by the Issuing Lender in respect of Letters of Credit and not theretofore reimbursed by the Company to the Issuing Lender or deemed Loans pursuant to Section 2.13(d).

 

“Maturity Date” means March 31, 2016.

 

“Maximum Loan Amount” means an aggregate amount of $500,000,000.  Each Lender’s Maximum Loan Amount is set forth on Schedule 1.1(a) hereto under the heading “Maximum Loan Amount”, or if such Lender is a party to an Assignment and Acceptance, the amount set forth on the most recent Assignment and Acceptance of such Lender, as that amount may be reduced or terminated pursuant to this Agreement.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Mortgages” means the Mortgages, Deeds of Trust, Security Agreements, Assignments of Production and Financing Statements from the Loan Parties, as applicable, in favor of the Administrative Agent, for the benefit of the Secured Parties, covering certain Oil and Gas Properties of the Loan Parties and all supplements, assignments, assumptions, amendments and restatements thereto (or any agreement in substitution therefor) which are executed and delivered to the Administrative Agent for benefit of the Lenders pursuant to Article IV of this Agreement.

 

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“Mortgaged Properties” means such Oil and Gas Properties upon which the Loan Parties have granted the Administrative Agent for the benefit of the Lenders a valid, first Lien pursuant to the Mortgages, subject to Permitted Liens.

 

“Multiemployer Plan” means a “multiemployer plan”, within the meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or, with respect to which the Company or any ERISA Affiliate may have a liability.

 

“Net Cash Proceeds” means (a) in connection with any Disposition or any Recovery Event, all proceeds thereof in the form of cash and Cash Equivalents of such Disposition or Recovery Event, net of reasonable and customary Attorney Costs, accountants’ fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any Property which is the subject of such Disposition or Recovery Event and other reasonable and customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence (other than the exercise price of stock options issued for compensatory purposes), net of Attorney Costs, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

 

“Net Present Value” means the PV-10 Value in the most recent Reserve Report previously delivered pursuant to Section 6.11 or Section 7.2(c) as adjusted at the date of determination for Dispositions and purchases of Hydrocarbon Interests occurring since the date of such report.  The Net Present Value shall be calculated by the Company as of each date of determination.

 

“Net Proceeds of Production” means the amounts attributable to the Company’s and its Restricted Subsidiaries’ interest in the proceeds received from the sale of Oil and Gas produced from Mortgaged Properties after deduction of (a) royalties; (b) third party pipeline and transportation charges; (c) production, ad valorem and severance taxes chargeable against such production; (d) marketing costs; (e) overriding royalties; (f) other interests in and measured by production burdening the Mortgaged Properties; and (g) the current portion of direct operating or production costs which is allocable to such interest in such Mortgaged Properties.

 

“Non-Recourse Obligations” means Indebtedness, Guaranty Obligations, and other obligations or commitments of any type as to which (a) no Loan Party (i) is obligated to provide credit support in any form (including any undertaking, agreement or instrument that would constitute Indebtedness) or (ii) is or becomes directly or indirectly liable and (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of such Indebtedness or Guaranty Obligations (other than Indebtedness or Guaranty Obligations included in the Obligations of a Loan Party) to declare a default on such Indebtedness, Guaranty Obligations, obligations or commitments of such Loan Party or cause the

 

17

 

payment of any such Indebtedness to be accelerated or payable prior to its stated maturity or cause any such Guaranty Obligations, obligations or other commitments to become payable.

 

“Notes” means the promissory notes, whether one or more, specified in Section 2.1(b), substantially in the same form as Exhibit E.

 

“Notice of Borrowing” means a notice in substantially the form of Exhibit A.

 

“Notice of Conversion/Continuation” means a notice in substantially the form of Exhibit B.

 

“NYMEX” means the New York Mercantile Exchange.

 

“Obligations” means the unpaid principal of and interest (including interest accruing at the then applicable rate provided herein after the maturity of the Loans and interest accruing at the then applicable rate provided herein after the filing of any petition for an Insolvency Proceeding, or the commencement of any Insolvency Proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans and all other advances, debts, liabilities, losses, damages, penalties, actions, judgments, suits, obligations, covenants and duties arising under any Loan Document owing by any Loan Party to any Lender, the Issuing Lender, the Administrative Agent, any Qualifying Derivative Contract Counterparty or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel) or otherwise.

 

“Oil and Gas” means petroleum, natural gas and other related hydrocarbons or minerals or any of them and all other substances produced or extracted in association therewith.

 

“Oil and Gas Liens” means (a) Liens arising under oil and gas leases, overriding royalty agreements, net profits agreements, royalty trust agreements, farm-out agreements, division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of oil, gas or other hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, operating agreements, joint operating agreements, production sales contracts, area of mutual interest agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements that are customary in the oil and gas business and are entered into by any Loan Party in the ordinary course of business; provided, however, in all instances that such Liens are limited to the assets that are the subject of the relevant agreement; and (b) Liens on pipelines or pipeline facilities that arise by operation of law.

 

“Oil and Gas Properties” means Hydrocarbon Interests now or hereafter owned by the Loan Parties and contracts executed in connection therewith and all tenements, hereditaments, appurtenances, and properties belonging, affixed or incidental to such Hydrocarbon Interests, including, without limitation, any and all Property, now owned by the Loan Parties and situated upon or to be situated upon, and used, built for use, or useful in connection with the operating, working or developing of such Hydrocarbon Interests, including, without limitation, any and all

 

18

 

petroleum or natural gas wells, buildings, structures, field separators, liquid extractors, plant compressors, pumps, pumping units, field gathering systems, tank and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, apparatus, equipment, appliances, tools, implements, cables, wires, towers, taping, tubing and rods, surface leases, rights of way, easements and servitudes, and all additions, substitutions, replacements for, fixtures and attachments to any and all of the foregoing owned directly or indirectly by the Loan Parties.

 

“Operating Agreements” mean those agreements now or hereafter executed in connection with the operation of the Oil and Gas Properties.

 

“Operating Lease” means an operating lease determined in accordance with GAAP.

 

“Organization Documents” means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation; for any limited liability company, the certificate of formation or organization, the limited liability company agreement, regulations or operating agreement, initial resolution of members and all other documents, filings and instruments necessary to create and constitute such company; and for any limited partnership, the certificate of formation or organization and the agreement of limited partnership, in each case, as amended from time to time.

 

“Originating Lender” has the meaning specified in Section 11.8(d).

 

“Other Taxes” means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, enforcement or registration of, or otherwise with respect to, any Loan Documents.

 

“Participant” has the meaning specified in Section 11.8(d).

 

“PBGC” means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA.

 

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan, which the Company or any of its Subsidiaries sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years.

 

“Permitted Holder” means Timothy M. Marquez and Bernadette B. Marquez, individually or as Trustees of the Marquez Trust dated February 26, 2002, as amended on April 22, 2010 (a trust for which Timothy M. Marquez and Bernadette B. Marquez serve as Trustees), and any entity of which any such Person owns, directly or indirectly, and exercises voting power with respect to, 80% or more of the capital stock, partnership or membership interests or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of (a) the board of directors of such entity, if such entity is a corporation, (b) the board of directors of its general partner, if such entity is a limited partnership or (c) the board or

 

19

 

committee of such entity serving a function comparable to that to the board of directors of a corporation, if such entity is neither a corporation nor limited partnership.

 

“Permitted Liens” means the collective reference to (i) in the case of Collateral other than Pledged Stock, Liens permitted by Section 8.1 and (ii) in the case of Collateral consisting of Pledged Stock, (A) Liens permitted by Sections 8.1(b) and (B) non-consensual Liens permitted by Section 8.1 to the extent arising by operation of law.

 

“Permitted Indebtedness” has the meaning specified in Section 8.5.

 

“Person” means an individual, sole proprietorship, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, limited liability partnership, joint venture, entity or Governmental Authority.

 

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) subject to ERISA, other than a Multiemployer Plan, which the Company, any of its Subsidiaries, or ERISA Affiliates sponsors or maintains.

 

“Pledged Stock” means “Pledged Stock” as such term is defined in the Security Agreement.

 

“Pricing Grid” means the annualized rates (stated in terms of basis points (“bps”)) set forth below, which shall be computed as of each day during the term hereof for the Applicable Margin (and Letter of Credit Rate) and Commitment Fee based upon the Utilization Percentage on such day as follows:

 

	
 
    	
 
    	
 
    	
 
    	
Applicable Margin
    	
 
    	
 
    	
 
    
	
Pricing
    Level
    	
 
    	
Utilization
    Percentage
    	
 
    	
Base Rate Loan
    (bps)
    	
 
    	
LIBO Rate
   Loan/Letter of
   Credit Rate
    (bps)
    	
 
    	
Commitment Fee
    (bps)
    	
 
    
	
Level V
    	
 
    	
90% or more
    	
 
    	
175.0
    	
 
    	
275.0
    	
 
    	
50.0
    	
 
    
	
Level IV
    	
 
    	
75% or more but less   than 90%
    	
 
    	
150.0
    	
 
    	
250.0
    	
 
    	
50.0
    	
 
    
	
Level III
    	
 
    	
50% or more but less   than 75%
    	
 
    	
125.0
    	
 
    	
225.0
    	
 
    	
50.0
    	
 
    
	
Level II
    	
 
    	
25% or more but less   than 50%
    	
 
    	
100.0
    	
 
    	
200.0
    	
 
    	
50.0
    	
 
    
	
Level I
    	
 
    	
less than 25%
    	
 
    	
75.0
    	
 
    	
175.0
    	
 
    	
50.0
    	
 
    

 

“Principal Business” means the business of the exploration for, and development, acquisition, production, and upstream marketing and transportation of Oil and Gas, and all activities and operations incidental thereto, including all general and administrative activities, and the leasing, operation or ownership of any office buildings or other real property related to such business.

 

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“Pro Rata Share” means, as to any Lender at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Lender’s Maximum Loan Amount divided by the combined Maximum Loan Amounts of all Lenders.

 

“Projected Oil and Gas Production” means the projected production of oil or gas (measured by volume unit or BTU equivalent, not sales price) from Oil and Gas Properties and interests owned by the Company and its Restricted Subsidiaries which have attributable to them Proved Developed Producing Reserves, as such production is projected in the most recent Reserve Report delivered pursuant to Section 7.2(c), after deducting projected production from any Oil and Gas Properties sold or under contract for sale that had been included in such report and after adding projected production from any Oil and Gas Properties or Hydrocarbon Interests that had not been reflected in such report but that are reflected in a separate or supplemental reports prepared on the same basis as the reports delivered pursuant to Section 7.2(c) and otherwise are satisfactory to the Administrative Agent.

 

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

 

“Proved Developed Producing Reserves” means those Oil and Gas Properties designated as proved developed producing (in accordance with the Definitions for Oil and Gas Reserves approved by the Board of Directors of the Society of Petroleum Engineers, Inc. from time to time) in the Reserve Report.

 

“Proved Reserves” means those Oil and Gas Properties designated as proved (in accordance with the Definitions for Oil and Gas Reserves approved by the Board of Directors of the Society of Petroleum Engineers, Inc. from time to time) in the Reserve Report.

 

“PV-10 Value” means, as of any date of determination, the present value of future cash flows from Proved Reserves included in the Company’s and its Restricted Subsidiaries’ Oil and Gas Properties as set forth in the most recent Reserve Report delivered pursuant to Section 6.11 or 7.2(c), utilizing a 10% discount rate.

 

“Qualifying Derivative Contract” means any Derivative Contract between any Loan Party and any Qualifying Derivative Contract Counterparty.

 

“Qualifying Derivative Contract  Counterparty” means, with respect to a Qualifying Derivative Contract, any Person that was a Lender or an Affiliate thereof at the time such Qualifying Derivative Contract was originally entered into.

 

“Quarterly Status Report” means a status report prepared quarterly by the Company in form, scope and content reasonably acceptable to the Administrative Agent for such quarter then ended (a) detailing the volumes of Oil and Gas produced, gross revenue, net lease income, related leasehold operating expenses, severance taxes, other taxes, capital costs and any material production imbalances incurred during such period, (b) describing the Company’s position regarding its Derivative Contracts including, as of the last Business Day of such quarter, a summary of its hedging positions under its Derivative Contracts, including the type, term, price, effective date and notional principal amount or volumes, “mark to market” calculations, the hedged price(s), interest rate(s) or exchange rate(s), as applicable, and the counterparty to each

 

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Derivative Contract, (c) containing a table that demonstrates the Company’s compliance with the requirements set forth in Section 8.9 and (d) containing such additional information with respect to any of Company’s Oil and Gas Properties as may be reasonably requested by Administrative Agent.

 

“Recovery Event” means any settlement of or payment in respect of any Property of the Company or any Restricted Subsidiary arising from a casualty insurance claim or any condemnation proceeding.

 

“Regulation U” and “Regulation X” means Regulation U and Regulation X, respectively, of the FRB from time to time in effect and shall include any successor or other regulations or official interpretations of the FRB relating to the subject matter addressed therein.

 

“Related Funds” means, with respect to any Lender that is a fund or combined investment vehicle that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

 

“Replacement Lender” has the meaning specified in Section 3.7.

 

“Reportable Event” means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC.

 

“Required Lenders” means, at any time, subject to Section 11.1, the Administrative Agent and the Lenders holding at least 50% of the sum of the Effective Amount at such time or, if there is no Effective Amount at such time, the Administrative Agent and the Lenders holding at least 50% of the aggregate Commitments at such time; provided, however, that the Effective Amount, the aggregate Commitments, and the principal amount of the Loans and participation interests in Letters of Credit of the Defaulting Lenders shall be excluded from the determination of Required Lenders; and provided, further, however, that for purposes of any determination under Section 2.6(b) or 2.6(c) as to any increase in the amount of the Borrowing Base, “Required Lenders” means all of the Lenders other than the Defaulting Lenders, if any.

 

“Requirement of Law” means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its Property or to which the Person or any of its Property is subject.

 

“Reserve Report” means the Initial Reserve Report, and each subsequent report delivered pursuant to Section 7.2(c), each of which shall be a report, in form, scope and content reasonably acceptable to the Administrative Agent, covering proved developed and proved undeveloped reserves attributable to the Company’s and its Restricted Subsidiaries’ Oil and Gas Properties and setting forth with respect thereto, (a) the total quantity of proved developed and proved undeveloped Oil and Gas reserves (separately classified as to producing, shut in, behind pipe, and undeveloped), (b) the estimated future net revenues and cumulative estimated future net revenues, (c) the present discounted value of future net revenues, and (d) such other information

 

22

 

and data with respect to the Mortgaged Properties as the Administrative Agent may reasonably request.

 

“Responsible Officer” means, with respect to any Person, the chief executive officer, president, chief financial officer, general counsel, vice president, secretary or treasurer of the Person; provided, however, that with respect to financial matters, “Responsible Officer” shall be limited to the chief executive office, chief financial officer or treasurer of such Person.

 

“Restricted Payments” has the meaning specified in Section 8.9.

 

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.  Subject to the right to redesignate certain Restricted Subsidiaries as Unrestricted Subsidiaries in accordance with the definition of “Unrestricted Subsidiary,” all of the Subsidiaries as of the date hereof are Restricted Subsidiaries.  Any Subsidiary designated as an Unrestricted Subsidiary may be redesignated as a Restricted Subsidiary; provided, however, that after giving effect to such redesignation, (a) no Default or Event of Default shall have occurred and be continuing and (b) the Company shall be in pro forma compliance with Sections 8.12 and 8.13.

 

“S&P” means Standard & Poor’s Rating Services.

 

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Second Lien Term Loan Agreement” means that certain Term Loan Agreement dated as of May 7, 2007, as amended by the First Amendment to Term Loan Agreement dated November 7, 2007, among the Company, the Guarantors party thereto, the several lenders from time to time party thereto, Credit Suisse, Cayman Islands Branch, as Administrative Agent, Credit Suisse Securities (USA) LLC and UBS Securities LLC, as Joint Lead Arrangers, and Lehman Brothers Inc. and BMO Capital Markets Corp., as Co-Arrangers, as such may be further amended, restated, supplemented or otherwise modified in accordance with the terms hereof.

 

“Secured Parties” has the meaning ascribed thereto in the Security Agreement.

 

“Security Agreement” means the Fourth Amended and Restated Security Agreement dated as of the date hereof executed by the Loan Parties pledging to the Administrative Agent for benefit of the Secured Parties all of the Property of the Loan Parties, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time pursuant to the terms hereof (including, in the case of any Restricted Subsidiary required to execute the Security Agreement pursuant to Section 7.12, by execution and delivery of a joinder thereto in the form of Annex 2 thereto).

 

“Security Documents” means the Mortgages, the Security Agreement, each Account Control Agreement and related financing statements as same may be amended from time to time and any and all other instruments or agreements now or hereafter executed in connection with or as security for the payment of the Indebtedness.

 

23

 

“Security Termination Date” means the date on which all Commitments have terminated or expired and all Obligations (other than Obligations under any Qualifying Derivative Contract and indemnity obligations and similar obligations that survive the termination of the Loan Documents) have been paid in full in cash and no Letter of Credit shall be outstanding (other than obligations with respect to which other arrangements satisfactory to the Issuing Lender and the Company have been made).

 

“Semi-Annual Proposed Borrowing Base” has the meaning specified in Section 2.6(c).

 

“Senior Notes” means each of (i) the 2017 Senior Notes and (ii) the 2019 Senior Notes.

 

“Senior Notes Debt Documents” means, collectively, the Senior Notes Indentures, the Senior Notes, and any Senior Notes Subsidiary Guarantees.

 

“Senior Notes Indentures” means each of (i) the 2017 Senior Notes Indenture and (ii) the 2019 Senior Notes Indenture.

 

“Senior Notes Subsidiary Guarantees” mean, collectively, the guarantees by certain Subsidiaries of the Senior Notes.

 

“Solvent” means, as to any Person at any time, that (a) the fair value of all of the Property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair salable value of all of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s Property would constitute unreasonably small capital.

 

“Special Damages” has the meaning specified in Section 11.21.

 

“Subsidiary” of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly, at the relevant time, by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof.  Unless the context otherwise clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of the Company, except that for purposes of Article IV only, “Subsidiary” excludes Ellwood and any Unrestricted Subsidiary.

 

“Supermajority Lenders” means, at any time, subject to Section 11.1, the Administrative Agent and the Lenders holding at least 662/3% of the sum of the Effective Amount at such time or, if there is no Effective Amount at such time, the Administrative Agent and the Lenders holding at least 662/3% of the aggregate Commitments at such time; provided, however, that the Effective Amount, the aggregate amount of the Commitments and the principal amount of the Loans and participation interests in Letters of Credit of the Defaulting Lenders shall be excluded from the determination of Supermajority Lenders; and provided, further, however, that for purposes of any

 

24

 

determination under Section 2.6(b) or 2.6(c) as to any increase in the amount of the Borrowing Base, “Supermajority Lenders” means all of the Lenders other than the Defaulting Lenders, if any.

 

“Surety Instruments” means all letters of credit (including standby), banker’s acceptances, bank guaranties, shipside bonds, surety or appeal bonds, performance bonds (including plugging and abandonment bonds) and similar instruments.

 

“Taxes” means any and all present or future taxes, levies, imposts, deductions, charges or withholdings which arise from any payment made hereunder, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender’s net income, gross margin or capital by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or maintains a lending office or conducts business (other than solely by reason of the transactions evidenced hereby or taking any action contemplated by the Loan Documents).

 

“Termination Date” means the earlier of (a) the Maturity Date or (b) the Security Termination Date.

 

“TexCal GP” means TexCal Energy (GP) LLC, a Delaware limited liability company.

 

“TexCal LP” means TexCal Energy (LP) LLC, a Delaware limited liability company.

 

“TexCal STX” means TexCal Energy South Texas L.P., a Texas limited partnership.

 

“UCC” means the Uniform Commercial Code as adopted and in effect in any applicable jurisdiction.

 

“UCP” has the meaning specified in Section 2.13(b).

 

“Unfunded Pension Liability” means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

 

“United States” and “U.S.” each means the United States of America.

 

“Unrestricted Subsidiary” means any Subsidiary of the Company (a) that becomes a Subsidiary after the date hereof and, at the time it becomes a Subsidiary, is designated as an Unrestricted Subsidiary, in each case pursuant to a written notice from the Company to the Administrative Agent, (b) which has not acquired any assets (other than cash made available pursuant to this Agreement) from the Company or any Restricted Subsidiary, except in compliance with Section 8.6, and (c) that has no Indebtedness, Guaranty Obligations or other obligations other than Non-Recourse Obligations.  Any Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary; provided, however, that after giving effect to such redesignation, (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Company shall be in pro forma compliance with Sections 8.12 and 8.13.

 

25

 

“Utilization Percentage” means, at any time, the percentage obtained by dividing (a) the Effective Amount at such time by (b) the Borrowing Base at such time.

 

“Whittier” means Whittier Pipeline Corporation, a Delaware corporation.

 

1.2           Other Interpretive Provisions.  With reference to this Agreement and each other Document, unless otherwise specified herein or in such Loan Document:  (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.  Unless otherwise specified or the context clearly requires otherwise, the words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and, subsection, Section, Schedule and Exhibit references are to this Agreement.  The term “documents” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.  The term “including” is not limiting and means “including without limitation.”  The term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”.  The recitals, captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.  (b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.”  (c) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement and any Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, supplements, restatements, amendments and restatements, renewals, substitutions, replacements, assumptions and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation, are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, implementing or interpreting the statute or regulation.  (d) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.  This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Administrative Agent, the Company and the other parties, and are the products of all parties.  Accordingly, they shall not be construed against the Lenders or the Administrative Agent merely because of the Administrative Agent’s or Lenders’ involvement in their preparation.  The terms “Lender” and “Administrative Agent” include their respective successors.

 

1.3           Accounting Principles.

 

(a)           Unless the context otherwise clearly requires or as otherwise modified in this Agreement, including Section 11.20, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied.  References to “consolidated”, when it precedes any accounting term, means such term as it would apply to the Company and its Subsidiaries on a consolidated basis, determined in accordance with GAAP.

 

(b)           References herein to “fiscal year” and “fiscal quarter” refer to such fiscal periods of the Company.

 

26

 

ARTICLE II

 

THE CREDIT

 

2.1           Amounts and Terms of the Commitments.

 

(a)           Each Lender severally agrees, on the terms and conditions set forth herein, to make revolving credit loans to the Company from time to time on any Business Day during the period from the Effective Time to the Termination Date (together with any conversions or continuations thereof, “Loans”), so long as, as of the time at which the requested Loan is to be made and after giving effect to such Loan, (i) the aggregate amount of all Loans by such Lender at such time does not exceed such Lender’s Pro Rata Share of the aggregate amount of Loans of all Lenders at such time, and (ii) the aggregate amount of such Lender’s Loans and such Lender’s Pro Rata Share of the LC Obligations outstanding at such time does not exceed such Lender’s Commitment.  Subject to the terms and conditions hereof, until the Termination Date, the Company may borrow, repay, and reborrow Loans hereunder.

 

(b)           If requested by any Lender, the obligation of the Company to repay to such Lender the aggregate amount of all Loans made by such Lender, together with interest accruing in connection therewith, shall be evidenced by a single Note made by the Company payable to the order of such Lender.  The amount of principal owing on any Lender’s Note at any given time shall be the aggregate amount of all Loans theretofore made by such Lender minus all payments of principal theretofore received by such Lender on such Note.  Interest on each Note shall accrue and be due and payable as provided herein.

 

(c)           Subject to the terms and conditions of Section 2.13 below and relying upon the representations and warranties herein set forth, the Issuing Lender for the account of the Lenders agrees to issue or renew Letters of Credit in accordance with the applicable Notice of Borrowing and LC Application therefor.  No Letter of Credit will be issued or renewed in a face amount which, after giving effect to the issuance or renewal of such Letter of Credit, would cause either (x) the LC Obligations to exceed $30,000,000 or (y) the Effective Amount to exceed the Borrowing Base then in effect.  Each Letter of Credit shall by its terms be stated to expire on a date no later than the earlier of (i) one year after its Issuance (or, if renewed, one year after the renewal date) and (ii) the Termination Date, unless such Letter of Credit has been cash-collateralized with cash in an amount at least equal to 105% of the undrawn face amount thereof at least 30 days before the Termination Date.  If any Letter of Credit has been drawn upon and the amount so drawn has not been reimbursed to the Issuing Lender, the Commitment of each Lender shall be deemed to be utilized for all purposes hereof in an amount equal to such Lender’s Pro Rata Share of the LC Obligations.  If, for any reason, any Letter of Credit remains outstanding as of the Termination Date, the Company shall cause such Letter of Credit to be collateralized with cash in an amount at least equal to 105% of the undrawn face amount thereof under arrangements satisfactory to the Administrative Agent or to be secured by back-to-back letters of credit issued by banks, and in form and substance, satisfactory to the Administrative Agent and the Issuing Lender.

 

(d)           At the Effective Time, and subject to satisfaction of the conditions precedent set forth in Section 5.1, the outstanding aggregate amount of Existing Revolving

 

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Credit Outstandings shall be refinanced, renewed, and extended, and such amount shall be, and shall be deemed to be, Loans or LC Obligations (as applicable) made by the Lenders and held by the Issuing Lender (as applicable) hereunder.

 

2.2           Procedure for Borrowing.

 

(a)           Each Borrowing of Loans shall be made upon the Company’s irrevocable written notice delivered to the Administrative Agent in the form of a Notice of Borrowing duly completed which notice must be received by the Administrative Agent prior to 12:00 p.m. (Chicago, Illinois time) (i) three Business Days prior to the requested Borrowing Date, in the case of LIBO Rate Loans; and (ii) on the requested Borrowing Date, in the case of Base Rate Loans.

 

(b)           Each Notice of Borrowing shall specify (i) the amount of the Borrowing, which shall be in an aggregate minimum amount (A) for Base Rate Loans equal to the lesser of (x) $500,000 or any multiple integrals of $100,000 in excess thereof or (y) the unadvanced portion of the applicable Available Borrowing Base and (B) for LIBO Rate Loans $1,000,000 or any multiple integrals of $1,000,000 in excess thereof (if the Available Borrowing Base as of such Borrowing Date will be less than $1,000,000, then the Company may not request an LIBO Rate Loan); (ii) the requested Borrowing Date, which shall be a Business Day; (iii) the Company’s calculation of the current Applicable Margin; (iv) the Interest Rate Type of Loans comprising the Borrowing; and (v) for LIBO Rate Loans the duration of the Interest Period applicable to such Loans.  If the Notice of Borrowing fails to specify the duration of the Interest Period for any Borrowing comprised of LIBO Rate Loans, such Interest Period shall be three months.

 

(c)           The number of tranches outstanding of LIBO Rate Loans, whether under a Borrowing, conversion or continuation, shall not exceed eight (8) at any one time.

 

(d)           The Administrative Agent will promptly notify each Lender of its receipt of any Notice of Borrowing and of the amount of such Lender’s Pro Rata Share of that Borrowing.

 

(e)           Provided the applicable conditions in Article V are met, each Lender will make the amount of its Pro Rata Share of each Borrowing available to the Administrative Agent for the account of the Company at the Agent’s Payment Office by 12:00 p.m. (Chicago, Illinois time) on the Borrowing Date requested by the Company, in funds immediately available to the Administrative Agent.  The proceeds of all such Loans will then be made available to the Company by the Administrative Agent by wire transfer to the account(s) specified by the Company in the related Notice of Borrowing.

 

2.3           Conversion and Continuation Elections.

 

(a)           Prior to the Termination Date, the Company may, upon irrevocable written notice to the Administrative Agent in accordance with Section 2.3(b), (i) elect, as of any Business Day in the case of Base Rate Loans, or as of the last day of the applicable Interest Period in the case of LIBO Rate Loans, to convert any such Loans into Loans of any other Interest Rate Type; or (ii) elect as of the last day of the applicable Interest Period, to continue

 

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any Loans having Interest Periods expiring on such day; provided, however, that if at any time an LIBO Rate Loan in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to less than $1,000,000, such LIBO Rate Loan shall automatically convert into a Base Rate Loan.

 

(b)           The Company shall deliver a Notice of Conversion/Continuation to be received by the Administrative Agent not later than 12:00 p.m. (Chicago, Illinois time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as LIBO Rate Loans; and (ii) on the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or continued; (C) the Interest Rate Type of Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period.

 

(c)           If, upon the expiration of any Interest Period applicable to LIBO Rate Loans, the Company has failed to select in a timely manner a new Interest Period to be applicable to LIBO Rate Loans, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such LIBO Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.

 

(d)           The Administrative Agent will promptly notify each Lender of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Administrative Agent will promptly notify each Lender of the details of any automatic conversion.  All conversions and continuations shall be made ratably according to the respective Lender’s Pro Rata Share of outstanding principal amounts of the Loans with respect to which the notice was given.

 

2.4           Voluntary Termination or Reduction.  Subject to Section 3.4, the Company may, upon not less than three Business Days’ prior notice to the Administrative Agent, permanently terminate the Commitments (in whole or in part) or reduce the aggregate Maximum Loan Amount by an aggregate minimum amount of $500,000 or any integral multiple thereof; unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the Effective Amount exceeds the aggregate Commitments then in effect.  Once reduced in accordance with this Section 2.4, the aggregate Maximum Loan Amount may not be increased.  Any reduction of the aggregate Maximum Loan Amount shall be applied to the respective Maximum Loan Amount of each Lender according to its Pro Rata Share.  All accrued commitment fees to, but not including, the effective date of any reduction of the aggregate Maximum Loan Amount or a termination of the Commitments, shall be paid on the effective date of such reduction or termination.

 

2.5           Optional Prepayments.  Subject to Section 3.4, the Company may, at any time or from time to time,

 

(a)           prepay Base Rate Loans upon irrevocable notice to the Administrative Agent, ratably as to each Lender, in whole or in part, in aggregate minimum principal amounts of

 

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$100,000 or integral multiples thereof (unless the Effective Amount is less than $500,000, then such prepayments shall be equal to the Effective Amount) and

 

(b)           prepay LIBO Rate Loans upon irrevocable notice to the Administrative Agent not less than three (3) Business Days, ratably as to each Lender, in whole or in part, in aggregate minimum principal amounts of $500,000 or integral multiples thereof plus all interest and expenses then outstanding on such LIBO Rate Loans.

 

Such notice of prepayment shall specify the date and amount of such prepayment and the Interest Rate Type(s) of Loans to be prepaid.

 

The Administrative Agent will promptly notify each Lender of its receipt of any such notice, and of such Lender’s Pro Rata Share of such prepayment.  The payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.4.

 

2.6           Borrowing Base Determinations, Mandatory Prepayments.

 

(a)           Scheduled Borrowing Base Determinations.  For the period from the Effective Date to the initial redetermination date pursuant to Section 2.6(c) or Section 2.6(d), the initial Borrowing Base hereunder shall be $200,000,000 (the “Initial Borrowing Base”).

 

(b)           Annual Borrowing Base Determinations.  Upon receipt by the Administrative Agent of each Reserve Report described in Section 7.2(c)(i), the Administrative Agent shall make a determination by May 1, or, if later, within 25 days of the receipt of such report (such determination, the “Annual Proposed Borrowing Base”) of the amount of the borrowing base (herein as determined and redetermined from time to time and in effect on any date called the “Borrowing Base”) on account of such reserves as of the preceding January 1, subject to the approval of all of the Lenders other than the Defaulting Lenders, if any, or the Supermajority Lenders (as applicable) as provided in this Section 2.6(b), and the Administrative Agent shall promptly notify the Lenders in writing of the Annual Proposed Borrowing Base once determined.  The Annual Proposed Borrowing Base shall be so made by the Administrative Agent in accordance with the Administrative Agent’s normal and customary practices and standards for oil and gas loans (including consideration of the Company’s liquidity, Derivative Contracts, market interest rates, commodity prices, permitted Indebtedness and capital expenditure requirements).  Any Annual Proposed Borrowing Base that would increase the Borrowing Base then in effect must be approved or deemed to have been approved by all of the Lenders other than the Defaulting Lenders, if any, and any Annual Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect must be approved or deemed to have been approved by the Supermajority Lenders, in each case as provided in this Section 2.6(b).  The Lenders other than the Defaulting Lenders, if any, or the Supermajority Lenders (as applicable) may approve the Annual Proposed Borrowing Base by written notice to the Administrative Agent within 15 days of the Administrative Agent’s notice of the Annual Proposed Borrowing Base.  Any Lender that fails to respond to any notice of the Annual Proposed Borrowing Base by the Administrative Agent pursuant to this Section 2.6(b) within such 15 days shall be deemed to have approved such Annual Proposed Borrowing Base.  If the

 

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Lenders other than the Defaulting Lenders, if any, or the Supermajority Lenders (as applicable) fail to approve the Annual Proposed Borrowing Base within such 15 days, then no later than five days after the end of such 15-day period, the Lenders shall submit to the Administrative Agent in writing, or the Administrative Agent shall poll the Lenders other than the Defaulting Lenders, if any, for, their individual recommendations for the redetermined Borrowing Base in accordance with their respective normal and customary practices and standards for oil and gas loans (including consideration of the Company’s liquidity, Derivative Contracts, market interest rates, commodity prices, permitted Indebtedness and capital expenditure requirements), whereupon the Administrative Agent shall designate the Borrowing Base at the largest amount approved by the Lenders other than the Defaulting Lenders, if any, or the Supermajority Lenders (as applicable); provided, however, that it is expressly understood that the Lenders and Administrative Agent have no obligation to agree upon or designate the Borrowing Base at any particular amount.  If any Lender refuses to accept an Annual Proposed Borrowing Base pursuant to this Section 2.6(b), the Company shall have the right, without the consent of the Lenders but with the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, to cause the Commitment of such dissenting Lender to be replaced pursuant to Section 3.7.

 

(c)           Semi-Annual Borrowing Base Determinations.  In addition, upon the receipt by the Administrative Agent of each Reserve Report described in Section 7.2(c)(ii), the Administrative Agent shall make a determination by November 1, or, if later, within 25 days of the receipt of such report (such determination, the “Semi-Annual Proposed Borrowing Base”) of the Borrowing Base as of the preceding July 1.  The Semi-Annual Proposed Borrowing Base shall be determined in the same manner and be subject to the same approvals as prescribed with respect to the Annual Proposed Borrowing Base set forth in Section 2.6(b), and likewise the Administrative Agent shall notify the Lenders in writing of the Semi-Annual Proposed Borrowing Base once determined.  The Lenders other than the Defaulting Lenders, if any, or the Supermajority Lenders (as applicable) may approve the Semi-Annual Proposed Borrowing Base by written notice to the Administrative Agent within 15 days of the Administrative Agent’s notice of the Semi-Annual Proposed Borrowing Base.  Any Lender that fails to respond to any notice of the Semi-Annual Proposed Borrowing Base by the Administrative Agent pursuant to this Section 2.6(c) within such 15 days shall be deemed to have approved such Semi-Annual Proposed Borrowing Base.  If the Lenders other than the Defaulting Lenders, if any, or the Supermajority Lenders (as applicable) fail to approve the Semi-Annual Proposed Borrowing Base within such 15 days, then no later than five days after the end of such 15-day period, the Lenders shall submit to the Administrative Agent in writing, or the Administrative Agent shall poll the Lenders other than the Defaulting Lenders, if any, for, their individual recommendations for the redetermined Borrowing Base in accordance with their respective normal and customary practices and standards for oil and gas loans (including consideration of the Company’s liquidity, Derivative Contracts, market interest rates, commodity prices, permitted Indebtedness and capital expenditure requirements), whereupon the Administrative Agent shall designate the Borrowing Base at the largest amount approved by the Lenders other than the Defaulting Lenders, if any, or the Supermajority Lenders (as applicable); provided, however, that it is expressly understood that the Lenders and Administrative Agent have no obligation to agree upon or designate the Borrowing Base at any particular amount.  If any Lender refuses to accept the Semi-Annual Proposed Borrowing Base pursuant to this Section 2.6(c), the Company shall have the right, without the consent of the Lenders but with the prior written consent of the

 

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Administrative Agent, which consent shall not be unreasonably withheld, to cause the Commitment of such dissenting Lender to be replaced pursuant to Section 3.7.

 

(d)           Other Determinations.  In addition, the Administrative Agent shall, in the normal course of business following a request of the Company, redetermine the Borrowing Base (in the same manner and subject to the same approvals as prescribed in Section 2.6(b) for the redetermination of the Borrowing Base); provided, however, (i) the Administrative Agent and the Lenders shall not be obligated to respond to more than one such request during any calendar year in addition to each scheduled annual and semi-annual redeterminations provided for above, and (ii) the Company shall have paid to the Administrative Agent a $20,000 engineering fee in connection with such requested redetermination of the Borrowing Base, regardless of whether or not such redetermination results in any increase to the Borrowing Base.  Notwithstanding the foregoing, the Administrative Agent may, at the request of the Supermajority Lenders, redetermine the Borrowing Base (in the same manner and subject to the same approvals as prescribed in Section 2.6(b) for the redetermination of the Borrowing Base) at any other time and from time to time; provided, however, the Administrative Agent and the Lenders may not redetermine the Borrowing Base under this second sentence of this Section 2.6(d) more than one time during any calendar year, subject to the terms of Section 2.6(g).

 

(e)           Lenders’ Discretion.  If the Company does not furnish the Reserve Reports or all such other information and data by the date required, the Required Lenders may nonetheless determine a new Borrowing Base.  It is expressly understood that the Lenders shall have no obligation to determine the Borrowing Base at any particular amount, either in relation to the Maximum Loan Amount or otherwise.  Furthermore, the Company acknowledges that the Lenders have no obligation to increase the Borrowing Base and may reduce the Borrowing Base in accordance with the terms of this Agreement, and that any increase in the Borrowing Base is subject to the credit approval processes of all of the Lenders subject to the terms hereof.

 

(f)            Mandatory Action.

 

(i)            If on any date a Deficiency exists, then the Company shall cure such Deficiency immediately by prepaying the Loans in an aggregate principal amount equal to such excess, together with interest on the principal amount paid and accrued to date of such prepayment and if such excess remains after prepaying the Loans because of any LC Obligations, pay to the Administrative Agent on behalf of the Lenders an amount equal to the excess to be held as cash collateral; provided, however, that upon any Deficiency caused by a redetermination downward of the Borrowing Base pursuant to Section 2.6, the Company may effect such cure through any of the following means or any combination thereof:  (A) the making of a lump sum principal prepayment on the Loans within 30 days of the occurrence of such Deficiency (and, if any Deficiency remains after prepayment of all Loans, cash collateralization of the LC Obligations to the extent required to eliminate the Deficiency); (B) the making of a principal prepayment on the Loans (and, if any Deficiency remains after prepayment of all Loans, cash collateralization of the LC Obligations to the extent required to eliminate the Deficiency) in six equal monthly installments commencing 30 days from the date the Deficiency occurs and continuing on the

 

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same day of the next five succeeding months thereafter; or (C) the pledge within 15 Business Days of the occurrence of such Deficiency of additional unencumbered Collateral of sufficient value and character (as determined by the Lenders in their sole discretion) that when added to the Borrowing Base shall equal the applicable Effective Amount.

 

(ii)           Notwithstanding the foregoing paragraph (i), upon any reduction to the Borrowing Base provided for in any of Section 8.2(f), if a Deficiency shall exist or the Company or any Restricted Subsidiary shall have incurred any early termination or similar payment Obligation(s) to any Qualifying Derivative Contract Counterparty as a result of the Disposition and termination or modification of any related Derivative Contract(s), the Company shall contemporaneously with such Disposition (x) make, or cause to be made, a principal prepayment on the Loans in an amount equal to the Deficiency and (y) satisfy in full all such Obligation(s) to any affected Qualifying Derivative Contract Counterparty.

 

(iii)          Unless the Required Lenders shall otherwise agree, if the Company or any of its Subsidiaries shall receive Net Cash Proceeds from any Disposition described in any of Section 8.2(f) or Recovery Event (A) during the continuance of an Event of Default, the Company shall cause the Loans to be prepaid or the outstanding Letters of Credit cash collateralized (at 105% of their respective face amounts) in an amount equal to the entirety of such Net Cash Proceeds and (B) except as provided in Section 2.6(f)(ii) and Section 8.9, so long as no Event of Default exists or is continuing, the Company shall apply such proceeds as permitted under Section 7.13.  The provisions of this Section 2.6(f)(iii) do not constitute a consent to the consummation of any Disposition not permitted by any of Section 8.2(f) or otherwise requiring the prior written consent of the Required Lenders.

 

(g)           Reduction of Borrowing Base Related to Derivative Contracts.  If during any Borrowing Base Period the Company liquidates, unwinds, restructures or otherwise modifies any one or more Derivative Contracts in one or more transactions which the Administrative Agent considered in determining the then-effective Borrowing Base, and the value attributable to such liquidated, unwound, restructured or modified Derivative Contract, as calculated by the Administrative Agent in the then-effective Borrowing Base, in the aggregate exceeds 5% of such Borrowing Base, then the Company shall promptly provide notice to the Administrative Agent after such transaction or transactions and at the request of the Required Lenders, the Administrative Agent shall redetermine the Borrowing Base solely to take into account the value assigned to such liquidated Derivative Contracts in the then-effective Borrowing Base.  Any such redetermination shall be in addition to the Lenders’ right to request an optional redetermination pursuant to Section 2.6(d).

 

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2.7           Repayment.

 

(a)           Principal.  The Company shall repay to the Administrative Agent for the benefit of the Lenders the outstanding principal balance of the Loans (and the outstanding principal of the Loans shall be due and payable) on the Termination Date.

 

(b)           Interest.

 

(i)            Each Loan shall bear interest on the principal amount thereof from the applicable Borrowing Date or date of conversion or continuation pursuant to Section 2.3, as the case may be, at a rate per annum equal to the lesser of (A) the LIBO Rate or the Adjusted Base Rate, as the case may be, plus the Applicable Margin and (B) the Highest Lawful Rate.

 

(ii)           Interest on each Loan shall be paid in arrears on each Interest Payment Date.  Interest shall also be paid on the date of any prepayment of Loans under Sections 2.5(b) or 2.6 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Administrative Agent.

 

(iii)          Notwithstanding paragraph (i) of this Section 2.7(b), while any Event of Default exists or after acceleration, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans, at a rate per annum equal to the lesser of (A) the Highest Lawful Rate and (B) the rate otherwise applicable plus two percent (2%) (“Default Rate”).

 

(iv)          During the period of any Deficiency, unless the Default Rate is then in effect, the Company shall pay interest at a rate per annum equal to the lesser of (A) (i) the Adjusted Base Rate plus the Applicable Margin calculated using the Level V rate set forth in the Pricing Grid or (ii) the LIBO Rate plus the Applicable Margin calculated using the Level V rate set forth in the Pricing Grid, as applicable, in each case, plus three-quarters of a percentage point (0.75%) and (B) the Highest Lawful Rate.

 

2.8           Fees.

 

(a)           Commitment Fees.  The Company shall pay to the Administrative Agent for the account of the Lenders an aggregate commitment fee on the actual daily amount of the Available Borrowing Base at a per annum rate equal to the amount set forth on the Pricing Grid.  Such commitment fee shall accrue from the Effective Time to the Termination Date and shall be due and payable quarterly in arrears on the first day of the month following the last Business Day of each quarter commencing with the quarter ended June 30, 2011 (and payable on July 1, 2011) through the Termination Date, with the final payment to be made on the Termination Date; provided, however, that in connection with any reduction of the aggregate Maximum Loan Amount or termination of the aggregate Commitments under Section 2.4, the accrued commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis

 

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of the period from such reduction or termination date to such quarterly payment date.  The commitment fees provided in this Section 2.8(a) shall accrue at all times after the Effective Time, up to the Termination Date including at any time during which one or more conditions in Article V are not met.

 

(b)           Letter of Credit Fees.  The Company agrees to pay (i) to the Administrative Agent for the account of the Lenders a Letter of Credit fee for each Letter of Credit, due and payable quarterly on the first day of the month following the last Business Day of each quarter and at the Termination Date, in arrears from the date of Issuance in an amount per annum equal to the product equal to the Letter of Credit Rate set forth on the Pricing Grid multiplied by the aggregate amount available under each Letter of Credit, on each day from the date of Issuance thereof to the date on which such Letter of Credit expires or is terminated, (ii) to the Issuing Lender for its account a fee, due and payable quarterly on the first day of the month following the last Business Day of each quarter and at the Termination Date, for the Issuance of each Letter of Credit in an amount per annum (calculated on the basis of a year of 360 days) equal to 0.00125 multiplied by the aggregate amount available under each Letter of Credit, on each day from the date of Issuance thereof to the date on which such Letter of Credit expires or is terminated and (iii) to the Issuing Lender, for its account on demand its customary letter of credit transactional fees and out-of-pocket expenses for each Letter of Credit Issued by it, including amendment fees, payable with respect to each such Letter of Credit. The Administrative Agent shall pay to each Lender its pro-rata share of the Letter of Credit fees paid pursuant to this Section 2.8(b)(i).  The Administrative Agent shall pay to the Issuing Lender the Letter of Credit fees paid pursuant to this Section 2.8(b)(ii) and 2.8(b)(iii).

 

(c)           Other Fees.  In addition to all other amounts due to the Administrative Agent under the Loan Documents, the Company will pay fees to the parties and in the amounts specified in the Agent Fee Letter and the Lender Fee Letter.

 

(d)           Defaulting Lender Fees.  The Company shall not be obligated to pay the Administrative Agent any Defaulting Lender’s ratable share of the fees described in Sections 2.8(a) and 2.8(b)(i) for the period commencing on the day such Defaulting Lender becomes a Defaulting Lender and continuing for so long as such Lender continues to be a Defaulting Lender.

 

2.9           Computation of Fees and Interest.

 

(a)           All computations of interest for Base Rate Loans when the Adjusted Base Rate is based on the prime rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365 day year).  Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof.

 

(b)           Each determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Company and the Lenders in the absence of manifest error.

 

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2.10         Payments by the Company; Borrowings Pro Rata.

 

(a)           All payments to be made by the Company shall be made without set off, recoupment or counterclaim.  Except as otherwise expressly provided herein, all payments by the Company shall be made to the Administrative Agent for the account of the Lenders at the Agent’s Payment Office, and shall be made in dollars and in immediately available funds, no later than 12:00 p.m. (Chicago, Illinois time) on the date specified herein.  Except to the extent otherwise expressly provided herein, (i) each payment by the Company of fees shall be made for the account of the Lenders ratably in accordance with their respective Pro Rata Shares, (ii) each payment of principal of Loans shall be made for the account of the Lenders ratably in accordance with their respective Pro Rata Share of the outstanding principal amount of such Loans, and (iii) each payment of interest on Loans shall be made for the account of the Lenders ratably in accordance with their respective Pro Rata Share of the aggregate amount of interest due and payable to the Lenders.  The Administrative Agent will promptly distribute to each Lender its applicable share of such payment in like funds as received.  Any payment received by the Administrative Agent later than 12:00 p.m. (Chicago, Illinois time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.

 

(b)           If at any time prior to the acceleration or maturity of the Loans, the Administrative Agent shall receive any payment in respect of principal of a Loan or a reimbursement of any LC Obligations while one or more Defaulting Lenders shall be party to this Agreement, the Administrative Agent shall apply such payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its Pro Rata Share until such time as such Borrowing(s) are paid in full or until such time as each Lender (including each Defaulting Lender) is owed its Pro Rata Share of all Loans then outstanding.

 

(c)           Subject to the provisions set forth in the definition of “Interest Period” herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

 

(d)           Unless the Administrative Agent receives notice from the Company prior to the date on which any payment is due to the Lenders that the Company will not make such payment in full as and when required, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender.  If and to the extent the Company has not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid.

 

(e)           Except to the extent otherwise expressly provided herein, each Borrowing hereunder shall be from the Lenders pro rata in accordance with their respective Pro Rata Shares.

 

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2.11         Payments by the Lenders to the Administrative Agent.

 

(a)           Unless the Administrative Agent (i) receives notice from a Lender on or prior to the Effective Time or, with respect to any Borrowing after the Effective Time, at least one Business Day prior to the date of such Borrowing with respect to all Borrowings (or in the case of Base Rate Loans prior to the time of such Loan), that such Lender will not make available as and when required hereunder to the Administrative Agent for the account of the Company the amount of that Lender’s Pro Rata Share of the Borrowing or (ii) knows that a Lender is a Defaulting Lender, the Administrative Agent may assume that each Lender has made such amount available to the Administrative Agent in immediately available funds on the Borrowing Date and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount.  If and to the extent any Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to the Company such amount, that Lender shall on the Business Day following such Borrowing Date make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for each day during such period.  A notice of the Administrative Agent submitted to any Lender with respect to amounts owing under this Section 2.11(a) shall be conclusive, absent manifest error.  If such amount is so made available, such payment to the Administrative Agent shall constitute such Lender’s Loan on the date of Borrowing for all purposes of this Agreement.  If such amount is not made available to the Administrative Agent on the Business Day following the Borrowing Date, the Administrative Agent will notify the Company of such failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to the Administrative Agent for the Administrative Agent’s account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing.

 

(b)           The existence of a Defaulting Lender or the failure of any Lender to make any Loan on any Borrowing Date shall not relieve any other Lender of any obligation hereunder to make a Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any Borrowing Date.

 

2.12         Sharing of Payments, Etc.  If any Lender shall obtain on account of the Obligations held by it any payment (whether voluntary, involuntary, through the exercise of any right of set off, or otherwise) or receive any collateral in respect thereof in excess of the amount such Lender was entitled to receive pursuant to the terms hereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment according to the terms hereof; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.  The Company agrees that any Lender so purchasing a participation from another

 

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Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set off, but subject to Section 11.9) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation.  The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.12 and will in each case notify the Lenders following any such purchases or repayments.

 

2.13         Issuing the Letters of Credit.

 

(a)           In order to effect the issuance of a Letter of Credit, the Company shall submit a Notice of Borrowing and LC Application in writing by telecopy to the Administrative Agent (who shall promptly notify the Issuing Lender) not later than 12:00 p.m., Chicago, Illinois time, three (3) Business Days before the requested date of issuance of such Letter of Credit.  Each such Notice of Borrowing and LC Application shall be signed by the Company, specify the Business Day on which such Letter of Credit is to be issued, the purpose for the requested Letter of Credit, specify the availability for Letters of Credit under the Borrowing Base, and the $30,000,000 aggregate LC Obligations limitation as of the date of issuance of such Letter of Credit and the expiry date thereof which shall not be later than the earlier of (i) one year after its Issuance (or, if renewed, one year after the renewal date) and (ii) the Termination Date, unless such Letter of Credit has been cash-collateralized with cash in an amount at least equal to 105% of the undrawn face amount thereof at least 30 days before the Termination Date.  If requested by the Company not later than three (3) Business Days prior to expiration of any Letter of Credit, any Letter of Credit may be renewed for the additional period specified in Section 2.1(c).

 

(b)           Upon satisfaction of the applicable terms and conditions set forth in Article V, the Issuing Lender shall issue such Letter of Credit to the specified beneficiary not later than the close of business, Chicago, Illinois time, on the date so specified.  The Administrative Agent shall provide the Company and each Lender with a copy of each Letter of Credit so issued.  Each such Letter of Credit shall (i) provide for the payment of drafts, presented for honor thereunder by the beneficiary in accordance with the terms thereon, at sight when accompanied by the documents described therein and (ii) (A) the Uniform Customs and Practice for Documentary Credits (2007 Revision) (the “UCP”), International Chamber of Commerce Publication No. 600 or (B) the International Standby Practices (ISP98) (the “ISP”), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender and shall, as to matters not governed by the UCP or ISP, be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

 

(c)           Upon the Issuance of each Letter of Credit, the Issuing Lender shall be deemed, without further action by any party hereto, to have sold to each other Lender, and each other Lender shall be deemed, without further action by any party hereto, to have purchased from the Issuing Lender, a participation, to the extent of such Lender’s Pro Rata Share, in such Letter of Credit, the obligations thereunder and in the reimbursement obligations of the Company due in respect of drawings made under such Letter of Credit.  If requested by the Issuing Lender, the other Lenders will execute any other documents reasonably requested by the Issuing Lender to evidence the purchase of such participation.

 

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(d)           Upon the presentment of any draft for honor under any Letter of Credit by the beneficiary thereof which the Issuing Lender determines is in compliance with the conditions for payment thereunder, the Issuing Lender shall promptly notify the Company, the Administrative Agent and each Lender of the intended date of honor of such draft and the Company hereby promises and agrees, at the Company’s option, to either (i) pay to the Administrative Agent for the account of the Issuing Lender, by 2:00 p.m., Chicago, Illinois time, on the date payment is due as specified in such notice, the full amount of such draft in immediately available funds or (ii) request a Loan pursuant to the provisions of Sections 2.1(a) and 2.2 of this Agreement in the full amount of such draft, which request shall specify that the Borrowing Date is to be the date payment is due under the Letter of Credit as specified in the Issuing Lender’s notice.  If the Company fails timely to make such payment because a Loan cannot be made pursuant to Section 2.1(a) or Section 5.2, each Lender shall, notwithstanding any other provision of this Agreement (including the occurrence and continuance of a Default or an Event of Default), make available to the Administrative Agent for the benefit of the Issuing Lender an amount equal to its Pro Rata Share of the presented draft on the day the Issuing Lender is required to honor such draft.  If such amount is not in fact made available to the Administrative Agent by such Lender on such date, such Lender shall pay to the Administrative Agent for the account of the Issuing Lender, on demand made by the Issuing Lender, in addition to such amount, interest thereon at the Federal Funds Rate for the first two days following demand and thereafter until paid at the Adjusted Base Rate.  Upon receipt by the Administrative Agent from the Lenders of the full amount of such draft, notwithstanding any other provision of this Agreement (including the occurrence and continuance of a Default or an Event of Default) the full amount of such draft shall automatically and without any action by the Company, be deemed to have been a Base Rate Loan as of the date of payment of such draft.  Nothing in this Section 2.13(d) or elsewhere in this Agreement shall diminish the Company’s obligation under this Agreement to provide the funds for the payment of, or on demand to reimburse the Issuing Lender for payment of, any draft presented to, and duly honored by, the Issuing Lender under any Letter of Credit, and the automatic funding of a Loan as provided in this Section 2.13(d) shall not constitute a cure or waiver of the Event of Default for failure to provide timely such funds as agreed in this Section 2.13(d).

 

(e)           In order to induce the issuance of Letters of Credit by the Issuing Lender and the purchase of participations therein by the other Lenders, the Company agrees with the Administrative Agent, the Issuing Lender and the other Lenders that neither the Administrative Agent nor any Lender (including the Issuing Lender) shall be responsible or liable (except as provided in the following sentence) for, and the Company’s unconditional obligation to reimburse the Issuing Lender through the Administrative Agent for amounts paid by the Issuing Lender, as provided in Section 2.13(d) above, on account of drafts so honored under the Letters of Credit shall not be affected by, any circumstance, act or omission whatsoever (whether or not known to the Administrative Agent or any Lender (including the Issuing Lender)) other than a circumstance, act or omission resulting from the gross negligence or willful misconduct of the Administrative Agent or any Lender, including the Issuing Lender.  The Company agrees that any action taken or omitted to be taken by the Administrative Agent or any Lender (including the Issuing Lender) under or in connection with any Letter of Credit or any related draft, document or Property shall be binding on the Company and shall not put the Administrative Agent or any Lender (including the Issuing Lender) under any resulting liability to the Company, unless such action or omission is the result of the gross negligence or willful misconduct of the

 

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Administrative Agent or any such Lender (including the Issuing Lender).  The Company hereby waives presentment for payment (except the presentment required by the terms of any Letter of Credit) and notice of dishonor, protest and notice of protest with respect to drafts honored under the Letters of Credit.  The Issuing Lender agrees promptly to notify the Company whenever a draft is presented under any Letter of Credit, but failure to so notify the Company shall not in any way affect the Company’s obligations hereunder.  Subject to Section 3.7, if while any Letter of Credit is outstanding, any law, executive order or regulation is enforced, adopted or interpreted by any public body, governmental agency or court of competent jurisdiction so as to affect any of the Company’s obligations or the compensation to any Lender in respect of the Letters of Credit or the cost to such Lender of establishing or maintaining the Letters of Credit (or any participation therein), such Lender shall promptly notify the Company thereof in writing and within ten Business Days after receipt by the Company of such Lender’s request (through the Administrative Agent) for reimbursement or indemnification or within 30 days after receipt of a notice in respect of Taxes or Other Taxes, the Company shall reimburse or indemnify such Lender, as the case may be, with respect thereto so that such Lender shall be in the same position as if there had been no such enforcement, adoption or interpretation.  The foregoing agreement of the Company to reimburse or indemnify the Lenders shall apply in (but shall not be limited to) the following situations:  an imposition of or change in reserve, capital maintenance or other similar requirements or in excise or similar Taxes or monetary restraints, except a change in franchise Taxes imposed on such Lender or in Tax on the net income of such Lender.

 

(f)            In the event that any provision of a LC Application is inconsistent with, or in conflict of, any provision of this Agreement, including provisions for the rate of interest applicable to drawings thereunder or rights of setoff or any representations, warranties, covenants or any events of default set forth therein, the provisions of this Agreement shall govern.

 

(g)           If the Obligations, or any part thereof, become immediately due and payable pursuant to Article IX of this Agreement, then the entirety of the LC Obligations shall become immediately due and payable without regard for actual drawings or payments on the Letters of Credit, and the Company shall be obligated to pay to the Administrative Agent immediately an amount equal to the entirety of the LC Obligations.  All amounts made due and payable by the Company under this Section 2.13(g) may be applied as the Issuing Lender and the Lenders elect to any of the various LC Obligations; provided, however, that such amounts applied by the Issuing Lender and the Lenders to the LC Obligations shall be (i) first applied to the Matured LC Obligations, and (ii) second held by the Administrative Agent in an interest bearing account for the benefit of the Issuing Lender and the Lenders as LC Collateral, such LC Collateral to be held in an account with the Administrative Agent or an Affiliate thereof, until such remaining portion of the LC Obligations has either (i) become a portion of the Matured LC Obligations, at which time such LC Collateral paid to the Administrative Agent shall be applied to such Matured LC Obligations, or (ii) expired undrawn, at which time an amount of such LC Collateral equal to such expired and undrawn LC Obligations, plus accrued interest thereon, shall be applied as otherwise required or permitted under Article IX.  This Section 2.13(g) shall not limit or impair any rights which the Administrative Agent, the Issuing Lender or any of the Lenders may have under any other document or agreement relating to any Letter of Credit or portion of the LC Obligations, including without limitation, any LC Application.

 

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(h)           Any Issuing Lender may resign at any time by written agreement among the Company, the Administrative Agent, and such resigning Issuing Lender.  The Administrative Agent shall notify the Lenders of any such resignation of an Issuing Lender.  At the time any such resignation shall become effective, the Company shall pay all unpaid fees accrued for the account of such resigning Issuing Lender pursuant to Section 2.8(b).  After the resignation of an Issuing Lender hereunder, the resigning Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to the Letters of Credit issued by it prior to such resignation, but shall not be required to issue additional Letters of Credit.

 

2.14         Cash Collateralization for Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

 

(a)           if any LC Obligations exist at the time a Lender is a Defaulting Lender, then the Company shall within one Business Day following notice by the Administrative Agent cash collateralize 100% of such Defaulting Lender’s Pro Rata Share of the LC Obligations for so long as such LC Obligations are outstanding and under arrangements satisfactory to the Administrative Agent;

 

(b)           if any Defaulting Lender’s Pro Rata Share of the LC Obligations is not cash collateralized as required in Section 2.14(a) above, then, without prejudice to any other rights or remedies of the Issuing Lender or any Lender hereunder, all letter of credit fees payable under Section 2.8(b) with respect to such Defaulting Lender’s Pro Rata Share of the LC Obligations shall be payable to the Issuing Lender until such Defaulting Lender’s Pro Rata Share of the LC Obligations is cash collateralized;

 

(c)           so long as any Lender is a Defaulting Lender, the Issuing Lender shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that cash collateral will be provided by the Company in accordance with Section 2.14(a) above; and

 

(d)           for the avoidance of doubt, the Company shall retain and reserve its other rights and remedies respecting each Defaulting Lender.

 

ARTICLE III

 

TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.1           Taxes.

 

(a)           Any and all payments by the Company to each Lender or the Administrative Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes.  In addition, the Company shall pay all Other Taxes.

 

(b)           Subject to Section 3.1(f), the Company agrees to indemnify and hold harmless each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this

 

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Section 3.1) paid by the Lender or the Administrative Agent and any liability (including penalties, interest, additions to Tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted.  Payment under this indemnification shall be made within 30 days after the date the affected Lender or the Administrative Agent makes written demand therefor.

 

(c)           If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 3.1), such Lender or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) the Company shall make such deductions and withholdings; (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) the Company shall also pay to each affected Lender or the Administrative Agent for the account of such Lender, at the time interest is paid, all additional amounts which such Lender specifies as necessary to preserve the after-tax yield such Lender would have received if such Taxes or Other Taxes had not been imposed.

 

(d)           Within 30 days after the date of any payment by the Company of Taxes or Other Taxes under Section 3.1(c) above, the Company shall furnish the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent.

 

(e)           If the Company is required to pay additional amounts to any Lender or the Administrative Agent pursuant to Section 3.1(c), then upon written request of the Company such Lender shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue, if such change in the judgment of such Lender is not otherwise disadvantageous to such Lender.

 

(f)            No Lender that is required to comply with Section 10.10 shall be entitled to any indemnification under this Section 3.1 if the obligation with respect to which indemnification is sought would not have arisen but for a failure of the affected Lender to comply with such Section 10.10.

 

3.2           Illegality.

 

(a)           If any Lender determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law (including, in each case, Dodd-Frank/Basel), has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make LIBO Rate Loans, then, on notice thereof by the Lender to the Company through the Administrative Agent, any obligation of that Lender to make LIBO Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exist.

 

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(b)           If a Lender determines that it is unlawful to maintain any LIBO Rate Loan, the Company shall, upon its receipt of notice of such fact and demand from such Lender (with a copy to the Administrative Agent), prepay in full such LIBO Rate Loans of that Lender then outstanding, together with interest accrued thereon and amounts required under Section 3.4, either on the last day of the Interest Period thereof, if the Lender may lawfully continue to maintain such LIBO Rate Loans to such day, or immediately, if the Lender may not lawfully continue to maintain such LIBO Rate Loan.  If the Company is required to so prepay any LIBO Rate Loan, then concurrently with such prepayment, the Company shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Loan.

 

(c)           If the obligation of any Lender to make or maintain LIBO Rate Loans has been so terminated or suspended, all Loans which would otherwise be made by the Lender as LIBO Rate Loans shall be instead Base Rate Loans.

 

(d)           Before giving any notice to the Administrative Agent under this Section 3.2, the affected Lender shall designate a different Lending Office with respect to its LIBO Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of such Lender, be illegal or otherwise disadvantageous to such Lender.

 

3.3           Increased Costs and Reduction of Return.

 

(a)           If any Lender determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the LIBO Rate) in or in the interpretation of any law or regulation (including Dodd-Frank/Basel) or (ii) the compliance by that Lender with any guideline or request from any central bank or other Governmental Authority (including Dodd-Frank/Basel) (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any LIBO Rate Loans, then the Company shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Administrative Agent), pay to the Administrative Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs.

 

(b)           If any Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation (including Dodd-Frank/Basel), (ii) any change in any Capital Adequacy Regulation (including Dodd-Frank/Basel), (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof (including Dodd-Frank/Basel), or (iv) compliance by such Lender (or its Lending Office) or any Affiliate controlling such Lender with any Capital Adequacy Regulation (including Dodd-Frank/Basel), affects or would affect the amount of capital required or expected to be maintained by such Lender or any Affiliate controlling such Lender and (taking into consideration such Lender’s or such Affiliate’s policies with respect to capital adequacy and such Lender’s desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, Loans, other Credit Extensions, or Obligations under this Agreement, then, upon demand of such Lender to the Company through the Administrative Agent, the Company shall pay to such Lender, from time

 

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to time as specified by such Lender, additional amounts sufficient to compensate such Lender for such increase.

 

3.4           Funding Losses.  The Company shall reimburse each Lender and hold each Lender harmless from any loss or expense which the Lender may sustain or incur as a consequence of (a) the failure of the Company to make on a timely basis any payment of principal of any LIBO Rate Loan; (b) the failure of the Company to borrow or continue a LIBO Rate Loan or to convert a Base Rate Loan to a LIBO Rate Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation (including by reason of the failure to satisfy any condition precedent thereto); (c) the failure of the Company to make any prepayment in accordance with any notice delivered under Section 2.5; (d) the prepayment (including pursuant to Section 2.6) or other payment (including after acceleration thereof) of a LIBO Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 2.3 of any LIBO Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBO Rate Loans or from fees payable to terminate the deposits from which such funds were obtained (but excluding any loss of margin).  For purposes of calculating amounts payable by the Company to the Lenders under this Section 3.4 and under Section 3.3(a), each LIBO Rate Loan made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the LIBO Rate for such LIBO Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such LIBO Rate Loan is in fact so funded.

 

3.5           Inability to Determine Rates.  If the Administrative Agent determines that for any reason adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan, or that the LIBO Rate applicable pursuant to Section 2.7(b) for any requested Interest Period with respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, the Administrative Agent will promptly so notify the Company and each Lender.  Thereafter, the obligation of the Lenders to make or maintain LIBO Rate Loans hereunder shall be suspended until the Administrative Agent upon the instruction of the Lenders revokes such notice in writing.  Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.  If the Company does not revoke such notice, the Lenders shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBO Rate Loans.

 

3.6           Certificates of Lenders.  Any Lender claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to such Lender hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error; provided, however, that such Lender shall only be entitled to collect amounts incurred within 180 days of such notice.

 

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3.7           Substitution of Lenders.  Upon (i) the receipt by the Company from any Lender of a claim for compensation under this Article III, (ii) the refusal of a Lender to accept the Annual Proposed Borrowing Base pursuant to Section 2.6(b) or Semi-Annual Proposed Borrowing Base pursuant to Section 2.6(c) (as applicable) or (iii) a Lender becoming a Defaulting Lender, and, as a result, the Company elects by written notice to the Administrative Agent to replace such Lender pursuant to this Section 3.7 (such Lender, an “Affected Lender”), the Company may:  (a) obtain a replacement bank or financial institution satisfactory to the Administrative Agent to acquire and assume all or a ratable part of all of such Affected Lender’s Loans and Commitment (a “Replacement Lender”); or (b) request one more of the other Lenders to acquire and assume all or part of such Affected Lender’s Loans and Commitment but none of the Lenders shall have any obligation to do so.  Any such designation of a Replacement Lender under clause (a) shall be subject to the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld.

 

3.8           Survival.  The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations.

 

ARTICLE IV

 

SECURITY

 

4.1           The Security.  The Obligations will be secured by the Security Documents.  Certain of the Security Documents are amendments and restatements of Security Documents (as defined in the Existing Credit Agreement), and as such, are granted by the Company, or its Restricted Subsidiaries, as applicable, in assumption, renewal, extension, amendment and restatement of such prior liens and security interests securing the Existing Credit Agreement and are entitled to the priority and perfection relating back to the date originally granted and assigned to the greatest extent possible.  Each of the Company and its Restricted Subsidiaries hereby adopts, assumes, ratifies, and reaffirms such prior Liens and security interests and confirms that such Liens and security interests secure the Obligations as a continuation of the original “Obligations” described in the Existing Credit Agreement.

 

4.2           Agreement to Deliver Security Documents.  The Company shall, and shall cause its Restricted Subsidiaries to, deliver, and cause its Restricted Subsidiaries, where applicable, to deliver whenever reasonably requested by the Administrative Agent, favorable title opinions from legal counsel reasonably acceptable to the Administrative Agent, or such other evidence of title reasonably satisfactory to the Administrative Agent with respect to the Mortgaged Properties, based upon abstract or record examinations acceptable to the Administrative Agent with respect to at least 80% of the Net Present Value of the Proved Reserves and 90% of the Net Present Value of the Proved Developed Producing Reserves, and providing that such Properties are free and clear of all Liens except Permitted Liens, and indicating that at least eighty-five (85%) of the Net Present Value of the Proved Reserves and at least ninety-five percent (95%) of the Net Present Value of the Proved Developed Producing Reserves, in each case as set forth in the most recent Reserve Report, are subject to Security Documents securing the Obligations that constitute and create legal, valid and duly perfected deed of trust or mortgage Liens in such Mortgaged Properties and interests, and assignments of and security interests in the Oil and Gas attributable to such Mortgaged Properties comprised of

 

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Oil and Gas Properties and interests and the proceeds thereof, in each case subject only to Permitted Liens, and (c) covering such other matters as the Administrative Agent may reasonably request.

 

4.3           [Reserved.]

 

4.4           Offset.  To secure the repayment of the Obligations, the Company hereby grants the Administrative Agent and each Secured Party a security interest, a Lien, and a right of offset, each of which shall be in addition to all other interests, Liens, and rights of the Administrative Agent, the Lenders and any other Secured Party at common law, under the Loan Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other Property (and the proceeds therefrom) of the Company now or hereafter held or received by or in transit to the Administrative Agent or any Secured Party from or for the account of the Company, whether for safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and all deposits (general or special, time or demand, provisional or final) at any time held or other Obligations (of whatsoever kind, including Obligations under Derivative Contracts) of the Company with the Administrative Agent or any Secured Party, and (c) any other credits and claims of the Company at any time existing against the Administrative Agent, Lender or Secured Party, including claims under certificates of deposit.  During the existence of any Event of Default, the Administrative Agent on behalf of the Secured Parties is hereby authorized to foreclose upon, offset, appropriate, and apply, at any time and from time to time, without notice to the Company, any and all items hereinabove referred to against the Obligations then due and payable.

 

4.5           Guaranty.

 

(a)           Each Guarantor has executed and delivered to the Administrative Agent, and each Restricted Subsidiary (other than Ellwood) of the Company now existing or created, acquired or coming into existence after the date hereof shall, promptly upon request by the Administrative Agent, execute and deliver to the Administrative Agent, a Guaranty setting forth therein an absolute and unconditional guaranty of the timely repayment of, and the due and punctual performance of the Obligations of the Company hereunder, which Guaranty shall be reasonably satisfactory to the Lenders in form and substance.  The Company will cause each of its Restricted Subsidiaries (other than Ellwood) to deliver to the Administrative Agent, simultaneously with its delivery of such a Guaranty, written evidence reasonably satisfactory to the Administrative Agent and its counsel that such Restricted Subsidiary has taken all corporate, limited liability company or partnership action necessary to duly approve and authorize its execution, delivery and performance of such Guaranty and any Security Documents and other documents which it is required to execute.

 

(b)           Guaranty Representations.  Each Loan Party represents and warrants to each such Person at the Effective Time:

 

(i)            Benefit to Guarantors.  The Loan Parties are mutually dependent on each other in the conduct of their respective businesses, with the credit needed from time to time by each often being provided by another or by means of financing obtained by one such Affiliate with the support of the other for their

 

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mutual benefit and the ability of each to obtain such financing is dependent on the successful operations of the other.  The board of directors, manager or general partner or similar governing body, of each Guarantor has determined that such Guarantor’s execution, delivery and performance of this Agreement may reasonably be expected to directly or indirectly benefit such Guarantor and is in the best interests of such Guarantor.

 

(ii)           Reasonable Consideration for Guaranties.  The direct or indirect value of the consideration received and to be received by such Guarantor in connection herewith is reasonably worth at least as much as the liability and obligations of each Guarantor hereunder and its Guaranty, and the incurrence of such liability and obligations in return for such consideration may reasonably be expected to benefit such Guarantor, directly or indirectly.

 

4.6           Production Proceeds.  Notwithstanding that, by the terms of the various Security Documents, the Company is and will be assigning to the Administrative Agent all of the Net Proceeds of Production accruing to the Mortgaged Properties covered thereby, so long as no Event of Default has occurred and is continuing, the Administrative Agent, on behalf of the Lenders, grants each of the Company and its Subsidiaries a revocable license to continue to receive from the purchasers of production all such Net Proceeds of Production, subject, however, to the Liens created under the Security Documents, which Liens are hereby affirmed and ratified.  During the continuance of an Event of Default described under Sections 9.1(g) or 9.1(h), this license shall be automatically revoked, and during the continuance of any other Event of Default, this license shall be revocable in the sole discretion of the Administrative Agent, by notice to the Company, and the Administrative Agent may exercise all rights and remedies granted under the Security Documents, including the right to obtain possession of all Net Proceeds of Production then held by the Loan Parties or to receive directly from the purchasers of production all other Net Proceeds of Production.  In no case shall any failure, whether purposeful or inadvertent, by the Administrative Agent to collect directly any such Net Proceeds of Production constitute in any way a waiver, remission or release of any of its rights under the Security Documents, nor shall any release of any Net Proceeds of Production by the Administrative Agent to the Loan Parties constitute a waiver, remission, or release of any other Net Proceeds of Production or of any rights of the Administrative Agent to collect other Net Proceeds of Production thereafter.

 

ARTICLE V

 

CONDITIONS PRECEDENT

 

5.1           Conditions of the Effective Date and Initial Credit Extensions.  The effectiveness of this Agreement, and each Lender’s obligation to lend money and otherwise extend credit to the Company to refinance, renew and extend the Existing Revolving Credit Outstandings are subject to the condition that on or before the Effective Time the Administrative Agent shall have received all of the following, in form and substance reasonably satisfactory to the Administrative Agent and each Lender (or, in the case of clauses (f), (h) or (p), the conditions specified therein shall have been satisfied):

 

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(a)           Credit Agreement and Related Documents.  This Agreement, the Notes (if any), the Guaranty and the Security Documents, duly executed and delivered by each Loan Party a party thereto;

 

(b)           Resolutions; Incumbency; Organization Documents.  (i) Resolutions of the board of directors of the Company and members or the board of directors or similar governing body of each Guarantor or its general partner, as applicable, authorizing the transactions contemplated hereby, certified as of the Effective Time by the Secretary or an Assistant Secretary of such Person; (ii) Certificates of the Secretary of the Company and the Secretary of each Guarantor certifying the names and true signatures of the officers of such Person authorized to execute, deliver and perform, as applicable, this Agreement, the Security Documents, the Guaranty, and all other Loan Documents to be delivered by it hereunder; and (iii) the Organization Documents of each Loan Party as in effect on the Effective Time, certified by the Secretary or Assistant Secretary of the such Person as of the Effective Time;

 

(c)           Good Standing.  Good standing certificates for each Loan Party from its state of incorporation or formation, and evidencing its qualification to do business in each other jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, in each case  as of a recent date;

 

(d)           Payment of Fees.  Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses owed pursuant to the Existing Credit Agreement and under this Agreement, Agent Fee Letter and the Lender Fee Letter, in each case to the extent then due and payable at the Effective Time and an invoice for which has been received by the Company at least one Business Day before the Effective Time, including any such costs, fees and expenses arising under or referenced in Sections 2.8 and 11.4;

 

(e)           Certificate.  A certificate signed by a Responsible Officer of the Company, dated as of the Effective Time, stating that (i) the representations and warranties contained in Article VI and Section 4.5(b) are true and correct in all material respects (except for representations and warranties which are qualified by a materiality qualifier, which shall be true and correct in all respects) on and as of the Effective Date, as though made on and as of such date (except in the case of representations and warranties which are made solely as of an earlier date or time, which representations and warranties shall be true and correct in all material respects (except for representations and warranties which are qualified by a materiality qualifier, which shall be true and correct in all respects) as of such earlier date or time); (ii) no litigation is pending or threatened against the Company or any Subsidiary in which there is a reasonable probability of an adverse decision which would result in a Material Adverse Effect; and (iii) there has occurred no event or circumstance that has resulted or would reasonably be expected to result in a Material Adverse Effect since December 31, 2010 and (iv) no Default or Event of Default (each as defined in the Existing Credit Agreement) has occurred and is continuing;

 

(f)            Due Diligence.  The Administrative Agent shall have completed a due diligence review satisfactory to the Administrative Agent on behalf of the Required Lenders, including as to the Company’s most recent engineering reports, land issues, legal structure, capital budgets, tax position, confirmation of all Borrowing Base amounts described herein, hedging strategy and hedging position of the Company and its Subsidiaries;

 

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(g)           Title.  Evidence that the Company and its Restricted Subsidiaries have good and marketable title on at least 80% of the Net Present Value of the Proved Reserves and 90% of the Net Present Value of the Proved Developed Producing Reserves, in each case,  subject to no other Liens, other than Permitted Liens, evidenced by title information satisfactory to the Administrative Agent and the Lenders;

 

(h)           Environmental.  The Administrative Agent shall have completed a review satisfactory to the Administrative Agent of current public environmental data sources, registers and lists regarding each Loan Party and their respective Oil and Gas Properties and the Administrative Agent and the Lenders shall be satisfied with all environmental matters;

 

(i)            Insurance Certificates.  Insurance certificates in form and substance reasonably satisfactory to the Administrative Agent, from the Company’s insurance carriers reflecting the current insurance policies required under Section 7.6 (such insurance will be primary and not contributing) including any necessary endorsements to reflect the Administrative Agent as loss payee for the ratable benefit of the Lenders;

 

(j)            Other Documents.  Such other approvals, opinions, documents or materials as the Administrative Agent or any Lender may request;

 

(k)           Opinions of Counsel.  (i) An opinion of Davis Graham & Stubbs LLP covering such matters as the Administrative Agent may require and in form and substance reasonably satisfactory to the Administrative Agent dated as of the Effective Time, (ii) an opinion of Bracewell & Giuliani LLP covering such matters of New York law as the Administrative Agent may require in form and substance reasonably satisfactory to the Administrative Agent dated as of the Effective Time and (iii) opinions of Bracewell & Giuliani LLP and Downey Brand LLP as to the enforceability and perfection of the Liens and security interests created under the Mortgages filed or to be filed in Texas and California, respectively;

 

(l)            Initial Reserve Report, Financial Statements and Pro Forma Financial Statements.  The Initial Reserve Report and the Audited Financial Statements, each in form and substance satisfactory to the Administrative Agent;

 

(m)          Lien Searches.  Evidence of the results of a recent lien search in each of the jurisdictions in which UCC financing statements or other filings or recordations should be made to evidence or perfect security interests in any assets of the Loan Parties, and such search shall reveal no Liens on any of the Property of the Loan Parties, except for Permitted Liens;

 

(n)           BOE Operational Matters.  Evidence that the Company is qualified by the United States Department of Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement to operate its Hydrocarbon Interests comprised of leases covering submerged lands on the federal Outer Continental Shelf;

 

(o)           Filings, Registrations and Recordings.  Each document (including, without limitation, any UCC financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a first priority perfected Lien on the Collateral described in any Security Document to which the Company or

 

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any Guarantor is a party, prior and superior in right to any other Person (other than with respect to Permitted Liens, shall have been filed, registered or recorded or shall have been delivered to the Administrative Agent in proper form for filing, registration or recordation;

 

(p)           Approvals.  All government and third party approvals (including any consents) necessary in connection with continuing operations of the Company and its Subsidiaries and the transactions contemplated by the Loan Documents shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the financing contemplated hereby;

 

(q)           Solvency.  A certificate from a Responsible Officer of the Company and each Subsidiary certifying that the Company and its Subsidiaries taken as a whole (i) as of the Effective Time, are, and (ii) after giving effect to the transactions contemplated hereby, will be, Solvent;

 

(r)            Pledged Stock; Stock Powers; Acknowledgment and Consent; Pledged Notes.  The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock of the Company’s Restricted Subsidiaries pledged pursuant to the Security Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof, and (ii) each promissory note pledged by the Loan Parties pursuant to the Security Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank reasonably satisfactory to the Administrative Agent) by the pledgor thereof;

 

(s)           Termination of Liens Associated with Second Lien Term Loan.  The Administrative Agent shall have received evidence satisfactory to the Administrative Agent confirming that all Liens associated with the Second Lien Term Loan Agreement have been released and terminated; and

 

(t)            2011 Annual Budget.  The Administrative Agent shall have received a copy of the annual budget of the Company and its Restricted Subsidiaries on a consolidated basis for 2011, projecting total Oil and Gas revenue, total revenue, total operating costs and expenses, net income, interest expense, EBITDA and total capital expenditures, by fiscal quarter.

 

5.2           Conditions to All Credit Extensions.  The obligation of each Lender to make any Loan (but specifically excluding the conversion into or continuation of LIBO Rate Loans), and of the Issuing Lender to issue any Letters of Credit, in each case from and after the Effective Time, is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date:

 

(a)           Notice.  The Administrative Agent shall have received a Notice of Borrowing;

 

(b)           Continuation of Representations and Warranties.  The representations and warranties in Article VI and Section 4.5(b) shall be true and correct in all material respects (except for representations and warranties which are qualified by a materiality qualifier, which shall be true and correct in all respects) on and as of such Borrowing Date with the same effect as

 

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if made on and as of such Borrowing Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date);

 

(c)           No Existing Default.  No Default or Event of Default shall exist or shall result from such Borrowing or Issuance;

 

(d)           No Event or Condition of Material Adverse Effect.  No event or condition having a Material Adverse Effect shall have occurred since December 31, 2010; and

 

(e)           Mortgaged Properties.  The Administrative Agent shall be satisfied that the Loan Parties have granted to it, at such time, first priority perfected Liens on Oil and Gas Properties that are Mortgaged Properties, subject only to Permitted Liens, sufficient to cause the Mortgaged Properties to include eighty-five percent (85%) of the Net Present Value of the Proved Reserves and at least ninety-five percent (95%) of the Net Present Value of the Proved Developed Producing Reserves.

 

Each Notice of Borrowing submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of each Borrowing Date that the conditions in this Section 5.2 are satisfied.

 

ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES

 

The Loan Parties represent and warrant, jointly and severally, to each such Person, as follows (each representation and warranty herein is given as of the Effective Date and shall be deemed repeated and reaffirmed on the date of each credit extension pursuant to Section 5.2):

 

6.1           Organization, Existence and Power.  Each Loan Party: (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (b) has the power and authority and all material governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation, limited partnership or limited liability company and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification or license, except where failure to do so would not reasonably be expected to have a Material Adverse Effect; and (d) is in compliance with all Requirements of Law, except where the failure to do so individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect.

 

6.2           Corporate Authorization; No Contravention.  The execution, delivery and performance by the Loan Parties of this Agreement and each other Loan Document to which such Person is a party have been duly authorized by all necessary organizational action, and do not and will not: (a) contravene the terms of any of that Person’s Organization Documents; (b) contravene any Senior Notes Indenture; (c) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any material Contractual

 

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Obligation to which such Person is a party that would be prior to the Liens granted to the Administrative Agent for the benefit of the Lenders or otherwise that would constitute a Material Adverse Effect, or any order, injunction, writ or decree of any Governmental Authority to which such Person or its material Property is subject; or (d) violate any Requirement of Law, except  where the failure to do so individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect.

 

6.3           Governmental Authorization.  No approval, permit, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary in connection with the execution, delivery or performance by, or enforcement against, the Company or any other Loan Party of this Agreement or any other Loan Document to which it is a party, except for filings necessary to obtain and maintain perfection of Liens; routine filings related to the Company and the operation of its business; and such filings as may be necessary in connection with the Lenders’ exercise of remedies hereunder.

 

6.4           Binding Effect.  This Agreement and each other Loan Document to which the Company or any Restricted Subsidiary is a party constitute the legal, valid and binding obligations of the Company and such Restricted Subsidiaries to the extent it is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

 

6.5           Litigation.  Unless specifically disclosed in Schedule 6.5 attached hereto, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company or its Subsidiaries or any of their respective Properties which (i) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (ii) if determined adversely to the Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect.  No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided.

 

6.6           No Default.  No Default or Event of Default exists or would be reasonably expected to result from the incurring of any Obligations by the Company.  No “Default” or “Event of Default” (as those terms are defined in the Senior Notes Indentures) exists under any Senior Notes Debt Documents.  Neither the Company nor any Subsidiary is in default under or with respect to any other Contractual Obligation in any respect which, individually or together with all such defaults, would reasonably be expected to have a Material Adverse Effect.

 

6.7           ERISA Compliance.  Except as specifically disclosed in Schedule 6.7:

 

(a)           Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law, except where failure to do so would not reasonably be expected to have a Material Adverse Effect.  Each Plan that is intended to be qualified under Code Section 401(a) is either (i) a prototype plan entitled to rely on the

 

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opinion letter issued by the IRS as to the qualified status of such plan under Section 401 of the Code to the extent provided in Revenue Procedure 2005-16, or (ii) the recipient of a determination letter from the IRS to the effect that such Plan is qualified.  To the best knowledge of the Company, nothing has occurred which would cause the loss of such qualification.  The  Company and each ERISA Affiliate have made all required contributions to any Plan subject to Section 412 of the Code, except as would not reasonably be expected to have a Material Adverse Effect, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

 

(b)           There are no pending or, to the best knowledge of Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or would reasonably be expected to result in a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(c)           (i) No ERISA Event has occurred or is reasonably expected to occur except as would not reasonably be expected to have a Material Adverse Effect; (ii) no Pension Plan has any Unfunded Pension Liability except as would not reasonably be expected to have a Material Adverse Effect; (iii) no Pension Plan has been determined to be, or is expected to be, in “at-risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code); (iv) except as would not reasonably be expected to have a Material Adverse Effect, neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (v) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (vi) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

 

6.8           Use of Proceeds; Margin Regulations.  The proceeds of the Loans shall be used solely for the purposes set forth in and permitted by Section 7.13.  Neither the Company nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.

 

6.9           Title to Properties.  The Company and each Restricted Subsidiary have good and marketable title to the Mortgaged Properties subject only to Permitted Liens, and, except for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, have good and marketable title to, or valid leasehold interests in, all other Property necessary or used in the ordinary conduct of their respective businesses.  The Mortgaged Properties of the Company and its Restricted Subsidiaries are subject to no Liens, other than Permitted Liens.

 

6.10         Oil and Gas Reserves.  Each of the Company and its Restricted Subsidiaries has complied in all material respects (from the time of acquisition by the Company or any Restricted Subsidiary) with all terms of each oil, gas and mineral lease comprising its Oil

 

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and Gas Properties, except where failure to do so would not reasonably be expected to have a Material Adverse Effect.  To the best of the knowledge of the Company and its Restricted Subsidiaries, all of the Hydrocarbon Interests comprising its Oil and Gas Properties are  enforceable in all material respects in accordance with their terms, except as such may be modified by applicable bankruptcy law or an order of a court in equity.

 

6.11         Reserve Report.  The Company has heretofore delivered to the Administrative Agent a true and complete copy of a report, dated effective as of January 1, 2011, prepared by DeGolyer & MacNaughton (the “Initial Reserve Report”) covering certain of the Company’s and its Restricted Subsidiaries’ Oil and Gas Properties described therein.  To the best knowledge of the Company, (i) the assumptions stated or used in the preparation of any Reserve Report are believed to be reasonable as of the date thereof, (ii) all information furnished by any Loan Party to the Independent Engineer for use in the preparation of any Reserve Report was accurate in all material respects, and (iii) there has been no material adverse change in the aggregate amount of the estimated Oil and Gas reserves shown in any Reserve Report since the date thereof, except for changes which have occurred as a result of production in the ordinary course of business.

 

6.12         Gas Imbalances.  Except as disclosed to the Lenders in writing prior to the Effective Time, there are no gas imbalances, take or pay or other prepayments with respect to any of the Oil and Gas Properties in excess of 3% of the Borrowing Base then in effect in the aggregate which would require the Company or its Restricted Subsidiaries to deliver Oil and Gas produced from any of the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor.

 

6.13         Taxes.  The Company and its Subsidiaries have filed all federal Tax returns and reports required to be filed, and have paid all federal Taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP.  The Company and its Subsidiaries have filed all state and other non-federal Tax returns and reports required to be filed, and have paid all state and other non-federal Taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties, income or assets prior to delinquency thereof, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP.  To the  knowledge of the Responsible Officers of the Company, there is no proposed Tax assessment against the Company or any Subsidiary that would, if made, reasonably be expected to have a Material Adverse Effect.

 

6.14         Financial Statements and Condition.

 

(a)           The Audited Financial Statements, (i) were prepared in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein; and (ii) fairly present in all material respects the consolidated financial condition of the Company and its Subsidiaries as of the dates thereof and results of operations for the periods covered thereby.

 

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(b)           During the period from December 31, 2010 to and including the date hereof there has been no Disposition by the Company or any Subsidiaries of any material part of  its business or Property, other than Dispositions permitted by Section 8.2(a), 8.2(b), 8.2(c), 8.2(d) or 8.2(e).

 

(c)           Since December 31, 2010, there has been no event, development or circumstance that has or could reasonably be expected to have a Material Adverse Effect.

 

6.15         Environmental Matters.  Each of the Company and its Subsidiaries conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and Properties, and such Properties which it is acquiring or planning to acquire and as a result thereof the Company has reasonably concluded that, unless specifically disclosed in Schedule 6.15, such Environmental Laws and Environmental Claims would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

6.16         Regulated Entities.  None of the Company, its Subsidiaries, any Person controlling the Company, or any Subsidiary, is an “investment company” within the meaning of the Investment Company Act of 1940.  None of the Company, any Person controlling the Company or any Subsidiary (other than Ellwood), is subject to regulation under the Public Utility Holding Company Act of 2005, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other federal or state statute or regulation limiting its ability to incur Indebtedness.

 

6.17         No Burdensome Restrictions.  Except as set forth on Schedule 6.17, neither the Company nor any Subsidiary is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which would reasonably be expected to have a Material Adverse Effect.

 

6.18         Copyrights, Patents, Trademarks and Licenses, Etc.  The Company and each Restricted Subsidiary own or are licensed or otherwise have the right to use all of the material patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without material conflict with the rights of any other Person.  To the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any Restricted Subsidiary infringes upon any rights held by any other Person.  Except as specifically disclosed in Schedule 6.5, no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Responsible Officers of the Company, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Responsible Officers of the Company, proposed, which, in either case, would reasonably be expected to have a Material Adverse Effect.

 

6.19         Subsidiaries.  As of the Effective Time, the Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.19 hereto and has no material equity investments in any other Person other than those specifically disclosed in part (b) of Schedule 6.19.

 

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6.20         Insurance.  The Company and each Restricted Subsidiary are insured as required under Section 7.6.

 

6.21         Full Disclosure.  None of the representations or warranties made by the Company or any Restricted Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, written statement or certificate furnished by or on behalf of the Company or any Restricted Subsidiary in connection with the Loan Documents, taken as whole, contains any untrue statement of a material fact known to the Company or omits any material fact known to the Company required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.

 

6.22         Solvency.  The Company and its Subsidiaries, taken as a whole are, and after giving effect to the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith, and all rights of contribution of such Person against other Loan Parties under the Guaranty, at law, in equity or otherwise, will be and will continue to be, Solvent.

 

6.23         Labor Matters.  Except to the extent such matters do not to constitute a Material Adverse Effect, (a) no actual or threatened strikes, labor disputes, slowdowns, walkouts, work stoppages, or other concerted interruptions of operations that involve any employees employed at any time in connection with the business activities or operations at the Property of the Company or any Subsidiary exist, (b) hours worked by and payment made to the employees of the Company have not been in violation of the Fair Labor Standards Act or any other applicable laws pertaining to labor matters, (c) all payments due from the Company or any Subsidiary for employee health and welfare insurance, including, without limitation, workers compensation insurance, have been paid or accrued as a liability on its books, and (d) the business activities and operations of the Company and each Subsidiary are in compliance with the Occupational Safety and Health Act and other applicable health and safety laws.

 

6.24         [Reserved.]

 

6.25         Derivative Contracts.  Neither the Company nor any Restricted Subsidiary is party to any Derivative Contract other than Derivative Contracts permitted by Section 8.10.  Set forth on Schedule 6.25 is a list of all Derivative Contracts entered into by the Company or any Restricted Subsidiary as of the Effective Time.

 

6.26         Ellwood Subsidiary.  Ellwood (a) has not engaged in any business other than the ownership and operation of common carrier crude oil pipelines and natural gas pipelines and (b) as a result of Requirements of Law in effect as of the Effective Date, is prevented from duly executing and delivering to the Administrative Agent and the Lenders a Guaranty (or a joinder thereto) or the Security Agreement (or a joinder thereto).

 

6.27         Senior Notes Indentures.  The Obligations incurred in connection with the Loan Documents, after giving effect to the transactions and extensions of credit contemplated hereby, (a) constitute “Senior Debt”, as defined in the Senior Notes Indentures, (b) constitute

 

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“Permitted Debt”, under and as defined in Section 3.3(b) of the Senior Notes Indentures and (c) are secured by Liens created by the Loan Documents that are “Permitted Liens” under and as defined in clause (1) of the definition thereof.

 

6.28         Existing Indebtedness.  Other than Permitted Indebtedness, after giving effect to the transactions contemplated hereby, no Loan Party has any Indebtedness or Disqualified Stock outstanding.

 

6.29         Security Documents.

 

(a)           The Security Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid, binding and enforceable security interest in the Collateral described therein and proceeds and products thereof.  In the case of the Pledged Stock described in the Security Agreement, when any stock certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral described in the Security Agreement which may be perfected by filing a financing statement, when financing statements in appropriate form are filed in the offices specified on Schedule 6.29(a)-1 (which financing statements may be filed by the Administrative Agent) at any time and such other filings as are specified on Schedule 3 to the Security Agreement have been completed (all of which filings may be filed by the Administrative Agent) at any time, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds and products thereof, as security for the Obligations, in each case prior and superior in right to any other Person (except Permitted Liens).  Schedule 6.29(a)-2 lists each UCC financing statement that (i) names any Loan Party as debtor and (ii) will remain on file after the Effective Time.  Schedule 6.29(a)-3 lists each UCC financing statement that (i) names any Loan Party as debtor and (ii) will be terminated on or prior to the Effective Time.

 

(b)           Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid, binding and enforceable Lien on the Mortgaged Properties described therein and proceeds and products thereof; and when the Mortgages are filed in the offices specified on Schedule 6.29(b) (in the case of Mortgages to be executed and delivered on the Effective Date) or in the recording office designated by the Company (in the case of any Mortgage to be executed and delivered pursuant to Section 7.14(b)), each Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties described therein and the proceeds and products thereof, as security for the Obligations, in each case prior and superior in right to any other Person (other than Persons holding Liens or other encumbrances or rights permitted by the relevant Mortgage).

 

ARTICLE VII

 

AFFIRMATIVE COVENANTS

 

So long as the Issuing Lender or any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied:

 

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7.1           Financial Statements.  The Company and each Guarantor shall, and shall cause each of its Subsidiaries to, (i) maintain for itself and each of its respective Restricted Subsidiaries, on a consolidated basis a system of accounting established and administered in accordance with GAAP and (ii) deliver to the Administrative Agent who will deliver to each Lender:

 

(a)           as soon as available, but in any event not later than 90 days after the end of each fiscal year ending thereafter, a copy of the annual audited consolidated balance sheet of the Company and its Restricted Subsidiaries as at December 31, 2011 and as at the end of such year ending thereafter, respectively, and the related consolidated statements of operations and retained earnings, comprehensive income and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year; the Company’s financial statements shall be accompanied by the unqualified opinion (or, if qualified, of a non-material nature (e.g. FASB changes of accounting principles) or nothing indicative of going concern or material misrepresentation nature) and a copy of the management letter, if any, of Ernst and Young LLP or other nationally recognized independent public accounting firm (the “Independent Auditor”), which report shall state that such consolidated financial statements present fairly in all material respects the consolidated financial position of the Company and its Restricted Subsidiaries at the end of such periods and the results of their operations and their cash flows for the periods indicated in conformity with GAAP; and

 

(b)           as soon as available, but not later than 60 days after the close of each of the first three quarterly periods, a copy of the unaudited consolidated balance sheet of the Company as of the end of such quarter and the related consolidated statements of operations and retained earnings, comprehensive income and cash flows for the period commencing on the first day and ending on the last day of such period, setting forth in each case in comprehensive form the figures for the comparable period in the previous fiscal year and certified by a Responsible Officer as fairly presenting in all material respects, in accordance with GAAP (subject to normal and recurring year-end audit adjustments), the consolidated financial position of the Company and its Restricted Subsidiaries at the end of such periods and the results of their operations and their cash flows.

 

7.2           Certificates; Other Production and Reserve Information.  The Company shall furnish to the Administrative Agent and each Lender:

 

(a)           as soon as available, but not later than 60 days after the close of each quarter, a Quarterly Status Report in a form reasonably acceptable to the Lenders, as of the last day of the immediately preceding quarter;

 

(b)           concurrently with the delivery of the financial statements referred to in Sections 7.1(a) and 7.1(b), and the reports referred to in Section 7.2(a), a Compliance Certificate executed by a Responsible Officer;

 

(c)           on or before (i)  April 1, effective as of January 1, of each year during the term of this Agreement, beginning with April 1, 2012, a Reserve Report prepared or audited  by Ryder Scott Co. L.P., Netherland Sewell & Associates, Inc., DeGolyer and MacNaughton or other independent petroleum engineer acceptable to the Administrative Agent (the “Independent

 

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Engineer”) and (ii) October 1, effective as of July 1, of each year during the term of this Agreement beginning October 1, 2011, a Reserve Report prepared by the Company in substantially the same form as the January 1 Reserve Report and certified by a Responsible Officer as being based on assumptions believed to be reasonable as of the date thereof, in each case in form and substance reasonably acceptable to the Administrative Agent;

 

(d)           promptly upon the request of the Administrative Agent, at the request of any Lender, such copies of all geological, engineering and related data contained in the Company’s files or readily accessible to the Company relating to its and its Subsidiaries’ Oil and Gas Properties as may reasonably be requested;

 

(e)           on request by the Administrative Agent, based upon the Administrative Agent’s or the Required Lenders’ good faith belief that the Company’s or its Restricted Subsidiaries’ title to the Mortgaged Properties or the Administrative Agent’s Lien thereon is subject to claims of third parties, or if required by regulations to which the Administrative Agent or any of the Lenders is subject, title and mortgage Lien evidence reasonably satisfactory to the Administrative Agent covering such Mortgaged Property as may be designated by the Administrative Agent, covering the Company’s or its Restricted Subsidiaries’ title thereto and evidencing that the Obligations are secured by Liens and security interests as provided in this Agreement and the Security Documents;

 

(f)            promptly upon its completion in each fiscal year of the Company commencing with the 2011 fiscal year through and including the 2016 fiscal year, and not later than January 30 of each such fiscal year, a copy of the annual budget of the Company and its Restricted Subsidiaries on a consolidated basis for such fiscal year, projecting total Oil and Gas revenue, total revenue, total operating costs and expenses, Consolidated Net Income, Consolidated Interest Expense, Consolidated EBITDA and total capital expenditures, by fiscal quarter; and

 

(g)           promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Restricted Subsidiary as the Administrative Agent, at the request of any Lender, may from time to time reasonably request.

 

7.3           Notices.  The Company shall promptly notify the Administrative Agent and each Lender in writing:

 

(a)           of the occurrence of any Default or Event of Default;

 

(b)           of any matter that has resulted or may reasonably be expected to result in a Material Adverse Effect, including (i) material breach or non performance of, or any default under, a Contractual Obligation of the Company or any Restricted Subsidiary or any allegation thereof; (ii) any material dispute, litigation, investigation, proceeding or suspension between the Company or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any material litigation or proceeding affecting the Company or any Subsidiary, including pursuant to any applicable Environmental Laws;

 

(c)           of any material change in accounting policies or financial reporting practices by the Company or any of its consolidated Restricted Subsidiaries; and

 

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(d)           of the formation or acquisition of any Subsidiary.

 

Each notice under this Section 7.3 shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company or any affected Subsidiary proposes to take with respect thereto and at what time.  Each notice under Section 7.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated.

 

7.4           Preservation of Company Existence, Etc.  The Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to:

 

(a)           preserve and maintain in full force and effect its legal existence, and maintain its good standing under the laws of its state or jurisdiction of formation except where the failure to do so would not reasonably be expected to have a Material Adverse Effect;

 

(b)           preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except where the failure to do so would not reasonably be expected to have a Material Adverse Effect;

 

(c)           use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; and

 

(d)           preserve or renew all of its registered patents, trademarks, trade names and service marks, the nonpreservation of which would reasonably be expected to have a Material Adverse Effect.

 

7.5           Maintenance of Property.  The Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to, maintain and preserve all its Property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and to use the standard of care typical in the industry in the operation and maintenance of its facilities and Oil and Gas Properties except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; provided, however, that nothing in this Section 7.5 shall prevent any such Persons from abandoning any well or forfeiting, surrendering or releasing any lease in the ordinary course of business which is not materially disadvantageous in any way to the Lenders and which, in its opinion, is in the best interest of the Company, and following which such Persons are and will hereafter be in compliance with all obligations hereunder and the other Loan Documents.

 

7.6           Insurance.  The Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to, maintain, with financially sound and reputable independent insurers, insurance with respect to its Properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts and with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses, owning similar Properties in localities where the Company or such Subsidiary operates, except where the failure to do so

 

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would not reasonably be expected to have a Material Adverse Effect.  Such insurance will be primary and not contributing.

 

7.7           Payment of Obligations.  Unless being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Restricted Subsidiary, the Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to, pay and discharge prior to delinquency, all their respective obligations and liabilities, including: (a) all Tax liabilities, assessments and governmental charges or levies upon it or its Properties or assets; (b) all lawful claims which, if unpaid, would by law become a Lien upon its Property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness; except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

 

7.8           Compliance with Laws.  The Company and each Guarantor shall, and shall cause each of their respective Subsidiaries to, comply in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act) except (a) such as may be contested in good faith or as to which a bona fide dispute may exist or (b) where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

 

7.9           Compliance with ERISA.  The Company and each Guarantor shall, and shall cause each of the Company’s ERISA Affiliates to: (a) maintain each Plan in compliance with the applicable provisions of ERISA, the Code and other federal or state law, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; (c) make all required contributions to any Plan subject to Section 412 of the Code, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; and (d) furnish to the Administrative Agent (i) as soon as possible, and in any event within 30 days after the Company or a duly appointed administrator of a Plan files or is required to file, with respect to any Plan, any notice of a “reportable event” (as such term is defined in Section 4043 of ERISA) for which the notice requirement has not been waived by the PBGC (provided that notice shall be required for reportable events arising from the disqualification of a Plan or the distress termination of a Plan (in accordance with ERISA Section 4041(c)) without regard to the waiver of notice provided by the PBGC by regulation or otherwise), a statement of the chief financial officer of the Company setting forth details as to such reportable event and the action which the Company, or such Subsidiary, as the case may be, proposes to take with respect thereto, together with a copy of the notice, if any, of such reportable event given to the PBGC and (ii) promptly after receipt thereof, a copy of any notice the Company, any Subsidiary or any ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC to terminate any Plan pursuant to Section 4042 of ERISA.

 

7.10         Inspection of Property and Books and Records.  The Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to, maintain proper books of record and account, in conformity with GAAP consistently applied.  The Company and each Guarantor shall, and shall cause each of their respective Restricted

 

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Subsidiaries to, permit representatives and independent contractors of the Administrative Agent or any Lender to visit and inspect any of their respective Properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss such Persons’ affairs, finances and accounts with their respective managers, directors, officers, and independent public accountants, all at the expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, when an Event of Default exists the Administrative Agent or any Lender may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice.

 

7.11         Environmental Laws.  The Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to, conduct its respective operations and keep and maintain their respective Properties in compliance with all Environmental Laws, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

 

7.12         New Subsidiary Guarantors.  If, at any time after the date of this Agreement, there exists any Restricted Subsidiary with total assets with a book value of $250,000; or more, then the Company and each Guarantor shall, and shall cause each of their respective Subsidiaries to, on the date any such Restricted Subsidiary is acquired or acquires or otherwise becomes possessed of such amount of total assets, (i) cause each such Restricted Subsidiary (excluding Ellwood) to execute and deliver the Guaranty to the Administrative Agent, (ii) pledge to the Administrative Agent for the benefit of the Lenders all of the outstanding Capital Stock of such Restricted Subsidiary or held by such Restricted Subsidiary (excluding the Capital Stock of any Unrestricted Subsidiary held by such Restricted Subsidiary) pursuant to a Security Document satisfactory to the Administrative Agent and (iii) cause such Subsidiary to execute and deliver such Security Documents as may be required pursuant to Sections 4.2, 4.5(a) or 7.14(b).   Upon the execution and delivery by any Restricted Subsidiary of a Guaranty, such Subsidiary shall automatically and immediately, and without any further action on the part of any Person, (x) become a Guarantor for all purposes of this Agreement and (y) be deemed to have made the representations and warranties, as applied to and including such new Subsidiary, set forth in this Agreement.

 

7.13         Use of Proceeds.  The Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to, use the proceeds of the Loans only for the following purposes: (i) to fund the acquisition, exploration and development of Hydrocarbon Interests; and (ii) for working capital and other general corporate purposes.  The Company and each Guarantor shall, and shall cause each of their respective Subsidiaries to, use the Letters of Credit solely as support for obligations in the ordinary course of business, and for other purposes approved by the Administrative Agent.

 

7.14         Further Assurances.

 

(a)           The Company and each Guarantor shall, and shall cause each of their respective Restricted Subsidiaries to, promptly (and in no event later than twenty (20) days after becoming aware of the need therefor) do all acts and things, and execute and file or record, all instruments, documents, or agreements reasonably requested by the Administrative Agent, to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements

 

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of the Loan Parties in the Loan Documents, including the Notes, or to further evidence and more fully describe the Collateral as security for the Obligations, as to correct any omissions in this Agreement or the Security Documents, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or the Security Documents or the priority thereof or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the reasonable discretion of the Administrative Agent, in connection therewith.

 

(b)           The Company shall promptly (and in no event later than ten Business Days after the need arises) execute and cause the Restricted Subsidiaries (other than Ellwood) to execute such additional Security Documents in form and substance reasonably satisfactory to Administrative Agent, granting to Administrative Agent for the benefit of the Secured Parties first priority perfected Liens on Oil and Gas Properties (subject only to Permitted Liens) that are not then part of the Mortgaged Properties, sufficient to cause the Mortgaged Properties to include at all times eighty-five percent (85%) of the Net Present Value of the Proved Reserves and at least ninety-five percent (95%) of the Net Present Value of the Proved Developed Producing Reserves, in each case as set forth in the most recent Reserve Report.  In addition, the Company and each Guarantor shall, and shall cause each of the Restricted Subsidiaries to, furnish to the Administrative Agent title due diligence in form and substance reasonably satisfactory to the Administrative Agent and will furnish all other documents and information relating to such Mortgaged Properties as the Administrative Agent may reasonably request, including, if so requested, title opinions reasonably satisfactory to the Administrative Agent.  The Company shall pay the costs and expenses of all filings and recordings and all searches deemed necessary by the Administrative Agent to establish and determine the validity and the priority of the Liens created or intended to be created by the Security Documents; and the Company and each Guarantor shall, and shall cause each of the Restricted Subsidiaries to, satisfy all other claims and charges which in the reasonable opinion of the Administrative Agent might prejudice, impair or otherwise affect any of the Mortgaged Properties or the Lien granted thereon to the Administrative Agent for the benefit of the Secured Parties (other than Permitted Liens).

 

(c)           With respect to any Property (other than the Capital Stock of any Unrestricted Subsidiary) acquired after the Effective Date by the Company or any of its Restricted Subsidiaries (other than Ellwood) as to which the Administrative Agent, for the benefit of the Secured Parties, does not otherwise have a first priority perfected Lien, promptly (and in no event later than twenty (20) days after becoming aware of the need therefor) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in such Property, subject only to Permitted Liens, including without limitation, the execution and delivery by all necessary third parties of any Account Control Agreements and the filing of UCC financing statements in such jurisdictions as may be required by the Security Documents or by law or as may be requested by the Administrative Agent.

 

7.15         Agreements Regarding Unrestricted Subsidiaries.  The Company will operate each Unrestricted Subsidiary as a legal entity separate and distinct from the Company or any Restricted Subsidiary.

 

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7.16         Title Opinions.  The Company shall deliver to the Administrative Agent, within 90 days after the date hereof or such other time period as the Administrative Agent in its reasonable discretion agrees, updated title opinions or other evidence of title in form reasonably satisfactory to the Administrative Agent covering at least 80% of the Net Present Value of the Proved Reserves and 90% of the Net Present Value of the Proved Developed Producing Reserves.

 

ARTICLE VIII

 

NEGATIVE COVENANTS

 

So long as the Issuing Lender or any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied:

 

8.1           Limitation on Liens.  The Company and each Guarantor shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Property, whether now owned or hereafter acquired, other than the following:

 

(a)           any Lien on Property of the Company or any Restricted Subsidiary as set forth in Schedule 8.1 securing Indebtedness outstanding on such date;

 

(b)           any Lien created under any Loan Document;

 

(c)           Liens for Taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that nonpayment thereof is permitted by Section 7.7;

 

(d)           carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other similar Liens arising in the ordinary course of business (whether by law or by contract) which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject thereto;

 

(e)           Liens consisting of pledges or deposits required in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation;

 

(f)            easements, rights of way, restrictions, defects or other exceptions to title and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, are not incurred to secure Indebtedness, and which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the businesses of the Company, the Guarantors and the Restricted Subsidiaries;

 

(g)           Liens on the Property of the Company, any Guarantor or any Restricted Subsidiary of such Person securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money) or statutory obligations, (ii) contingent obligations on surety  

 

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and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business;

 

(h)           Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution or under any deposit account agreement entered into in the ordinary course of business; provided, however, that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company, (ii) the Company (or applicable Restricted Subsidiary) maintains (subject to such right of set off) dominion and control over such account(s), and (iii) such deposit account is not intended by the Company, any Guarantor or any Restricted Subsidiary to provide cash collateral to the depository institution;

 

(i)            Oil and Gas Liens to secure obligations which are not delinquent and which do not in any case materially detract from the value of the Oil and Gas Property subject thereto.

 

(j)            purchase money Liens and Liens in connection with Capital Leases, in each case upon or in any Property acquired or held by the Company or any Restricted Subsidiary in the ordinary course of business; provided that the Indebtedness secured by such Liens (i) was incurred solely for the purpose of financing the acquisition of such Property, and does not exceed the aggregate purchase price of such Property and (ii) is secured only by such Property and proceeds therefrom and not by any other assets of the Company or any Restricted Subsidiary;

 

(k)           licenses of intellectual property granted by Company or any Restricted Subsidiary in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of the Company or any Restricted Subsidiary;

 

(l)            Liens that secure Indebtedness permitted by Section 8.5(d); and

 

(m)          Liens not otherwise permitted under this Section 8.1 securing an amount not to exceed $2,000,000 at any time.

 

8.2           Disposition of Assets.  The Company and each Guarantor shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) (collectively, “Dispositions”) any Property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except:

 

(a)           as permitted under Sections 6.10, 7.5, 8.3, 8.4, or 8.10;

 

(b)           Dispositions of inventory including produced Oil and Gas in the ordinary course of business;

 

(c)           Dispositions among the Company and wholly-owned Restricted Subsidiaries which are Guarantors;

 

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(d)           Property that is (i) used, worn out, obsolete, depleted, uneconomic, or surplus disposed of in the ordinary course of business, (ii) no longer necessary for the business of such Person, or (iii) contemporaneously replaced by Property of at least comparable value and use;

 

(e)           Dispositions of accounts and notes receivable in the ordinary course of business consistent with past practices;

 

(f)            Dispositions of interests in Oil and Gas Properties included in the then-effective Borrowing Base, or portions thereof, that are sold for fair cash consideration (considering any net production proceeds from the effective date of any such Disposition to the closing thereof that are credited against the purchase price payable at such closing as Net Cash Proceeds received by the Company or such Guarantor); provided, however, that the aggregate sales prices (as of the effective date of each particular Disposition) for Dispositions made pursuant to this Section 8.2(f) during any Borrowing Base Period shall not exceed 10% of the then effective Borrowing Base; provided further, however, that any such aggregate Disposition of Oil and Gas Properties in any Borrowing Base Period which result in the receipt on a cumulative basis in such period of Net Cash Proceeds in excess of 5% of the then effective Borrowing Base (considering any net production proceeds from the effective date of any Disposition to the closing thereof that are credited against the purchase price payable at such closing as Net Cash Proceeds received by the Company or such Guarantor) shall immediately and automatically, and without the need for further act or evidence, reduce the Borrowing Base on a dollar-for-dollar basis (based on the amount attributable by the Administrative Agent to the sold Oil and Gas Properties in the most recent Borrowing Base determination under Section 2.6) and any resulting Deficiency shall be immediately cured by the Company pursuant to Section 2.6(f)(i);

 

(g)           the sale or other Disposition of any Unrestricted Subsidiary;

 

(h)           the sale or other Disposition of any Oil and Gas Properties not included in the then-effective Borrowing Base (other than the Disposition of the Hastings Assets); and

 

(i)            the sale or other Disposition of all or any portion of the Hastings Assets; provided, however, that to the extent any of the Hastings Assets include Proved Reserves, upon such sale or other Disposition of such assets, the then-effective Borrowing Base shall be reduced by an amount equal to the value assigned to such assets in the then effective Borrowing Base, as determined by the Administrative Agent.

 

8.3           Consolidations and Mergers.  The Company and each Guarantor shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except:

 

(a)           any Guarantor may merge or consolidate with, or transfer all or substantially all of its assets to, the Company or another Guarantor; provided, however, that the

 

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Company shall be the continuing or surviving corporation in the case of a merger involving the Company;

 

(b)           any Subsidiary that is not a Guarantor may merge or consolidate with, or transfer all or substantially all of its assets to, the Company or a Guarantor; provided, however, that the Company or such Guarantor shall be the continuing or surviving corporation in the case of a merger involving the Company or a Guarantor; and

 

(c)           any Guarantor or other Subsidiary may make Dispositions to the Company or another Guarantor.

 

8.4           Loans and Investments.  The Company and each Guarantor shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person, including any Affiliate of the Company, except for:

 

(a)           investments in Cash Equivalents;

 

(b)           extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business;

 

(c)           investments in Restricted Subsidiaries or Persons that become Restricted Subsidiaries upon such investment;

 

(d)           investments in Derivative Contracts permitted under Section 8.10;

 

(e)           investments resulting from transactions specifically permitted under Section 8.3;

 

(f)            investments with third parties that are (i) customary in the oil and gas business, (ii) made in the ordinary course of the Company’s business, and (iii) made in the form of or pursuant to operating agreements, processing agreements, farm-in agreements, farm-out agreements, joint venture agreements, development agreements, unitization agreements, pooling agreements, joint bidding agreements, service contracts and other similar agreements, that do not, in any case, (x) constitute an investment in any state law partnership or other Person (subject to Section 8.4(m)) or (y) involve the Disposition of any Mortgaged Property covering Proved Reserves;

 

(g)           advances by the Company to any of its full-time employees for housing loans and for the payment of relocation expenses which do not exceed $2,000,000 at any time outstanding in the aggregate to all such employees;

 

(h)           acquisitions of proved Hydrocarbon Interests and related assets;

 

(i)            provided that there shall not have occurred and be continuing a Default hereunder, and no such Default would result therefrom, the Company and the Guarantors may

 

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make (i) cash investments in Ellwood not to exceed an aggregate amount of $2,000,000 in any fiscal year and (ii) investments in Ellwood for the purpose of the construction and maintenance of a pipeline and related facilities that when aggregated with Indebtedness incurred pursuant to Section 8.5(d) does not exceed $25,000,000;

 

(j)            provided that there shall not have occurred and be continuing a Default hereunder, and no such Default would result therefrom, the Company and the Guarantors may make cash investments in Unrestricted Subsidiaries in an amount not to exceed $15,000,000 in the aggregate during the term of this Agreement;

 

(k)           investments in stock, obligations or securities received in settlement of debts;

 

(l)            the creation of any additional Subsidiaries in compliance with Section 7.12; and

 

(m)          Ellwood’s contribution of pipeline and related facilities assets to a Person that is not a Subsidiary so long as the fair value of the assets contributed at the time of contribution, net of the fair value of the Borrower’s and its Subsidiaries’ interest in such Person at the time of contribution, does not exceed $15,000,000.

 

8.5           Limitation on Indebtedness.  The Company and each Guarantor shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume, suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness, except (collectively, “Permitted Indebtedness”):

 

(a)           Indebtedness incurred pursuant to the Loan Documents;

 

(b)           Indebtedness incurred pursuant to (i) the 2017 Senior Notes Indenture in an aggregate principal amount not to exceed $150,000,000 and (ii) the 2019 Senior Notes Indenture in an aggregate principal amount not to exceed $500,000,000;

 

(c)           [Reserved];

 

(d)           Indebtedness incurred in connection with the financing of the Ellwood pipeline expansion not to exceed $20,000,000, provided, that (i) the Company shall have furnished to the Administrative Agent not less than seven Business Days prior written notice of its intent to incur such Indebtedness, the amount thereof, and the anticipated closing date, together with copies of drafts of the definitive documents; and (ii) such Indebtedness may be secured only by a lien on the assets of Ellwood and shall otherwise be Non-Recourse Obligations;

 

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

 

(f)            Indebtedness secured by the Liens permitted under paragraph (j) of Section 8.1 in an aggregate amount not to exceed $10,000,000 at any time;

 

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(g)           Indebtedness owing in connection with the financing of insurance premiums in the ordinary course of business; and

 

(h)           in addition to the Indebtedness otherwise permitted under this Section 8.5, Indebtedness of the Loan Parties not to exceed $15,000,000 in the aggregate at any time outstanding.

 

8.6           Transactions with Affiliates.  Except as set forth on Schedule 8.6, the Company and each Guarantor shall not, and shall not permit any of their respective Restricted Subsidiaries to, directly or indirectly, enter into any transaction with or make any payment or transfer to any Affiliate of the Company or its shareholders, except in the ordinary course of business and on terms no less favorable to the Company, such Guarantor or such Subsidiary than would obtain in a comparable arm’s length transaction with a Person not an Affiliate of the Company, such Guarantor or such Subsidiary or to the extent permitted under Section 8.9.

 

8.7           Margin Stock.  The Company and each Guarantor shall not, and shall not permit any of their respective Restricted Subsidiaries to, directly or indirectly, suffer or permit any Subsidiary to, use any portion of the proceeds of the Loans (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance Indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 15(d) of the Exchange Act.

 

8.8           [Reserved.]

 

8.9           Restricted Payments.  The Company and each Guarantor shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, (i) purchase, redeem or otherwise acquire for value any membership interests, partnership interests, capital accounts, shares of its capital stock or any warrants, rights or options to acquire such membership interests, partnership interests or shares, now or hereafter outstanding from its members, partners or stockholders (other than from its members, partners or stockholders that are Loan Parties); (ii) declare or pay any distribution, dividend or return capital to its members, partners or stockholders (other than to its members, partners or stockholders that are Loan Parties), or make any distribution of assets in cash or in kind to its members, partners or stockholders (other than members, partners or stockholders that are Loan Parties); or (iii) make any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Indebtedness outstanding under or in respect of any Senior Notes Indenture (collectively “Restricted Payments”); provided, however, that the Company may if (A) no Default shall have occurred and be continuing, (B) no such Restricted Payment shall cause a Default, and (C) at the time any such Restricted Payment is made by the Company, and giving pro forma effect to such payment, the ratio of the Effective Amount to the Borrowing Base does not exceed .75 to 1.00:

 

(x) following delivery to the Administrative Agent of the Company’s audited consolidated financial statements pursuant to Section 7.1(a), declare and pay in any fiscal year commencing with the 2011 fiscal year regular Cash Dividends that do not exceed the greater of

 

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(A) $5,000,000 and (B) an aggregate amount equal to 25% of Consolidated Net Income for the prior fiscal year;

 

(y) make regularly scheduled payments of interest or mandatory prepayments in respect of Indebtedness under or in respect of any Senior Notes Indenture in accordance with the terms of the applicable Senior Notes Indenture, but only to the extent required by the applicable Senior Notes Indenture; and

 

(z) make optional prepayments, redemptions, purchases or other defeasances in respect of any Senior Notes using the Net Cash Proceeds of an “Equity Offering” as defined in the Senior Notes Indentures, or the issuance of debt securities or instruments or the incurrence of loans.

 

8.10         Derivative Contracts.

 

(a)           No Loan Party shall, directly or indirectly, enter into or in any manner be liable on any Derivative Contract except:

 

(i)            Derivative Contracts entered into with the purpose and effect of fixing or setting a floor for prices on oil or gas expected to be produced by such Person; provided, however, that at all times (a) no such contract shall be for speculative purposes; (b) as of any date (the “Calculation Date”) no such contract, when aggregated with all Derivative Contracts permitted under this Section 8.10(a)(i), shall cover a notional volume in excess of the Applicable Percentage of the total Projected Oil and Gas Production to be produced in any month from the Proved Developed Producing Reserves reflected in the most recent Reserve Report; provided, however, for purposes of the foregoing calculation, that any Derivative Contract under which the Company’s or any Guarantor’s interest is solely a put or an option to purchase a put shall not be considered when calculating the Applicable Percentage; (c) each such contract (excluding Derivative Contracts offered by national commodity exchange) shall be with the Administrative Agent, or any of the Lenders or their Affiliates, or with a counterparty or have a guarantor of the obligation of the counterparty which, at the time the contract is made, has long-term obligations rated BBB+ or Baa1 or better, respectively, by S&P or Moody’s; and (d) no such contract requires the Company to put up money, assets, letters of credit or other security against the event of its non-performance prior to actual default by the Company in performing its obligations thereunder, except Liens in favor of the Administrative Agent for the benefit of the Secured Parties under the Security Documents; or

 

(ii)           Derivative Contracts entered into with the purpose and effect of (A) fixing or capping interest rates on a principal amount of Indebtedness of the Company that is accruing interest at a variable rate, the notional amount of which does not exceed (when aggregated with all other Derivative Contracts of the Company then in effect and effectively converting interest rates from floating to fixed) 100% of the outstanding principal amount of Indebtedness which bears interest at a floating rate or (B) converting the interest rate on a principal amount

 

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of Indebtedness of the Company that is accruing interest at a fixed rate to a floating rate the notional amount of which does not exceed (when aggregated with all Derivative Contracts of the Company then in effect effectively converting interest rates from fixed to floating) 100% of the outstanding principal amount of Indebtedness which bears interest at a fixed rate; provided, however, that, in each case, (i) no such contract shall be for speculative purposes; (ii) in the case of clause (A) above, the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding Indebtedness of the Company to be hedged by such contract, (iii) no such contract requires the Company to put up money, assets, letters of credit, or other security against the event of its non-performance prior to actual default by the Company in performing its obligations thereunder, (iv) each such contract shall be with a Lender or with a counterparty or have a guarantor of the obligation of the counterparty who, at the time the contract is made, has long-term obligations rated BBB+ or Baa1 or better, respectively, by S&P or Moody’s, and (v) such Derivative Contracts shall correspond to the tenor of the corresponding Indebtedness and (iv) no such Derivative Contract shall remain in effect after the corresponding Indebtedness with respect to which such Derivative Contract was originally entered into has been repaid in full.

 

(b)           In the event the Company enters into a Derivative Contract with any Lender, the contingent obligations evidenced under such Derivative Contract shall not be applied against such Lender’s Commitment nor against the Effective Amount.  The benefits of the Security Documents and of the provisions of the Loan Documents relating to the Collateral shall also extend to and be available on a pro rata basis to each Qualifying Derivative Contract Counterparty in respect to all Obligations with respect to the related Qualifying Derivative Contract.

 

8.11         Sale Leasebacks.  No Loan Party shall, directly or indirectly, become liable, directly or by way of any Guaranty Obligation, with respect to any lease of any Property (whether real, personal or mixed) whether now owned or hereafter acquired, (a) which the Loan Party has sold or transferred (excluding transfers effected by means of dividends of Property or Capital Stock permitted hereunder) or is to sell or transfer to any other Person or (b) which the Loan Party intends to use for substantially the same purposes as any other Property which has been or is to be sold or transferred (excluding transfers effected by means of dividends of Property or Capital Stock permitted hereunder) by the Loan Party to any other Person in connection with such lease.

 

8.12         Consolidated Leverage Ratio.  The Company shall not permit the Consolidated Leverage Ratio to exceed 4.00 to 1.00 for any fiscal quarter.

 

8.13         Current Ratio.  The Company shall not permit the ratio of Current Assets to Current Liabilities to be less than 1.00 to 1.00 as of the last day of any fiscal quarter; provided, however, that for purposes of such ratio, assets or liabilities required by ASC 815 and ASC 410 shall be excluded from current assets and current liabilities, respectively.

 

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8.14         Change in Business.

 

(a)           The Company and each Guarantor shall not, and shall not permit any Restricted Subsidiaries to, directly or indirectly, engage in any business or activity other than the Principal Business.  The Company and each Guarantor shall not permit Ellwood to, directly or indirectly, engage in any business other than the ownership and operation of common carrier crude oil pipelines.  The Company and each Guarantor shall not, and shall not permit any Unrestricted Subsidiaries to, directly or indirectly, engage in any business or activity other than the Principal Business.

 

(b)           The Company and each Guarantor will not permit any Restricted Subsidiary which is a general partner in or owner of a general partnership interest in an Unrestricted Subsidiary to own or acquire any other Property except for distributions made to it by such Unrestricted Subsidiary or other rights or interests relating to such Unrestricted Subsidiary; or permit any Restricted Subsidiary which is a general partner in or owner of a general partnership interest in an Unrestricted Subsidiary to engage in any business or activity other than holding the Capital Stock in and other rights or interests relating to such Unrestricted Subsidiary.   With respect to Unrestricted Subsidiaries, the Company and each Guarantor will not permit any Restricted Subsidiary to be the general partner in or owner of a general partnership interest in an Unrestricted Subsidiary, unless such Restricted Subsidiary is a corporation or a limited liability company.

 

8.15         Accounting Changes.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Company or of any Subsidiary.

 

8.16         Certain Contracts; Amendments; Multiemployer Plans.  Except for the restrictions expressly set forth in the Loan Documents and the Senior Notes Indentures, the Company and each Guarantor shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Restricted Subsidiary of the Company to: (a) pay dividends or make other distributions to the Company, (b) redeem equity interests held in it by the Company, (c) repay loans and other Indebtedness owing by it to the Company, or (d) transfer any of its assets to the Company.  The Company and each Guarantor shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into any “take-or-pay” contract or other contract or arrangement for the purchase of goods or services which obligates it to pay for such goods or service regardless of whether they are delivered or furnished to it, except as permitted by Section 8.5(e).  The Company and each Guarantor shall not, and shall not permit any ERISA Affiliate to, incur any obligation to contribute to any Multiemployer Plan (within the meaning of Section 4001(a)(3) of ERISA) in a manner that could reasonably be expected to have a Material Adverse Effect.

 

8.17         Senior Notes.  The Company and each Guarantor shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly:

 

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(a)           amend or modify any of the terms or provisions of the Senior Notes Indentures or the Senior Notes, if such amendment or modification would have the effect of (i) accelerating the maturity date of the principal amount thereof, or any scheduled interest payment thereon; (ii) increasing the principal amount thereof or interest rate thereon; (iii) causing, or purporting to cause, the Liens securing the Obligations to cease to be “Permitted Liens” (as defined in the respective Senior Notes Indentures); or (iv) requiring the Company to grant any Lien for the benefit of the holders thereof, except to the extent described in Section 3.5 of the Senior Notes Indentures (it being understood in all events that no provision which would cause the Company to be required to grant any such Lien may be granted if prohibited by any term of this Agreement); or

 

(b)           amend or modify any other term or provision of the Senior Notes Indentures or the Senior Notes, if such amendment or modification would be materially adverse to the Lenders.

 

8.18         Forward Sales, Production Payments, Etc.  The Company and each Guarantor shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly:

 

(a)           enter into any forward sales transaction or agreement with respect to physical deliveries of Oil and Gas outside the ordinary course of business as conducted prior to the Effective Time; or

 

(b)           sell or convey any production payment, term overriding royalty interest, net profits interest or any similar interest (except for overriding royalty or net profits interests granted to employees or consultants of the Company or any Restricted Subsidiary in the ordinary course of business in connection with the generation of prospects or the development of Oil and Gas Properties).

 

8.19         Use of Proceeds.  The Company and each Guarantor shall not, and shall not permit any of its respective Restricted Subsidiaries to, directly or indirectly, use or permit the use of all or any portion of the Loans or any Letters of Credit for any purpose other than those set forth in Section 7.13.

 

8.20         New Bank Accounts.  The Company and each Guarantor shall not, and shall not permit any of its respective Restricted Subsidiaries to, open or otherwise establish, or deposit or otherwise transfer funds into, any bank account in the name or otherwise for the benefit of the Company or such Subsidiary with a balance in excess of $500,000 (other than zero-balance accounts with a balance of equal to or less than $20,000 that are swept daily into an account controlled by the Administrative Agent), unless the Administrative Agent shall have received an Account Control Agreement within 30 days after the establishment of such account or such other time period as the Administrative Agent in its reasonable discretion agrees, in form and substance reasonably satisfactory to the Administrative Agent in its sole discretion, executed and delivered by Borrower and the bank or other financial institution at which such account is maintained, unless such requirement is waived by the Administrative Agent in writing.

 

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ARTICLE IX

 

EVENTS OF DEFAULT

 

9.1           Event of Default.  Any of the following shall constitute an “Event of Default”:

 

(a)           Principal Non Payment.  The Company fails to pay, when and as required to be paid herein, any amount of scheduled principal payment of any Loan, including any mandatory prepayment under Section 2.6(f) of this Agreement;

 

(b)           Interest and Expense Non-Payment.  Any Loan Party fails to pay, when and as required to be paid herein, any interest due on any Interest Payment Date, any other payments for fees, expenses, or other amounts payable hereunder or under any other Loan Document within three (3) Business Days after the same becomes due and payable;

 

(c)           Representation or Warranty.  Any written representation or warranty by the Company, any Guarantor or any Restricted Subsidiary made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any Guarantor, any Restricted Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made;

 

(d)           Specific Defaults.  Any Loan Party fails to perform or observe any term, covenant or agreement contained in Sections 7.3(a), 7.6, 7.12 or 7.13, in Article VIII, or in the Agent Fee Letter or in the Lender Fee Letter;

 

(e)           Other Defaults.  The Company, any Guarantor or any Restricted Subsidiary fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of (i) 15 days, in the case of Sections 7.1 and 7.14 and (ii) 30 days, in all other cases after the earlier of (x) the date upon which a Responsible Officer knew or reasonably should have known of such default or (y) the date upon which written notice thereof is given to the Company by the Administrative Agent or any Lender;

 

(f)            Cross Default.  The Company, any Guarantor or any Restricted Subsidiary (i) fails to make any payment of more than $15,000,000 in respect of any Indebtedness when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (ii) fails after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness having an aggregate principal amount of more than $15,000,000 if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity; (iii) any

 

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Indebtedness of the Company, any Guarantor or any other Restricted Subsidiary in excess of $15,000,000 shall be declared due and payable prior to its stated maturity; or (iv) an “Event of Default” as defined in any Senior Notes Indenture as in effect on the Closing Date, or any other or additional “Event of Default” which may be added to or otherwise be included or exist after the Effective Date in any Senior Notes Indenture, shall occur and be continuing;

 

(g)           Insolvency; Voluntary Proceedings.  The Company, any Guarantor or any Restricted Subsidiary (i) generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) commences any Insolvency Proceeding with respect to itself; or (iii) takes any action to effectuate or authorize any of the foregoing;

 

(h)           Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company, any Guarantor or any Restricted Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against all or a substantial part of the Company’s, any Guarantor’s or any Restricted Subsidiary’s Properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company, any Guarantor or any Restricted Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company, any Guarantor or any Restricted Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its Property or business;

 

(i)            Monetary Judgments.  One or more non-interlocutory judgments, non-interlocutory orders, decrees or arbitration awards is entered against the Company, any Guarantor or any other Restricted Subsidiary involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $15,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after the entry thereof;

 

(j)            Change of Control.  There occurs any Change of Control;

 

(k)           Loss of Permit.  Any Governmental Authority revokes or fails to renew any material license, permit or franchise of the Company, any Guarantor or any other Restricted Subsidiary, or the Company, any Guarantor or any other Restricted Subsidiary for any reason loses any material license, permit or franchise, or the Company, any Guarantor or any other Restricted Subsidiary suffers the imposition of any restraining order, escrow, suspension or impound of funds in connection with any proceeding (judicial or administrative) with respect to any material license, permit or franchise and, in each case, such revocation, failure or loss could reasonably be expected to have a Material Adverse Effect; and such default remains unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of such default or (ii) the date upon which written notice thereof is given to the Company by the Administrative Agent or any Lender;

 

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(l)            Guaranty Default.  A Guaranty is for any reason partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and effect, or such Guarantor or any other Person contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder;

 

(m)          Enforceability or Perfection of Loan Documents.  (i) Any Loan Document shall, at any time after its execution and delivery and for any reason, cease to be in full force and effect or shall be declared to be null and void, the validity or enforceability thereof shall be contested by any Person party thereto (other than the Administrative Agent or any Lender) or any such Person party thereto (other than the Administrative Agent or any Lender) shall deny that it has any or further liability or obligation thereunder, or the Obligations shall be subordinated for any reason (other than by the consent of the Lenders); or (ii) any Lien created under any Loan Document shall fail to constitute a first priority, perfected Lien in a material portion of the Collateral, subject only to Permitted Liens, and such failure shall continue for at least thirty (30) days after the earlier of (A) the date upon which a Responsible Officer knew or reasonably should have known of such default or (B) the date upon which written notice thereof is given to the Company by the Administrative Agent or any Lender; or

 

(n)           ERISA.  Either (i) any unpaid minimum required contribution (as defined in Section 430 of the Code in excess of $15,000,000 exists with respect to any Pension Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii) the Company or any ERISA Affiliate institutes steps to terminate any Pension Plan and the then current value of such Pension Plan’s benefit liabilities exceeds the then current value of such Pension Plan’s assets available for the payment of such benefit liabilities by more than $15,000,000.

 

9.2           Remedies.  If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders:

 

(a)           declare the Commitment, if any, of each Lender to make Loans or participate in Issuances of Letters of Credit to be terminated, or declare all or any part of the unpaid principal of the Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be immediately due and payable, whereupon the same shall be, without presentment, demand, protest, notice of intention to accelerate, notice of acceleration, or any other notice of any kind, all of which are hereby expressly waived by the Company and each Guarantor, immediately due and payable; and

 

(b)           exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in Section 9.1(g) or 9.1(h) (in the case of clause (i) of Section 9.1(h) upon the expiration of the 60-day period mentioned therein), the obligation of each Lender to make Loans or participate in Issuances of Letters of Credit shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Administrative Agent, or any Lender and without presentment, demand, protest, notice of intention to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by the Company and each Guarantor.

 

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9.3                                 Application of Proceeds.  The proceeds received by the Administrative Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Administrative Agent of its remedies shall be applied, in full or in part, together with any other sums then held by the Administrative Agent pursuant to this Agreement, promptly by the Administrative Agent as follows:

 

(a)                                  first, to the payment or reimbursement of the Administrative Agent for all costs, expenses, disbursements and losses incurred by the Administrative Agent and which any Loan Party is required to pay or reimburse pursuant to the Loan Documents, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full;

 

(b)                                 second, to the payment or reimbursement of the Lenders and each Qualified Derivative Contract Counterparty for all costs, expenses, disbursements and losses incurred by such Persons and which any Loan Party is required to pay or reimburse pursuant to the Loan Documents, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full;

 

(c)                                  third, to the payment of interest on the Loans which is then due;

 

(d)                                 fourth, to the payment of principal of the Loans which is then due and to the payment or prepayment to the Lenders and each Qualified Derivative Contract Counterparty of all other Obligations; and

 

(e)                                  fifth, to whomsoever shall be legally entitled thereto.

 

In the event that any such proceeds are insufficient to pay in full the items described in clauses (a) through (e) of this Section 9.3, the Loan Parties shall remain liable, jointly and severally, for any deficiency.  Each Loan Party acknowledges the relative rights, priorities and agreements of the Administrative Agent, the Lenders and the Qualified Derivative Contract Counterparty, as set forth in this Agreement, including as set forth in this Section 9.3.

 

9.4                                 Rights Not Exclusive.  The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.

 

ARTICLE X

 

THE ADMINISTRATIVE AGENT

 

10.1                           Appointment and Authorization; Limitation of Agency.

 

(a)                                  Each Lender hereby irrevocably (subject to Section 10.9) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other

 

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Loan Document, together with such powers as are reasonably incidental thereto.  The Administrative Agent expressly agrees to act on behalf of the Lenders and each other Secured Party that is an Affiliate of any Lender.  The duties of the Administrative Agent shall be administrative and mechanical in nature; notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Administrative Agent shall not have any duty or responsibility, except those expressly set forth herein, nor shall the Administrative Agent, under any circumstances, have or be deemed to have any fiduciary relationship with any Person, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.

 

(b)                                 The Issuing Lender shall have all of the benefits and immunities (i) provided to the Agent in this Article X with respect to any acts taken or omissions suffered by the Issuing Lender in connection with Letters of Credit Issued by it or proposed to be Issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term “Administrative Agent,” as used in this Article X, included the Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to the Issuing Lender.

 

10.2                           Delegation of Duties.  The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects with reasonable care.

 

10.3                           Liability of Administrative Agent.  None of the Administrative Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Company, any Guarantor or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness (other than such Administrative Agent-Related Person’s own due execution and delivery), genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company, any Guarantor or any other party to any Loan Document to perform its obligations hereunder or thereunder.  No Administrative Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Properties, books or records of the Company or any of the Company’s Subsidiaries or Affiliates.

 

10.4                           Reliance by Administrative Agent.

 

(a)                                  The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter,

 

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telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

 

(b)                                 For purposes of determining compliance with the conditions specified in Section 5.1, each Lender that has made available to the Administrative Agent its Pro Rata Share of the initial Credit Extension or subsequent Credit Extension, as the case may be, shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender as a condition precedent to such initial Credit Extension or subsequent Credit Extension, as applicable.

 

10.5                           Notice of Default.  The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to Defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”.  The Administrative Agent will notify the Lenders of its receipt of any such notice.  Subject to Section 10.4(a), the Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Lenders in accordance with Article IX; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

 

10.6                           Credit Decision.  Each Lender acknowledges that no Administrative Agent-Related Person has made any representation or warranty to it, and that no act by any Administrative Agent-Related Person hereafter taken, including any review of the affairs of the Company, any Guarantor or their respective Subsidiaries, shall be deemed to constitute any representation or warranty by any Administrative Agent-Related Person to any Lender.  Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into the business, prospects, operations, Property, financial and other condition and creditworthiness of the Company, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the

 

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Company hereunder.  Each Lender also represents that it will, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, Property, financial and other condition and creditworthiness of the Company.  Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, Property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Administrative Agent-Related Persons.

 

10.7                           Indemnification.  Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Administrative Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata according to each respective Lender’s Pro Rata Share, each Administrative Agent-Related Person from and against any and all Indemnified Liabilities INCLUDING SUCH INDEMNIFIED LIABILITIES AS MAY ARISE OR BE CAUSED BY THE NEGLIGENCE, SOLE, JOINT, CONCURRENT, COMPARATIVE OR OTHERWISE OF SUCH ADMINISTRATIVE AGENT-RELATED PERSONS; provided, however, that no Lender shall be liable for the payment to any Administrative Agent-Related Persons of any portion of such Indemnified Liabilities to the extent the same arise from (i) the gross negligence or willful misconduct of any Administrative Agent-Related Person or (ii) a claim or action asserted by one or more other Administrative Agent-Related Persons.  Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out of pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Company.  The undertaking in this Section 10.7 shall survive the payment of all Obligations hereunder and the resignation or replacement of the Administrative Agent.

 

10.8                           Administrative Agent in Individual Capacity.  Bank of Montreal and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire or underwrite equity or debt securities of and generally engage in any kind of banking, investment banking, trust, financial advisory, underwriting or other business with the Company and its Affiliates as though Bank of Montreal were not the Administrative Agent hereunder and without notice to or consent of the Lenders.  The Lenders acknowledge that, pursuant to such activities, Bank of Montreal or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Affiliate) and acknowledge that the Administrative Agent-Related Persons shall be under no obligation to provide such information to them.  With respect to Obligations held by it, Bank of Montreal shall have the same rights and powers under this Agreement as any

 

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other Lender and may exercise the same as though it were not the Administrative Agent or the Issuing Lender.

 

10.9                           Successor Administrative Agent.  The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders.  If the Administrative Agent resigns under this Agreement, the Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders.  If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders, a successor administrative agent from among the Lenders.  Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor administrative agent and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article X and Sections 11.4 and 11.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.  If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Lenders appoint a successor administrative agent as provided for above.

 

10.10                     Withholding Tax.

 

(a)                                  If any Lender is not a “United States Person” within the meaning of Section 7701(a)(30) of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding Tax under Sections 1441 or 1442 of the Code, such Lender agrees with and in favor of the Administrative Agent, to deliver to the Administrative Agent:

 

(i)                                     if such Lender claims an exemption from, or a reduction of, withholding Tax under a United States Tax treaty, properly completed IRS Form W-8 BEN (or any successor form thereto) before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement;

 

(ii)                                  if such Lender claims that interest paid under this Agreement is exempt from United States withholding Tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form W-8 ECI (or any successor form thereto) before the payment of any interest is due in the first taxable year of such Lender and in each succeeding taxable year of such Lender during which interest may be paid under this Agreement, and IRS Form W 9; and

 

(iii)                               such other certificates, form or forms as may be required or appropriate under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding Tax.

 

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Such Lender agrees to promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

 

(b)                                 If any Lender claims exemption from, or reduction of, withholding Tax under a United States Tax treaty by providing IRS Form W-8 BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations held by such Lender, such Lender agrees to notify the Administrative Agent of the percentage amount in which it is no longer the beneficial owner of Obligations held by such Lender.  To the extent of such percentage amount, the Administrative Agent will treat such Lender’s IRS Form W-8 BEN as no longer valid.

 

(c)                                  If any Lender claiming exemption from United States withholding Tax by filing IRS Form W-8 ECI with the Administrative Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations held by such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding Tax requirements imposed by Sections 1441 and 1442 of the Code.

 

(d)                                 If any Lender is entitled to a reduction in the applicable withholding Tax, the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding Tax after taking into account such reduction.  If the forms or other documentation required by Section 10.10(a) of this Section 10.10 are not delivered to the Administrative Agent, then the Administrative Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding Tax.

 

(e)                                  If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding Tax ineffective, or for any other reason) such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including penalties and interest, and including any Taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section 10.10(e), together with all costs and expenses (including Attorney Costs).  The obligation of the Lenders under this Section 10.10(e) shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent.

 

10.11                     Arranger; Syndication Agents; Documentation Agents.  The Arranger and each of the Co-Syndication Agents  and Co-Documentation Agents  in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liability, under this Agreement or the other Loan Documents.

 

10.12                     Release of Collateral.  The Administrative Agent is hereby irrevocably authorized by each of the Lenders to effect any release of Liens or guarantee obligations contemplated by Section 11.26.

 

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ARTICLE XI

 

MISCELLANEOUS

 

11.1                           Amendments and Waivers.  No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document (other than with respect to any Qualifying Derivative Contract and any documents delivered in connection therewith, which shall be governed with respect to any amendment, modification, termination or waiver as expressly provided for in such Qualifying Derivative Contract and any other document delivered in connection therewith), and no consent with respect to any departure by the Company, any Guarantor or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Administrative Agent at the written request of the Required Lenders) and the Company and acknowledged by the Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given; provided, however, that no such agreement shall waive or amend Section 2.14 or change the definition of “Defaulting Lender” without the written consent of the Administrative Agent and the Issuing Lender; and provided further, however, that no such waiver, amendment, modification, termination or consent shall, unless in writing and signed by all the Lenders, and the Company and acknowledged by the Administrative Agent, do any of the following:

 

(a)                                  increase or extend the Commitment of any Lender (including without limitation by means of any amendment purporting to remove or change the requirement that such Commitment not exceed the Borrowing Base), or increase the maximum amount of Letters of Credit;

 

(b)                                 postpone the final maturity date of any Loan, or postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder (including any mandatory prepayments thereof or prepayments otherwise required to be made on the Loans should a Deficiency occur) or under any other Loan Document;

 

(c)                                  reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder (including any mandatory prepayments thereof or prepayments otherwise required to be made on the Loans should a Deficiency occur) or under any other Loan Document;

 

(d)                                 change the Pro Rata Shares or change in any manner the definition of “Required Lenders” or “Supermajority Lenders” or the Lenders required to rescind or annul an acceleration;

 

(e)                                  amend this Section 11.1, or Section 9.1, or any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of all Lenders;

 

(f)                                    subject to Section 11.26, release all or substantially all of the Collateral (except for releases in connection with Dispositions which are permitted hereunder or under any

 

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Loan Document), or release any Guarantor from any Guaranty (except for releases upon a Permitted Disposition of a Guarantor);

 

(g)                                 reduce the amount or postpone the due date of any amount payable in respect of, or extend the required expiration date of, any Letter of Credit, or change in any manner the obligations of the Lenders relating to the purchase of participations in Letters of Credit; or

 

(h)                                 modify Section 2.6(a) or the definition of the term “Borrowing Base”;

 

provided further, however, that (i) any amendment, modification, termination or waiver of any of the provisions contained in Article V shall be effective only if evidenced by a writing signed by or on behalf of the Administrative Agent and the Required Lenders, (ii) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Issuing Lender under this Agreement or any LC Related Document relating to any Letter of Credit Issued or to be Issued by it, and (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document.

 

11.2                           Notices.  All notices, requests and other communications shall be in writing and mailed, faxed or delivered, to the address or facsimile number specified for notices on the signature pages hereof; or, as directed to the Company or the Administrative Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Administrative Agent.

 

(a)                                  All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when received, or transmitted in legible form by facsimile machine (except that, if not faxed during normal business hours for the recipient, shall be deemed to have been given the opening of business or the next Business Day for the recipient), respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered by hand, upon delivery; except that notices pursuant to Article II or Article IX shall not be effective until actually received by the Administrative Agent.

 

(b)                                 Any agreement of the Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company.  The Administrative Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Administrative Agent and the Lenders shall not have any liability to the Company or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders in reliance upon such telephonic or facsimile notice.  The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Administrative Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation

 

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which is at variance with the terms understood by the Administrative Agent and the Lenders to be contained in the telephonic or facsimile notice.

 

11.3                           No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights and remedies of the Administrative Agent and the Lenders hereunder and under any other Loan Document are cumulative and are not exclusive of any rights and remedies than they would otherwise have.

 

11.4                           Costs and Expenses.  The Company shall:

 

(a)                                  whether or not the transactions contemplated hereby are consummated, pay or reimburse the Administrative Agent within five Business Days after demand (subject to Section 5.1(d)) for all reasonable costs and expenses incurred by the Administrative Agent or any other Agent, the Issuing Lender, the Lenders or any of their Affiliates in connection with the syndications of the extensions of credit hereunder (other than fees payable to syndicate members) and the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, the consummation of the transactions contemplated hereby and thereby, and the syndication of the credit facilities provided herein, including Attorney Costs incurred by the any such Person with respect thereto except such costs and expenses as may be incurred by the assignor Lenders or Assignee under Section 11.8(c); and

 

(b)                                 pay or reimburse the Administrative Agent, any other Agent, the Issuing Lender and each Lender within five Business Days after demand (subject to Section 5.1(d)) for all costs and expenses (including Attorney Costs) incurred by each of them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document (including, but not limited to, the collection or enforcement of any Note through any legal proceedings) during the existence of an Event of Default or after acceleration of the Loans (including in connection with any “workout” or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding).

 

11.5                           Indemnity.  Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold each Agent-Related Person, the Issuing Lender and each Lender and each of their respective Affiliates, successors and assignors and its and their respective officers, directors, employees, counsel, agents, advisors, controlling Persons, members and attorneys in fact (each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, charges, expenses and disbursements (including Attorney Costs) and settlement costs of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans, and the termination, resignation or replacement of the Administrative Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or

 

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referred to herein, including any of the Loan Documents, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or any Loan Document, the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE OUT OF OR AS A RESULT OF ANY INDEMNIFIED PARTY’S NEGLIGENCE IN WHOLE OR IN PART, INCLUDING, WITHOUT LIMITATION, THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED PARTY, OR ANY ONE OR MORE OF THEM; provided, however, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent same arise from the gross negligence or willful misconduct of any Indemnified Person.  No Indemnified Person shall be liable for any damages arising from the use by unauthorized Persons of information or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by such Persons or for any special, indirect, consequential or punitive damages in connection with this Agreement.  All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor.  The agreements in Sections 11.4 and 11.5 shall survive payment of all other Obligations.

 

11.6                           Payments Set Aside.  To the extent that the Company makes a payment to the Administrative Agent or the Lenders, or the Administrative Agent or the Lenders exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, debtor-in-possession, receiver or any other Person, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent or such Lender upon demand its Pro Rata Share of any amount so recovered from or repaid by the Administrative Agent or such Lender.

 

11.7                           Successors and Assigns.  This Agreement shall become effective at the Effective Time after it shall have been executed by the Company, each Guarantor and the Administrative Agent and after the Administrative Agent shall have been notified by each Lender and Issuing Lender that such Lender or Issuing Lender has executed it and thereafter this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender.

 

11.8                           Assignments, Participations, Confidentiality, etc.

 

(a)                                  Any Lender may, upon the prior written consent of the Administrative Agent and the Company (such consent not to be unreasonably withheld), at any time assign all, or any ratable part of all in a minimum commitment amount of at least $1,000,000 or in

 

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$1,000,000 increments in excess thereof, of the Loans, the Commitments, and the other rights and obligations of such Lender hereunder; provided, that no written consent of the Administrative Agent or the Company is required with respect to assignments to (i) one or more Eligible Assignees or (ii) an Eligible Assignee that is an Affiliate of such Lender (each an “Assignee”); provided, however, that the Company and the Administrative Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Administrative Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Company and the Administrative Agent an Assignment and Acceptance in the form of Exhibit D (“Assignment and Acceptance”) together with any Note or Notes subject to such assignment and (iii) the assignor Lender or Assignee has paid to the Administrative Agent a processing and recordation fee in the amount of $3,500.00 (which fee may be  waived or reduced in the sole discretion of the Administrative Agent), provided, however, that only one such fee shall be payable in the case of concurrent assignments to Persons that, after giving effect to such assignments, will be Related Funds.

 

(b)                                 From and after the date that the Administrative Agent notifies the assignor Lender that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents.

 

(c)                                  Within five Business Days after its receipt of notice by the Administrative Agent that it has received an executed Assignment and Acceptance and payment of the processing fee, and provided that it consents to such assignment in accordance with Section 11.8(b), the Company shall execute and deliver to the Administrative Agent a new Note evidencing such Assignee’s assigned Loans and Maximum Loan Amount (if such Note is requested by the Assignee) and, if the assignor Lender has retained a portion of its Loans and its Commitment, a replacement Note (if such Note is requested by the assignor Lender) in the principal amount equal to the Maximum Loan Amount retained by the assignor Lender (such Note to be in exchange for, but not in payment of, the Note held by such Lender).  Immediately upon each Assignee’s making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Lenders’ respective Maximum Loan Amounts and Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitment of the assigning Lender pro tanto.

 

(d)                                 Any Lender may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a “Participant”) participating interests in any Loans, the Commitment of that Lender and the other interests of that Lender (the “Originating Lender”) hereunder and under the other Loan Documents; provided, however, that (i) the Originating Lender’s obligations under this Agreement shall remain unchanged, the Originating Lender shall remain a Lender for all purposes hereof and the other Loan Documents to which

 

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such Originating Lender is a party, and the Participant may not become a Lender for purposes hereof or for any other of the Loan Documents, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Company and the Administrative Agent shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender’s rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Lenders. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents (the Participant’s rights against the Originating Lender in respect of such participation being those set forth in the agreement creating or evidencing such participation with such Lender), and all amounts payable by the Company hereunder shall be determined as if such Lender had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement.

 

(e)                                  Each Lender agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as “confidential” or “secret” by the Company and provided to it by the Company or any of its Subsidiaries, or by the Administrative Agent on such Company’s or Subsidiary’s behalf, under or in connection with this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents, except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by such Lender, or (ii) was or becomes available on a non confidential basis from a source other than the Company, provided, however, that such source is not bound by a confidentiality agreement with the Company known to the Lender; provided further, however, that any Lender may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which such Lender is subject or in connection with an examination of such Lender by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which the Administrative Agent, any Lender or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Lender’s independent auditors and other professional advisors; (G) to any Affiliate of such Lender, or to any Participant or Assignee, actual or potential, provided that such Affiliate, Participant or Assignee agrees to keep such information confidential to the same extent required of the Lenders hereunder; (H) to any direct, indirect, actual or prospective counterparty (and its advisor) to any swap, derivative or securitization transaction related to the Obligations under this Agreement or surety, reinsurer, guarantee or credit liquidity enhancer; and (I) as to any Lender, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company is party or is deemed party with such Lender.

 

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(f)            Notwithstanding any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Notes held by it in favor of any “Federal Reserve Lender” in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and such “Federal Reserve Lender” may enforce such pledge or security interest in any manner permitted under applicable law.

 

(g)           Notwithstanding anything to the contrary in Section 11.8(f) or any other provision of this Agreement or any other Loan Document, any party hereto or thereto (and each employee, representative, or other agent of such party) may disclose to any and all Persons, without limitation of any kind, the Tax treatment and Tax structure of the transactions contemplated herein and therein and all materials of any kind in each case within the meaning of United States Treasury Regulation Section 1.6011-4 (including opinions or other Tax analyses) that are provided to such party relating to such Tax treatment and Tax structure; provided, however, that with respect to any document or similar item that in either case contains information concerning Tax treatment or Tax structure of the transactions contemplated by this Agreement as well as other information, this Section 11.8(g) shall only apply to such portions of the document or similar item that relate to such Tax treatment or Tax structure.

 

11.9         Interest.  It is the intention of the parties hereto to comply with applicable usury laws, if any; accordingly, notwithstanding any provision to the contrary in this Agreement or any other Loan Document (including any Notes) or otherwise relating hereto, in no event shall this Agreement, the Notes or any other Loan Document require or permit the payment, taking, reserving, receiving, collection, or charging of any sums constituting interest under applicable laws which exceed the Highest Lawful Rate.  If any such excess interest is called for, contracted for, charged, taken, reserved, or received in connection with the Loans or in any of the Loan Documents or otherwise relating thereto, or in any communication by the Administrative Agent, the Issuing Lender, or the Lenders or any other Person to the Company or any other Person, or in the event all or part of the principal or interest thereof shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved, or received on the amount of principal actually outstanding from time to time under the Loans or any Loan Document shall exceed the Highest Lawful Rate, then in any such event it is agreed as follows:  (i) the provisions of this Section 11.9 shall govern and control, (ii) neither any Loan Party nor any other Person now or hereafter liable for the payment of the Loans shall be obligated to pay the amount of such interest to the extent such interest is in excess of the Highest Lawful Rate, (iii) any such excess which is or has been received notwithstanding this Section 11.9 shall be credited against the then unpaid principal balance of the Loans or, if the Loans have been or would be paid in full, refunded to the Company, and (iv) the provisions of this Agreement, the Notes, or any other Loan Document and otherwise relating thereto, and any communication to the Company, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the Highest Lawful Rate as now or hereafter construed by courts having jurisdiction hereof or thereof.  Without limiting the foregoing, all calculations of the rate of the interest contracted for, charged, collected, taken, reserved, or received in connection with the Loans, this Agreement or any other Loan Document which are made for the purpose of determining whether such rate exceeds the Highest Lawful Rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period

 

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of the full term of the Loans, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged, taken, collected, reserved, or received.  The terms of this Section 11.9 shall be deemed to be incorporated in every document and communication relating to the Notes, the Loans, any other Credit Extension or any other Loan Document.

 

11.10       Indemnity and Subrogation.  In addition to all such rights of indemnity and subrogation as any Guarantor may have under applicable law, the Company agrees that in the event a payment shall be made by a Guarantor under a Guaranty in respect of a Credit Extension to the Company, the Company shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment subject to the provisions of the Guaranty executed by such Guarantor.  Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under this Section 11.10 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full of the Obligations, and no payments may be made in respect of such rights of indemnity, contribution or subrogation until all the Obligations have been paid in full and the Commitment shall have expired.  No failure on the part of the Company to make the payments required by this Section 11.10 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of the Guarantors with respect to any Guaranty, and each Guarantor shall remain liable for the full amount of the obligation of the Guarantors under each such Guaranty in accordance therewith.

 

11.11       Automatic Debits of Fees.  With respect to any commitment fee, arrangement fee, Letter of Credit fee or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Administrative Agent under the Loan Documents, the Company hereby irrevocably authorizes the Administrative Agent, after giving reasonable prior notice to the Company, to debit any deposit account of the Company with the Administrative Agent in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense.  If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in the Administrative Agent’s sole discretion) and such amount not debited shall be deemed to be unpaid.  No such debit under this Section 11.11 shall be deemed a set-off.

 

11.12       Notification of Addresses, Lending Offices, Etc.  Each Lender shall notify the Administrative Agent in writing of any changes in the address to which notices to the Lender should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Administrative Agent shall reasonably request.

 

11.13       Counterparts.  This Agreement may be executed in any number of separate counterparts, no one of which need be signed by all parties; each of which, when so executed, shall be deemed an original, and all of such counterparts taken together shall be deemed to constitute but one and the same instrument.  A fully executed counterpart of this Agreement by facsimile signatures shall be binding upon the parties hereto.

 

90

 

11.14       Severability.  The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

 

11.15       No Third Parties Benefited.  This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Guarantors, the Lenders, the Administrative Agent, the Administrative Agent-Related Persons and the Indemnified Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.

 

11.16       Governing Law, Jurisdiction.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

11.17       Submission To Jurisdiction; Waivers.  Each of the Company and each Guarantor hereby irrevocably and unconditionally, and shall cause each of their respective Subsidiaries to irrevocably and unconditionally:

 

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

 

(b)           waive, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (a) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)           consent to service of process in the manner provided for notices herein. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

 

11.18       Entire Agreement.  This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the

 

91

 

Guarantors, the Lenders and the Administrative Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, oral or written, relating to the subject matter hereof and thereof and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Secured Party relative to the subject matter hereof or thereof not expressly set forth or referred to herein or in any other Loan Document.

 

11.19       NO ORAL AGREEMENTS.  THIS WRITTEN FOURTH AMENDED AND RESTATED CREDIT AGREEMENT, TOGETHER WITH THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

11.20       Accounting Changes.  In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Company and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Company’s financial condition shall be the same after such Accounting Change as if such Accounting Change had not been made.  Until such time as such an amendment shall have been executed and delivered by the Company, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Change had not occurred.  “Accounting Change” refers to any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.

 

11.21       WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC.  THE COMPANY AND EACH LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY “SPECIAL DAMAGES”, AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 11.21.  AS USED IN THIS

 

92

 

SECTION 11.21, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.

 

11.22       Amendment and Restatement.

 

(a)           From and after the Effective Time, this Agreement amends and restates in its entirety the Existing Credit Agreement; the Notes issued under this Agreement, if any, amend and restate the “Notes” (as defined in the Existing Credit Agreement) issued under the Existing Credit Agreement; and the Existing Credit Agreement shall thereafter be of no further force and effect except to evidence the incurrence by the Company and any other Loan Party of the “Obligations” under and as defined therein (whether or not such “Obligations” are contingent as of the Effective Time).  This Agreement and the Notes, if any, issued do not constitute and shall not be construed to evidence a novation of or a payment and readvance of any of the “Obligations” (as defined in the Existing Credit Agreement) heretofore outstanding under the Existing Credit Agreement, it being the intention of the parties hereto that this Agreement provide for the terms and conditions of, and the Notes issued, if any, evidence, at such time, the same “Obligations” as were then outstanding under the Existing Credit Agreement.  Each Lender shall surrender the “Notes” outstanding on the Effective Date issued to it under the Existing Credit Agreement.

 

(b)           The terms and conditions of this Agreement and the Administrative Agent’s, the Lenders’ and the Issuing Lender’s rights and remedies under this Agreement and the other Loan Documents shall apply to all of the “Obligations” incurred under the Existing Credit Agreement and the Notes issued thereunder.

 

(c)           The Company reaffirms the Liens granted pursuant to the Existing Loan Documents to the Administrative Agent for the benefit of the Secured Parties under the Existing Security Agreement, which Liens shall continue in full force and effect during the term of this Agreement and any renewals or extensions thereof and shall continue to secure the Obligations hereunder.

 

(d)           From and after the Effective Time, (i) all references to the Existing Credit Agreement (or to any amendment, supplement, modification or amendment and restatement thereof) in the Loan Documents (other than this Agreement) shall be deemed to refer to the Existing Credit Agreement as amended and restated hereby, (ii) all references to any section (or subsection) of the Existing Credit Agreement in any Loan Document (but not herein) shall be amended to become mutatis mutandis, references to the corresponding provisions of this Agreement and (iii) except as the context otherwise provides, from or after the Effective Time, all references to this Agreement herein (including for purposes of indemnification and reimbursement of fees) shall be deemed to be references to the Existing Credit Agreement as amended and restated hereby.

 

(e)           This amendment and restatement is limited as written and is not a consent to any other amendment, restatement, waiver or other modification, whether or not similar, and, except as expressly provided herein or in any other Loan Document, all terms and conditions of

 

93

 

the Loan Documents remain in full force and effect unless otherwise specifically amended by this Agreement or any other Loan Document.

 

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

 

11.24       Acknowledgments.  Each of the Company and each Guarantor hereby acknowledges that:

 

(a)           it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

 

(b)           neither the Administrative Agent nor the Issuing Lender nor the other Agents nor any Lender has any fiduciary relationship with or duty to the Company or any Guarantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent, the Issuing Lender, the other Agents and the Lenders, on one hand, and the Loan Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

 

(c)           no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Administrative Agent, the Issuing Lender, the other Agents and the Lenders or among the Loan Parties and the Lenders.

 

11.25       Survival of Representations and Warranties.  All representations and warranties made by the Borrower and each Guarantor herein, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith, shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of this Agreement, and the making of the Loans and other extensions of credit hereunder, regardless of any investigation made by the Lenders or on their behalf.  The provisions of Sections 11.5 and 11.10 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or enforceability of any term or provision of this Agreement or any other Loan Document or any investigation made by or on behalf of the Administrative Agent or any Lender.

 

11.26       Release of Collateral and Guarantee Obligations.

 

(a)           Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon request of the Company in connection with any Disposition of Property permitted by the Loan Documents, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, any Qualified Derivative Contract Counterparty or any Indemnified Person) take such actions as shall be required to release its security interest in any Collateral being Disposed of in such Disposition, and to release any guarantee obligations under any Loan Document of any Person being Disposed of in such Disposition, to the extent necessary to permit

 

94

 

consummation of such Disposition in accordance with the Loan Documents; provided, however,  that the Company shall have delivered to the Administrative Agent, at least ten Business Days prior to the date of the proposed release (or such shorter period agreed to by the Administrative Agent), a written request for release identifying the relevant Collateral being Disposed of in such Disposition and the terms of such Disposition in reasonable detail, including the date thereof, the price thereof and any expenses in connection therewith, together with a certification by the Company stating that such transaction is in compliance with this Agreement and the other Loan Documents and that the proceeds of such Disposition will be applied in accordance with this Agreement and the other Loan Documents.

 

(b)           Notwithstanding anything to the contrary contained herein or any other Loan Document, on the Security Termination Date, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, any Qualified Derivative Contract Counterparty, and any Indemnified Person) take such actions as shall be required to release its security interest in all Collateral, and to release all guarantee obligations provided for in any Loan Document.  Any such release of guarantee obligations shall be deemed subject to the provision that such guarantee obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made.

 

[THE REMAINDER OF THIS PAGE IS LEFT BLANK]

 

95

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
VENOCO, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy M. Marquez
    
	
 
    	
 
    	
Timothy M. Marquez
    
	
 
    	
 
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address for Notice to the Loan Parties:
    
	
 
    	
Principal Place of Business and Chief   Executive Office:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
370 17th Street, Suite 2950
    
	
 
    	
 
    	
Denver, Colorado 80202-1370
    
	
 
    	
 
    	
Attention: Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Facsimile No.: (303) 626-8315
    

 

Fourth Amended and Restated Credit Agreement Signature Page

 

 

	
 
    	
GUARANTORS:
    
	
 
    	
 
    
	
 
    	
WHITTIER PIPELINE   CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy M. Marquez
    
	
 
    	
 
    	
Timothy M. Marquez
    
	
 
    	
 
    	
President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
TEXCAL ENERGY (LP) LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
VENOCO, INC., its Manager
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy M. Marquez
    
	
 
    	
 
    	
Timothy M. Marquez
    
	
 
    	
 
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
TEXCAL ENERGY (GP) LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
VENOCO, INC., its Manager
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy M. Marquez
    
	
 
    	
 
    	
Timothy M. Marquez
    
	
 
    	
 
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
TEXCAL ENERGY SOUTH TEXAS   L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
TEXCAL ENERGY (GP) LLC,
    
	
 
    	
 
    	
as general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
VENOCO, INC., its Manager
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy M. Marquez
    
	
 
    	
 
    	
Timothy M. Marquez
    
	
 
    	
 
    	
Chief Executive Officer
    

 

Fourth Amended and Restated Credit Agreement Signature Page

 

 

	
 
    	
ADMINISTRATIVE AGENT AND A   LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
BANK OF MONTREAL, acting through its U.S. branches and agencies, including its   Chicago, Illinois branch, as Administrative Agent and as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Joseph A. Bliss
    
	
 
    	
 
    	
Joseph A. Bliss
    
	
 
    	
 
    	
Managing Director
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
Bank of Montreal
    
	
 
    	
 
    	
Houston Agency
    
	
 
    	
 
    	
700 Louisiana Street
    
	
 
    	
 
    	
4400 Bank of America Center
    
	
 
    	
 
    	
Houston, Texas 77002
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(713) 223-4007
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Jim Ducote
    
	
 
    	
 
    	
 
    
	
 
    	
with a copy to:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
115 South LaSalle Street
    
	
 
    	
 
    	
17th Floor West
    
	
 
    	
 
    	
Chicago, Illinois 60603
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(312) 765-8078
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Angelina Monarrez
    
	
 
    	
 
    	
 
    
	
 
    	
Applicable Lending Office for Base Rate Loans   and LIBO Rate Loans:
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
115 South LaSalle Street,
    
	
 
    	
 
    	
17th Floor West
    
	
 
    	
 
    	
Chicago, Illinois 60603
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(312) 765-8078
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Angelina Monarrez
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
CO-SYNDICATION AGENT AND
    
	
 
    	
A LENDER:
    
	
 
    	
 
    
	
 
    	
THE BANK OF NOVA SCOTIA
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Frazell
    
	
 
    	
Name:
    	
John Frazell
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
711 Louisiana St.   Suite 1400
    
	
 
    	
 
    	
Houston, Texas   77002
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(713) 752-2425
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Jay Salitza
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
CO-SYNDICATION AGENT AND
    
	
 
    	
A LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
THE ROYAL BANK OF SCOTLAND   PLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Phillip Ballard
    
	
 
    	
Name:
    	
Phillip Ballard
    
	
 
    	
Title:
    	
Authorized Signatory
    
	
 
    	
 
    	
 
    

 

	
 
    	
Address:
    	
600 Washington Blvd.
    
	
 
    	
 
    	
Stamford CT 06901
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
203-873-5019
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Loan Operations
    

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
CO-DOCUMENTATION AGENT AND
    
	
 
    	
A LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
KEYBANK NATIONAL ASSOCIATION
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ David Morris
    
	
 
    	
Name:
    	
David Morris
    
	
 
    	
Title:
    	
Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
8115 Preston Road, Suite 500
    
	
 
    	
 
    	
Dallas, Texas 75225
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(214) 414-2610
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
KeyBank Energy Group
    
					

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
CO-DOCUMENTATION AGENT AND
    
	
 
    	
A LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
UNION BANK, N.A.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Zachary Kelly
    
	
 
    	
Name:
    	
Zachary Kelly
    
	
 
    	
Title:
    	
Assistant Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
500 North Akard, Suite 4200
    
	
 
    	
 
    	
Dallas, Texas 75201
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
214-922-4209
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
 
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
A LENDER:
    
	
 
    	
 
    
	
 
    	
BANK OF AMERICA, N.A.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Stephen Hoffman
    
	
 
    	
Name:
    	
Stephen Hoffman
    
	
 
    	
Title:
    	
Managing Director
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
100 Federal Street
    
	
 
    	
 
    	
Boston MA 02110
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
617-434-9652
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Stephen Hoffman
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
A LENDER:
    
	
 
    	
 
    
	
 
    	
BNP PARIBAS
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Russell Otts
    
	
 
    	
Name:
    	
Russell Otts
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Greg Smothers
    
	
 
    	
Name:
    	
Greg Smothers
    
	
 
    	
Title:
    	
Director
    

 

 

	
 
    	
Address:
    	
1200 Smith St., Suite 3100
    
	
 
    	
 
    	
Houston, TX 77002
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
713-659-6915
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Greg Smothers/Russell Otts
    

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
A LENDER:
    
	
 
    	
 
    
	
 
    	
RB INTERNATIONAL FINANCE (USA) LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Shirley Ritch
    
	
 
    	
Name:
    	
Shirley Ritch
    
	
 
    	
Title:
    	
Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Peter Armieri
    
	
 
    	
Name:
    	
Peter Armieri
    
	
 
    	
Title:
    	
Vice Preesident
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    	
7 Kenosia Avenue
    
	
 
    	
 
    	
Danbury, Connecticut 06810
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(203) 744-6474
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Shirley Ritch, Vice President
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
A LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
AMEGY BANK NATIONAL   ASSOCIATION
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kevin Donaldson
    
	
 
    	
Name:
    	
Kevin Donaldson
    
	
 
    	
Title:
    	
Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
1001 17th Street, Suite 1160
    
	
 
    	
 
    	
Denver, Colorado 80202
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(720) 947-7440
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Kevin Donaldson
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
A LENDER:
    
	
 
    	
 
    
	
 
    	
BOKF, NA dba BANK OF   OKLAHOMA
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Guy C. Evangelista
    
	
 
    	
Name:
    	
Guy C. Evangelista
    
	
 
    	
Title:
    	
Senior Vice President 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
1675 Broadway, Suite 1650
    
	
 
    	
 
    	
Denver, Colorado 80202
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(303) 864-7349
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Guy C. Evangelista
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature Page

 

 

	
 
    	
A LENDER:
    
	
 
    	
 
    
	
 
    	
CREDIT SUISSE AG, CAYMAN   ISLANDS
    
	
 
    	
BRANCH
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Nupur Kumar
    
	
 
    	
Name:
    	
Nupur Kumar
    
	
 
    	
Title:
    	
Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Rahul Parmar 
    
	
 
    	
Name:
    	
Rahul Parmar 
    
	
 
    	
Title:
    	
Associate
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
Eleven Madison Avenue
    
	
 
    	
 
    	
New York, New York 10010
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.1:
    	
(212) 322-0418
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
                          
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
with copy to:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
Eleven Madison Avenue
    
	
 
    	
 
    	
New York, New York 10010
    
	
 
    	
 
    	
 
    
	
 
    	
Facsimile No.:
    	
(212) 322-0486
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Larcy Naval
    
				

 

Venoco Fourth Amended and Restated Credit Agreement

Signature PageExhibit 10.1

 

GNC HOLDINGS, INC.

 

 

2011 STOCK AND INCENTIVE PLAN

 

 

Adopted as of March 31, 2011

 

 

GNC HOLDINGS, INC.

 

 

2011 STOCK AND INCENTIVE PLAN

 

 

ARTICLE I

 

PURPOSE

 

The purpose of the Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer Eligible Employees, Consultants and Non-Employee Directors incentive awards to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders.  Awards granted under the Plan may be made in compliance with the requirements of Section 162(m) of the Code to the extent determined by the Committee in its sole discretion.

 

ARTICLE II

 

DEFINITIONS

 

For purposes of the Plan, the following terms shall have the following meanings:

 

2.1                                 “Acquisition Event” means a merger or consolidation in which the Company is not the surviving entity, any transaction that results in the acquisition of all or substantially all of the Company’s outstanding Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, or the sale or transfer of all or substantially all of the Company’s assets.  The occurrence of Acquisition Event shall be determined by the Committee in its sole discretion.

 

2.2                                 “Affiliate” means each of the following:  (a) any Subsidiary; (b) any Parent; (c) any corporation, trade or business (including, without limitation, a partnership or limited liability company) that is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company; (d) any corporation, trade or business (including, without limitation, a partnership or limited liability company) that directly or indirectly controls 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Company; and (e) any other entity in which the Company or any of its Affiliates has a material equity interest and that is designated as an “Affiliate” by resolution of the Committee; provided, however, that if the Common Stock subject to any Award does not constitute “service recipient stock” for purposes of Section 409A of the

 

 

Code, the Company intends that such award shall be designed to comply with Section 409A of the Code.

 

2.3                                 “Appreciation Award” means any Award under this Plan of any Stock Option, Stock Appreciation Right or Other Stock-Based Award, provided that such Other Stock-Based Award is based on the appreciation in value of a share of Common Stock in excess of an amount equal to at least the Fair Market Value of the Common Stock on the date such Other Stock-Based Award is granted.

 

2.4                                 “Award” means any award under the Plan of any Stock Option, Restricted Stock or Other Stock-Based Award.  All Awards shall be subject to the terms of a written or electronic agreement executed by the Company and the Participant.  Any reference herein to an agreement in writing shall be deemed to include an electronic writing to the extent permitted by applicable law.

 

2.5                                 “Board” means the Board of Directors of the Company.

 

2.6                                 “Cause” means with respect to a Participant’s Termination of Employment or Termination of Consultancy from and after the date hereof, the following: (a) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “cause” (or words of like import)), termination due to a Participant’s insubordination, dishonesty, fraud, incompetence, moral turpitude, misconduct, refusal to perform his or her duties or responsibilities for any reason other than illness or incapacity or unsatisfactory performance of his or her duties for the Company or an Affiliate, as determined by the Committee in its sole discretion; or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award or an Award agreement that defines “cause” (or words of like import), “cause” as defined under such agreement; provided, however, that with regard to any agreement under which the definition of “cause” only applies on occurrence of a change in control, such definition of “cause” shall not apply until a change in control actually takes place and then only with regard to a termination thereafter.  With respect to a Participant’s Termination of Directorship, “cause” means an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.

 

2.7                                 “Centers” means General Nutrition Centers, Inc., a Delaware corporation, and its successors by operation of law.

 

2.8                                 “Change in Control” means, unless otherwise determined by the Committee in the applicable Award agreement, the occurrence of any of the following:

 

(a)                                  the acquisition (including any acquisition through purchase, reorganization, merger, consolidation or similar transaction) in one or more transactions by any individual, entity (including any employee benefit plan or any

 

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trust for an employee benefit plan) or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (for purposes of this Section 2.7 only, a “Person”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of shares or other securities (as defined in Section 3(a)(10) of the Exchange Act) representing 50% or more of either (i) the Common Stock or (i) the combined voting power of the securities of the Company entitled to vote generally in the election of directors of the Board (the “Company Voting Securities”), in each case calculated on a fully diluted basis after giving effect to such acquisition; provided, however, that neither of the following acquisitions shall constitute a Change in Control as defined in this clause (a): (A) any acquisition by any Person or group of Persons consisting solely of stockholders of the Company on the Effective Date and (B) any acquisition so long as such acquisition does not result in any Person (other than any stockholder or stockholders of the Company on the Effective Date), beneficially owning shares or securities representing 50% or more of either the Common Stock or Company Voting Securities; or

 

(b)                                 any election has occurred of Persons to the Board that causes two-thirds of the Board to consist of Persons other than (i) Persons who were members of the Board on the Effective Date and (ii) Persons who were nominated for elections as members of the Board at a time when two-thirds of the Board consisted of Persons who were members of the Board on the Effective Date; provided, however, that any Person nominated for election by a Board at least two-thirds of whom constituted Persons described in clauses (i) or (ii) or by Persons who were themselves nominated by such Board shall, for this purpose, be deemed to have been nominated by a Board composed of Persons described in clause (i); or

 

(c)                                  approval by the stockholders of the Company of (i) a complete liquidation or dissolution of the Company or Centers or (ii) the sale or other disposition (other than a merger or consolidation) of all or substantially all of the assets of Centers and its subsidiaries, taken as a whole, to any Person.

 

Notwithstanding the foregoing, subsections (b) and (c)(i) shall not constitute a Change in Control with respect to the amount of any payment pursuant to an Award under this Plan, or any portion thereof, that is triggered upon a Change in Control and that is intended to constitute “non-qualified deferred compensation” pursuant to Section 409A of the Code

 

2.9                                 “Code” means the Internal Revenue Code of 1986, as amended.  Any reference to any section of the Code shall also be a reference to any successor provision and any Treasury Regulation promulgated thereunder.

 

2.10                           “Committee” means (a) prior to the first anniversary of the Registration Date, the Board, or (b) following the first anniversary of the Registration Date, a committee or subcommittee of the Board appointed from time to time by the Board, which committee or subcommittee shall consist of two or more non-employee directors,

 

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each of whom is intended to be, (i) to the extent required by Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, a “non-employee director” as defined in Rule 16b-3; (ii) to the extent required Section 162(m) of the Code, an “outside director” as defined in Section 162(m) of the Code; and (iii) an “independent director” as defined under Section 303A.02 of the NYSE Listed Company Manual or such other applicable stock exchange rules.  To the extent that no Committee exists that has the authority to administer this Plan, the functions of the Committee shall be exercised by the Board.  If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance shall not affect the validity of Awards, grants, interpretations or other actions of the Committee.  Notwithstanding the foregoing, if and to the extent that no Committee exists that has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board and all references herein to the Committee shall be deemed references to the Board.

 

2.11                           “Common Stock” means the Class A Common Stock of the Company, par value $0.001 per share.

 

2.12                           “Company” means GNC Holdings, Inc., a Delaware corporation, and its successors by operation of law.

 

2.13                           “Consultant” means any Person who provides bona fide consulting or advisory services to the Company or its Affiliates, provided that such services are not in connection with the offer or sale of securities in a capital raising transaction, and do not, directly or indirectly, promote or maintain a market for the Company’s or its Affiliates’ securities.

 

2.14                           “Detrimental Activity” means:

 

(a)                                  disclosing, divulging, furnishing or making available to anyone at any time, except as necessary in the furtherance of Participant’s responsibilities to the Company or any of its Affiliates, either during or subsequent to Participant’s service relationship with the Company or its Affiliates, any knowledge or information with respect to confidential or proprietary information, methods, processes, plans or materials of the Company or any of its Affiliates, or with respect to any other confidential or proprietary aspects of the business of the Company or any of its Affiliate, acquired by the Participant at any time prior to the Participant’s Termination;

 

(b)                                 any activity while employed or performing services that results, or if known could reasonably be expected to result, in the Participant’s Termination that is classified by the Company as a termination for Cause;

 

(c)                                  (i) directly or indirectly soliciting, enticing or inducing any employee of the Company or of any of its Affiliates to be employed by an person, firm or corporation that is, directly or indirectly, in competition with the business or activities of the Company or any of its Affiliates; (ii) directly or indirectly approaching any such employee for these purposes; (iii) authorizing or knowingly

 

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approving the taking of such actions by other persons on behalf of any such person, firm or corporation, or assisting any such person, firm or corporation in taking such action; (iv) directly or indirectly soliciting, raiding, enticing or inducing any person, firm or corporation (other than the U.S. Government or its agencies) who or which is, or at any time from and after the date of grant of the Award was, a customer of the Company or of any of its Affiliates to become a customer for the same or similar products or services that it purchased from the Company or any of its Affiliates, or any other person, firm or corporation, or approaching any such customer for such purpose or authorize or knowingly approving the taking of such actions by any other person; or

 

(d)                                 a material breach of any agreement between the Participant and the Company or an Affiliate (including, without limitation, any employment agreement or noncompetition or nonsolicitation or confidentiality agreement).  Unless otherwise determined by the Committee at grant, Detrimental Activity shall not be deemed to occur after the end of the one-year period following the Participant’s Termination.

 

For purposes of subsections (a), (c) and (d) above, the Chief Executive Officer of the Company has the authority to provide the Participant with written authorization to engage in the activities contemplated thereby and no other person shall have authority to provide the Participant with such authorization.

 

2.15                           “Disability” means with respect to a Participant’s Termination, a permanent and total disability as defined in Section 22(e)(3) of the Code.  A Disability shall only be deemed to occur at the time of the determination by the Committee of the Disability.  Notwithstanding the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant is disabled under Section 409A(a)(2)(C)(i) or (ii) of the Code.

 

2.16                           “Disparagement” means making comments or statements to the press, the Company’s or its Affiliates’ employees, consultants or any individual or entity with whom the Company or its Affiliates has a business relationship that could reasonably be expected to adversely affect in any manner: (a) the conduct of the business of the Company or its Affiliates (including, without limitation, any products or business plans or prospects); or (b) the business reputation of the Company or its Affiliates, or any of their products, or their past or present officers, directors or employees.

 

2.17                           “Effective Date” means the effective date of the Plan as defined in Article XVII.

 

2.18                           “Eligible Employee” means each employee of the Company or an Affiliate.

 

2.19                           “Exchange Act” means the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder.  Any references to any section of the Exchange Act shall also be a reference to any successor provision.

 

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2.20                           “Exercisable Awards” has the meaning set forth in Section 4.2(d).

 

2.21                           “Fair Market Value” means, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, as of any date and except as provided below, the closing price reported for the Common Stock on the applicable date: (a) as reported on the principal national securities exchange in the United States on which it is then traded; or (b) if not traded on any such national securities exchange, as quoted on an automated quotation system sponsored by the Financial Industry Regulatory Authority or if the Common Stock shall not have been reported or quoted on such date, on the first day prior thereto on which the Common Stock was reported or quoted.  If the Common Stock is not traded, listed or otherwise reported or quoted, then Fair Market Value means the fair market value of the Common Stock as determined by the Committee in good faith in whatever manner it considers appropriate taking into account the requirements of Section 422 of the Code or Section 409A of the Code, as applicable.  For purposes of the grant of any Award, the applicable date shall be the trading day immediately prior to the date on which the Award is granted.  For purposes of the exercise of any Award, the applicable date shall be the date a notice of exercise is received by the Committee or, if not a day on which the applicable market is open, the next day that it is open.  Notwithstanding anything herein to the contrary, for purposes of Stock Options that are granted effective on the Registration Date, if any, the Fair Market Value shall equal the initial public offering price of the Common Stock.

 

2.22                           “Family Member” means “family member” as defined in Rule 701 under the Securities Act or, following the filing of a Form S-8 pursuant to the Securities Act with respect to the Plan, as defined in Section A.1.(5) of the general instructions of Form S-8, as may be amended from time to time.

 

2.23                           “Incentive Stock Option” means any Stock Option awarded to an Eligible Employee of the Company, its Subsidiaries or its Parent (if any) under the Plan intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.

 

2.24                           “Individual Target Award” has the meaning set forth in Section 11.1.

 

2.25                           “Limited Stock Appreciation Right” has the meaning set forth in Section 7.5.

 

2.26                           “Non-Employee Director” means a director of the Company who is not an active employee of the Company or an Affiliate.

 

2.27                           “Non-Qualified Stock Option” means any Stock Option awarded under the Plan that is not an Incentive Stock Option.

 

2.28                           “Other Stock-Based Award” means an Award of Common Stock and other awards (including awards of cash) made pursuant to Article X that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock, including, without limitation, a restricted stock unit or an Award valued by reference to an Affiliate.

 

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2.29                           “Parent” means any parent corporation of the Company within the meaning of Section 424(e) of the Code.

 

2.30                           “Participant” means an Eligible Employee, Consultant or Non-Employee Director to whom an Award has been granted pursuant to the Plan.

 

2.31                           “Performance-Based Cash Award” means a cash Award under Article XI of this Plan that is payable or otherwise based on the attainment of certain pre-established performance criteria during a Performance Period.

 

2.32                           “Performance Period” means each fiscal year of the Company or such period (as specified by the Committee) over which the performance of any performance criteria (including, the Performance Goals specified in Exhibit A attached hereto) is to be measured.

 

2.33                           “Performance Share” means an Award made pursuant to Article IX of this Plan of the right to receive Common Stock or cash of an equivalent value at the end of a specified Performance Period.

 

2.34                           “Permissible Transferee” means any Family Member.

 

2.35                           “Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, incorporated organization, governmental or regulatory or other entity.

 

2.36                           “Plan” means this GNC Holdings, Inc. 2011 Stock and Incentive Plan, as amended from time to time.

 

2.37                           “Reference Stock Option” has the meaning set forth in Section 7.1.

 

2.38                           “Registration Date” means the first date on or after the Effective Date (a) on which the Company sells its Common Stock in a bona fide, firm commitment underwriting pursuant to a registration statement under the Securities Act or (b) any class of common equity securities of the Company is required to be registered under Section 12 of the Exchange Act.

 

2.39                           “Restricted Stock” means an Award of shares of Common Stock issued under the Plan that is subject to restrictions pursuant to Article VIII.

 

2.40                           “Restriction Period” has the meaning set forth in Section 7.1.

 

2.41                           “Rule 16b-3” means Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provision.

 

2.42                           “Section 4.2 Event” has the meaning set forth in Section 4.2(b).

 

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2.43                           “Securities Act” means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder.  Any reference to any section of the Securities Act shall also be a reference to any successor provision.

 

2.44                           “Section 162(m) of the Code”  means the exception for performance-based compensation under Section 162(m) of the Code and any applicable Treasury regulations thereunder.

 

2.45                           “Section 409A of the Code” means the nonqualified deferred compensation rules under Section 409A of the Code and any applicable Treasury regulations thereunder.

 

2.46                           “Stock Appreciation Right” means the right pursuant to an Award granted under Article VIII.  A Tandem Stock Appreciation Right shall mean the right to surrender to the Company all (or a portion) of a Stock Option in exchange for a number of shares of Common Stock equal to the difference between (i) the Fair Market Value on the date such Stock Option (or such portion thereof) is surrendered, of the Common Stock covered by such Stock Option (or such portion thereof), and (ii) the aggregate exercise price of such Stock Option (or such portion thereof).  A Non-Tandem Stock Appreciation Right shall mean the right to receive a number of shares of Common Stock equal to the difference between (x) the Fair Market Value of a share of Common Stock on the date such right is exercised, and (y) the aggregate exercise price of such right, otherwise than on surrender of a Stock Option.

 

2.47                           “Stock Option” or “Option” means any option to purchase shares of Common Stock granted to Eligible Employees, Non-Employee Directors or Consultants pursuant to Article VI.

 

2.48                           “Subsidiary” means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.

 

2.49                           “Tandem Stock Appreciation Rights” has the meaning set forth in Section 7.1.

 

2.50                           “Ten Percent Stockholder” means a person owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, its Subsidiaries or its Parent.

 

2.51                           “Termination” means a Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

 

2.52                           “Termination of Consultancy” means:  (a) that the Consultant is no longer acting as a consultant to the Company or an Affiliate; or (b) when an entity that is retaining a Participant as a Consultant ceases to be an Affiliate unless the Participant otherwise is, or thereupon becomes, a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate.  In the event that a Consultant becomes an Eligible Employee or a Non-Employee Director upon the termination of his or her consultancy, unless otherwise determined by the Committee, in its sole discretion, no

 

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Termination of Consultancy shall be deemed to occur until such time as such Consultant is no longer a Consultant, an Eligible Employee or a Non-Employee Director.  Notwithstanding the foregoing, the Committee may, in its sole discretion, otherwise define Termination of Consultancy in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Consultancy thereafter.

 

2.53                           “Termination of Directorship” means that the Non-Employee Director has ceased to be a director of the Company; except that if a Non-Employee Director becomes an Eligible Employee or a Consultant upon the termination of his or her directorship, his or her ceasing to be a director of the Company shall not be treated as a Termination of Directorship unless and until the Participant has a Termination of Employment or Termination of Consultancy, as the case may be.

 

2.54                           “Termination of Employment” means: (a) a termination of employment (for reasons other than a military or approved personal leave of absence) of a Participant from the Company and its Affiliates; or (b) when an entity that is employing a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate at the time the entity ceases to be an Affiliate.  In the event that an Eligible Employee becomes a Consultant or a Non-Employee Director upon the termination of his or her employment, unless otherwise determined by the Committee, in its sole discretion, no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee, a Consultant or a Non-Employee Director.  Notwithstanding the foregoing, the Committee may, in its sole discretion, otherwise define Termination of Employment in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Employment thereafter.

 

2.55                           “Transfer” means: (a) when used as a noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition (including the issuance of equity in a Person), whether for value or no value and whether voluntary or involuntary (including by operation of law), and (b) when used as a verb, to directly or indirectly transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise dispose of (including the issuance of equity in a Person) whether for value or for no value and whether voluntarily or involuntarily (including by operation of law).  “Transferred” and “Transferrable” shall have a correlative meaning.

 

2.56                           “Transition Period” means the “reliance period” under Treasury Regulation Section 1.162-27(f)(2), which ends on the earliest to occur of the following: (i) the date of the first annual meeting of stockholders of the Company at which directors are to be elected that occurs after December 31, 2013 or, if the Registration Date does not occur in 2010, the date of the first annual meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Registration Date occurs; (ii) the date the Plan is materially amended for purposes of Treasury Regulation Section 1.162-27(h)(1)(iii); or (iii) the date all shares of Common Stock available for issuance under this Plan have been allocated.

 

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ARTICLE III

 

ADMINISTRATION

 

3.1                                 The Committee.  The Plan shall be administered and interpreted by the Committee.

 

3.2                                 Grants of Awards.  The Committee shall have full authority to grant, pursuant to the terms of the Plan, to Eligible Employees, Consultants and Non-Employee Directors: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Performance Share, (v) Other Stock-Based Awards and (vi) Perfomance Based Cash Awards.  In particular, the Committee shall have the authority:

 

(a)                                  to select the Eligible Employees, Consultants and Non-Employee Directors to whom Awards may from time to time be granted hereunder;

 

(b)                                 to determine whether and to what extent Awards are to be granted hereunder to one or more Eligible Employees, Consultants or Non-Employee Directors;

 

(c)                                  to determine, in accordance with the terms of the Plan, the number of shares of Common Stock to be covered by each Award granted hereunder;

 

(d)                                 to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder (including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Award and the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion);

 

(e)                                  to determine whether and under what circumstances a Stock Option may be settled in cash, Common Stock and/or Restricted Stock under Section 6.3(d);

 

(f)                                    to determine whether, to what extent and under what circumstances to provide loans (which may be on a recourse basis and shall bear interest at the rate the Committee shall provide) to Participants in order to exercise Awards or to purchase or pay for shares of Common Stock issuable pursuant to Awards under the Plan, provided that on and after the Registration Date executive officers and directors are not eligible to receive such loans, and provided further, that all outstanding loans shall be repaid before the Registration Date;

 

(g)                                 to determine whether a Stock Option is an Incentive Stock Option or Non-Qualified Stock Option;

 

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(h)                                 to determine whether to require an Eligible Employee, Non-Employee Director or Consultant, as a condition of the granting of any Award, not to sell or otherwise dispose of shares of Common Stock acquired pursuant to an Award for a period of time as determined by the Committee, in its sole discretion, following the date of the Award;

 

(i)                                     to set the performance criteria and the Performance Period with respect to any Award for which the grant, vesting or payment of such Award is conditioned upon the attainment of specified performance criteria and to certify the attainment of any such performance criteria; provided, that with regard to any Award that is intended to comply with Section 162(m) of the Code, the applicable performance criteria shall be based on one or more of the Performance Goals set forth in Exhibit A hereto;

 

(j)                                     to determine whether, to what extent and under what circumstances grants of Options and other Awards under this Plan are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company outside of this Plan;

 

(k)                                  to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the Participant in any case, in a manner intended to comply with Section 409A of the Code; and

 

(l)                                     generally, to exercise such powers and to perform such acts as the Committee deems necessary or expedient to promote the best interests of the Company that are not in conflict with the provisions of the Plan.

 

3.3                                 Guidelines.  Subject to Article XIV, the Committee shall, in its sole discretion, have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its administrative responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of the Plan and any Award granted under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan; provided, that with regard to any provision of this Plan or any agreement relating thereto that is intended to comply with Section 162(m) of the Code, any such action by the Committee shall be permitted only to the extent such action is taken during the Transition Period or, following the Transition Period, would be permitted under Section 162(m) of the Code.  The Committee may, in its sole discretion, correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan.  The Committee may, in its sole discretion, adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions to comply with applicable

 

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tax and securities laws and may impose any limitations and restrictions that it deems necessary to comply with the applicable tax and securities laws of such domestic or foreign jurisdictions.  To the extent applicable, the Plan is intended to comply with the applicable requirements of Rule 16b-3 and, with respect to Awards intended to be “performance-based,” is intended to rely on the Transition Period and, following the Transition Period, to comply the applicable provisions of Section 162(m) of the Code and this Plan shall be limited, construed and interpreted in a manner so as to comply therewith.

 

3.4                                 Decisions Final.  Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns.

 

3.5                                 Procedures.  If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable, including, without limitation, by telephone conference or by written consent to the extent permitted by applicable law.  A majority of the Committee members shall constitute a quorum.  All determinations of the Committee shall be made by a majority of its members.  Any decision or determination reduced to writing and signed by all the Committee members in accordance with the By-Laws of the Company, shall be as fully effective as if it had been made by a vote at a meeting duly called and held.  The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.

 

3.6                                 Designation of Consultants/Liability.  (a)      The Committee may, in its sole discretion and to the extent permitted by applicable law and applicable exchange rules, designate employees of the Company and professional advisors to assist the Committee in the administration of the Plan and may grant authority to officers to execute agreements or other documents on behalf of the Committee.

 

(b)                                 The Committee may, in its sole discretion, employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent.  Expenses incurred by the Committee or the Board in the engagement of any such counsel, consultant or agent shall be paid by the Company.  The Committee, its members and any person designated pursuant to this Section 3.6 shall not be liable for any action or determination made in good faith with respect to the Plan.  To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it.

 

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3.7                                 Indemnification.  To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the Company and to the extent not covered by insurance directly insuring such person, each officer or employee of the Company or any Affiliate and member or former member of the Committee or the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Committee) or liability (including any sum paid in settlement of a claim with the approval of the Committee), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the administration of the Plan, except to the extent arising out of such officer’s, employee’s, member’s or former member’s own fraud or bad faith.  Such indemnification shall be in addition to any rights of indemnification the employees, officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporation or By-Laws of the Company or any Affiliate.  Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted to him or her under the Plan.

 

ARTICLE IV

 

SHARE LIMITATIONS

 

4.1                                 Shares

 

(a)                                  General Limitations.  The aggregate number of shares of Common Stock that may be issued or used for reference purposes or with respect to which Awards may be granted under this Plan shall not exceed 8,500,000 shares (subject to any increase or decrease pursuant to Section 4.2), which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company or both.  Any shares of Common Stock that are subject to Restricted Stock, Performance Shares or Other Stock-Based Awards that are not Appreciation Awards shall be counted against this limit as 1.8 shares for every share granted.  If any Option, Stock Appreciation Right or Other Stock-Based Award that is an Appreciation Award granted under this Plan expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of Common Stock underlying any unexercised Award shall again be available for the purpose of Awards under this Plan.  If any shares of Restricted Stock, Performance Shares or Other Stock-Based Awards that are not Appreciation Awards granted under this Plan to a Participant are forfeited for any reason, 1.8 shares of Common Stock shall again be available for the purposes of Awards under this Plan. If a Tandem Stock Appreciation Right or a Limited Stock Appreciation Right is granted in tandem with an Option, such grant shall only apply once against the maximum number of shares of Common Stock which may be issued under this Plan.  The number of shares of Common Stock available for the purpose of Awards under this Plan shall be reduced by (i) the total number of Stock Options or Stock Appreciation Rights exercised, regardless of whether any of the shares of Common Stock underlying such Awards are not actually issued to

 

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the Participant as the result of a net settlement, and (ii) any shares of Common Stock used to pay any exercise price or tax withholding obligation with respect to any Award.  In addition, the Company may not use the cash proceeds it receives from Stock Option exercises to repurchase shares of Common Stock on the open market for reuse under this Plan.  Awards that may be settled solely in cash shall not be deemed to use any shares of Common Stock which may be issued under this Plan.

 

(b)                                 Individual Participation Limitations.  The individual limits on Awards that may be granted under the Plan set forth in this Section 4.2(b) shall be effective for all Awards granted with an effective date after the end of the Transition Period:

 

(i)                                     The maximum number of shares of Common Stock subject to all types of Awards which may be granted under this Plan during any fiscal year of the Company to each Eligible Employee or Consultant shall not exceed 1,500,000 (which shall be subject to any further increase or decrease pursuant to Section 4.2) during any fiscal year of the Company.  If a Tandem Stock Appreciation Right is granted or a Limited Stock Appreciation Right is granted in tandem with a Stock Option, it shall apply against the Eligible Employee’s or Consultant’s individual share limitations for both Stock Appreciation Rights and Stock Options.

 

(ii)                                  There are no annual individual Eligible Employee or Consultant share limitations on Restricted Stock for which the grant of such Award or the lapse of the relevant Restriction Period is not subject to attainment of performance criteria in accordance with Section 8.3(b) hereof.

 

(iii)                               The maximum value at grant of Performance Shares denominated in dollars for any Performance Period which may be granted under this Plan during any fiscal year of the Company to each Eligible Employee or Consultant shall be $5,000,000.  Each Performance Share shall be referenced to one share of Common Stock and shall be charged against the available shares under this Plan at the time the unit value measurement is converted to a referenced number of shares of Common Stock in accordance with Section 9.1.

 

(iv)                              The individual Participant limitations set forth in this Section 4.1(b) shall be cumulative; that is, to the extent that shares of Common Stock for which Awards are permitted to be granted to an Eligible Employee or Consultant during a fiscal year are not covered by an Award to such Eligible Employee or Consultant in a

 

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fiscal year, the number of shares of Common Stock available for Awards to such Eligible Employee or Consultant shall automatically increase in the subsequent fiscal years during the term of this Plan until used.

 

(v)                                 The individual Participation limitation for Performance Cash Awards is set forth in Section 11.2(f) of this Plan.

 

4.2                                 Changes.

 

(a)                                  The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger or consolidation of the Company or any Affiliate, (iii) any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock, (iv) the dissolution or liquidation of the Company or any Affiliate, (v) any sale or transfer of all or part of the assets or business of the Company or any Affiliate, (vi) any Section 4.2 Event or (vii) any other corporate act or proceeding.

 

(b)                                 Subject to the provisions of Section 4.2(d), in the event of any change in the capital structure or business of the Company by reason of any stock split, reverse stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, consolidation, spin-off, reorganization, partial or complete liquidation, issuance of rights or warrants to purchase any Common Stock or securities convertible into Common Stock, any sale or transfer of all or part of the Company’s assets or business, or any other corporate transaction or event having an effect similar to any of the foregoing and effected without receipt of consideration by the Company (a “Section 4.2 Event”) then the Committee shall make such adjustments consistent with such change in such manner as the Committee deems equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, Participants under this Plan, to (i) the aggregate number and kind of shares that thereafter may be issued under the Plan, (ii) the number and kind of shares or other property (including cash) to be issued upon exercise of an outstanding Award or under other Awards granted under the Plan and (iii) the purchase price thereof, and/or the individual Participant limits set forth in Section 4.1(b) (other than those based on cash limitations).  Any such adjustment determined by the Committee in good faith shall be final, binding and conclusive on the Company and all Participants and their respective heirs, executors, administrators, successors and assigns.  In connection with any Section 4.2 Event, the Committee may provide, in its sole discretion, for the cancellation of any outstanding Awards and payment in cash or other property in exchange therefor.  Except as provided in this Section 4.2 or in the applicable Award agreement, a Participant shall have no rights by reason of any issuance by the Company of any class of securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any

 

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stock dividend, any other increase or decrease in the number of shares of stock of any class, any sale or transfer of all or part of the Company’s assets or business or any other change affecting the Company’s capital structure or business.

 

(c)                                  Fractional shares of Common Stock resulting from any adjustment in Awards pursuant to Section 4.2(a) or (b) shall be eliminated at the time of such adjustment by rounding-down for any fractional shares.  No fractional shares of Common Stock shall be issued under the Plan.  Notice of any adjustment shall be given by the Committee to each Participant whose Award has been adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan.

 

(d)                                 In the event of an Acquisition Event, the Committee may, in its sole discretion, terminate all outstanding and unexercised Stock Options or any Other Stock Based Award that provides for a Participant elected exercise (“Exercisable Awards”), effective as of the date of the Acquisition Event, by delivering notice of termination to each Participant at least 20 days prior to the date of consummation of the Acquisition Event, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each such Participant shall have the right to exercise his or her Exercisable Awards that are then outstanding to the extent vested as of the date on which such notice of termination is delivered (or, at the discretion of the Committee, without regard to any limitations on exercisability otherwise contained in the Award agreements), but any such exercise shall be contingent upon and subject to the occurrence of the Acquisition Event, and, provided that, if the Acquisition Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be null and void.  If the Acquisition Event does take place after giving such notice, any Exercisable Award not exercised prior to the date of the consummation of such Acquisition Event shall be forfeited simultaneous with the consummation of the Acquisition Event.  For the avoidance of doubt, in the event of an Acquisition Event, the Committee may, in its sole discretion, terminate any Exercisable Award for which the exercise price is equal to or exceeds the Fair Market Value without payment of consideration therefor.

 

If an Acquisition Event occurs but the Committee does not terminate the outstanding Exercisable Awards pursuant to this Section 4.2(d), then the applicable provisions of Section 4.2(b) and Article XIII shall apply.

 

4.3                                 Minimum Purchase Price.  Notwithstanding any provision of the Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued under the Plan, such shares shall not be issued for a consideration that is less than as permitted under applicable law.

 

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ARTICLE V

 

ELIGIBILITY AND GENERAL REQUIREMENTS FOR AWARDS

 

5.1                                 General Eligibility.  All Eligible Employees, Non-Employee Directors and Consultants and prospective Eligible Employees, Consultants and Non-Employee Directors are eligible to be granted Awards.  Eligibility for the grant of Awards and actual participation in this Plan shall be determined by the Committee in its sole discretion.  Notwithstanding anything herein to the contrary, no Award under which a Participant may receive shares of Common Stock may be granted under this Plan to an Eligible Employee, Consultant or Non-Employee Director of any Affiliate if such shares of Common Stock do not constitute “service recipient stock” for purposes of Section 409A of the Code with respect to such Eligible Employee, Consultant or Non-Employee Director.

 

5.2                                 Incentive Stock Options.  Notwithstanding anything herein to the contrary, only Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock Options under the Plan.  Eligibility for the grant of an Incentive Stock Option and actual participation in the Plan shall be determined by the Committee in its sole discretion.

 

5.3                                 General Requirement.  The granting, vesting and exercise of Awards granted to a prospective Eligible Employee, Consultant or Non-Employee Director are conditioned upon such individual actually becoming an Eligible Employee, Consultant or Non-Employee Director, provided that no Award may be granted to a prospective Eligible Employee, Consultant or Non-Employee Director unless the Company determines that the Award will comply with applicable laws, including the securities laws of all relevant jurisdictions.

 

ARTICLE VI

 

STOCK OPTIONS

 

6.1                                 Stock Options.  Stock Options may be granted alone or ina addition to other Awards granted under the Plan.  Each Stock Option granted under the Plan shall be one of two types: (a) an Incentive Stock Option; or (b) a Non-Qualified Stock Option.

 

6.2                                 Grants.  The Committee shall, in its sole discretion, have the authority to grant to any Eligible Employee (subject to Section 5.2) Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options.  To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof that does not qualify, shall constitute a separate Non-Qualified Stock Option.  The Committee shall, in its sole discretion, have the authority to grant any Consultant or Non-Employee Director one or more Non-Qualified Stock Options.

 

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6.3                                 Terms of Stock Options.  Stock Options granted under the Plan shall be subject to the following terms and conditions, and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee, in its sole discretion, shall deem desirable:

 

(a)                                  Exercise Price.  The exercise price per share of Common Stock subject to a Stock Option shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Stock Option shall not be less than 100% (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of the Common Stock at the time of grant.

 

(b)                                 Stock Option Term.  The term of each Stock Option shall be fixed by the Committee; provided, that (i) no Stock Option shall be exercisable more than 10 years after the date such Stock Option is granted; and (ii) the term of an Incentive Stock Option granted to a Ten Percent Stockholder shall not exceed five years.

 

(c)                                  Exercisability.  Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant.  If the Committee provides, in its discretion, that any Stock Option is exercisable subject to certain limitations (including, without limitation, that such Stock Option is exercisable only in installments or within certain time periods or upon the attainment of certain financial results or other criteria), the Committee may waive such limitations on the exercisability at any time at or after grant in whole or in part (including, without limitation, waiver of the installment exercise provisions or acceleration of the time at which such Stock Option may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion.  Unless otherwise determined by the Committee at grant, the Option agreement shall provide that (i) in the event the Participant engages in Detrimental Activity prior to any exercise of the Stock Option, all Stock Options held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise of a Stock Option, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event the Participant engages in Detrimental Activity during the one-year period commencing on the later of the date the Stock Option is exercised or the date of the Participant’s Termination, the Company shall be entitled to recover from the Participant at any time within one year after such date, and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise (whether at the time of exercise or thereafter).  In the event that a written employment agreement between the Company and a Participant provides for a vesting schedule that is more favorable than the vesting schedule provided in the form of Award agreement, the vesting schedule in such employment agreement

 

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shall govern, provided that such agreement is in effect on the date of grant and applicable to the specific Award.

 

(d)                                 Method of Exercise.  Subject to whatever installment exercise and waiting period provisions apply under subsection (c) above, to the extent vested, a Stock Option may be exercised in whole or in part at any time and from time to time during the Stock Option term by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be acquired.  Such notice shall be accompanied by payment in full of the purchase price as follows: (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) solely to the extent permitted by applicable law, if the Common Stock is traded on a national securities exchange or quoted on a national quotation system sponsored by the National Association of Securities Dealers, through a procedure whereby the Participant delivers irrevocable instructions to a broker reasonably acceptable to the Committee to deliver promptly to the Company an amount equal to the purchase price, to the extent authorized by the Committee; or (iii) on such other terms and conditions as may be acceptable to the Committee (including, without limitation, the relinquishment of Stock Options or by payment in full or in part in the form of Common Stock owned by the Participant and for which the Participant has good title free and clear of any liens and encumbrances) based on the Fair Market Value of the Common Stock on the payment date as determined by the Committee, in its sole discretion.  No shares of Common Stock shall be issued until payment therefor, as provided herein, has been made or provided for.

 

(e)                                  Incentive Stock Option Limitations.  To the extent that the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under the Plan and/or any other stock option plan of the Company, any Subsidiary or any Parent exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.  In addition, if an Eligible Employee does not remain employed by the Company, any Subsidiary or any Parent at all times from the time an Incentive Stock Option is granted until three months prior to the date of exercise thereof (or such other period as required by applicable law), such Stock Option shall be treated as a Non-Qualified Stock Option.  Should any provision of the Plan not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may, in its sole discretion, amend the Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company.

 

(f)                                    Form, Modification, Extension and Renewal of Stock Options.  Subject to the terms and conditions and within the limitations of the Plan, Stock Options shall be evidenced by such form of agreement or grant as is approved by the Committee, and the Committee may, in its sole discretion, (i) modify, extend or renew outstanding Stock Options granted under the Plan (provided that (x) the

 

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rights of a Participant are not reduced or adversely affected without his or her consent and (y) such action does not subject the Stock Options to Section 409A of the Code), and (ii) accept the surrender of outstanding Stock Options (up to the extent not theretofore exercised) and authorize the granting of new Stock Options in substitution therefor (to the extent not theretofore exercised).  Notwithstanding anything herein to the contrary, an outstanding Option may not be modified to reduce the exercise price thereof nor may a new Option at a lower price be substituted for a surrendered Option (other than adjustments or substitutions in accordance with Section 4.2), unless such action is approved by the stockholders of the Company.

 

(g)                                 Early Exercise.  The Committee may provide that a Stock Option include a provision whereby the Participant may elect at any time before the Participant’s Termination to exercise the Stock Option as to any part or all of the shares of Common Stock subject to the Stock Option prior to the full vesting of the Stock Option and such shares shall be subject to certain restrictions as determined by the Committee and be treated as Restricted Stock.  Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Committee determines to be appropriate.

 

(h)                                 Other Terms and Conditions.  Stock Options may contain such other provisions, which shall not be inconsistent with any of the terms of the Plan, as the Committee shall, in its sole discretion, deem appropriate.

 

ARTICLE VII

 

STOCK APPRECIATION RIGHTS

 

7.1                                 Tandem Stock Appreciation Rights.  Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a “Reference Stock Option”) granted under this Plan (“Tandem Stock Appreciation Rights”).  In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option.  In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option.

 

7.2                                 Terms and Conditions of Tandem Stock Appreciation Rights.  Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee in its sole discretion, and the following:

 

(a)                                  Exercise Price.  The exercise price per share of Common Stock subject to a Tandem Stock Appreciation Right shall be the exercise price of the Reference Stock Option as determined in accordance with Section 6.3(a).

 

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(b)                                 Term.  A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a Reference Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option, except that, unless otherwise determined by the Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by the Reference Stock Option shall not be reduced until and then only to the extent the exercise or termination of the Reference Stock Option causes the number of shares covered by the Tandem Stock Appreciation Right to exceed the number of shares remaining available and unexercised under the Reference Stock Option.

 

(c)                                  Exercisability.  Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Reference Stock Options to which they relate shall be exercisable in accordance with the provisions of Article VI and Section 12.2, and shall be subject to the provisions of Section 6.3(c).

 

(d)                                 Method of Exercise.  A Tandem Stock Appreciation Right may be exercised by the Participant by surrendering the applicable portion of the Reference Stock Option.  Upon such exercise and surrender, the Participant shall be entitled to receive an amount determined in the manner prescribed in this Section 7.2.  Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Tandem Stock Appreciation Rights have been exercised.

 

(e)                                  Payment.  Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled to receive up to, but no more than, a number of shares of Common Stock equal in value to the excess of the Fair Market Value of one share of Common Stock over the Option exercise price per share specified in the Reference Stock Option agreement, multiplied by the number of shares in respect of which the Tandem Stock Appreciation Right shall have been exercised.

 

(f)                                    Deemed Exercise of Reference Stock Option.  Upon the exercise of a Tandem Stock Appreciation Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Article IV of the Plan on the number of shares of Common Stock to be issued under the Plan.

 

(g)                                 Transferability. Tandem Stock Appreciation Rights shall be Transferable only when and to the extent that the underlying Stock Option would be Transferable under Section 12.1 of the Plan.

 

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7.3                                 Non-Tandem Stock Appreciation Rights.  Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock Options granted under the Plan.

 

7.4                                 Terms and Conditions of Non-Tandem Stock Appreciation Rights.  Non-Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee in its sole discretion, and the following:

 

(a)                                  Exercise Price.  The exercise price per share of Common Stock subject to a Non-Tandem Stock Appreciation Right shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Non-Tandem Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the Common Stock at the time of grant

 

(b)                                 Term.  The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee; provided that no Non-Tandem Stock Appreciation Right shall be exercisable more than ten (10) years after the date the right is granted.

 

(c)                                  Exercisability.  Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant.  If the Committee provides, in its discretion, that any such right is exercisable subject to certain limitations (including, without limitation, that it is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after grant in whole or in part (including, without limitation, waiver of the installment exercise provisions or acceleration of the time at which such right may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion.  Unless otherwise determined by the Committee at grant, the Award agreement shall provide that (i) in the event the Participant engages in Detrimental Activity prior to any exercise of the Non-Tandem Stock Appreciation Right, all Non-Tandem Stock Appreciation Rights held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise of a Non-Tandem Stock Appreciation Right, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of this Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event the Participant engages in Detrimental Activity during the one year period commencing on the later of the date the Non-Tandem Stock Appreciation Right is exercised or becomes vested, the Company shall be entitled to recover from the Participant at any time within one year after such exercise or vesting, and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise (whether at the time of exercise or thereafter).

 

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(d)                                 Method of Exercise.  Subject to whatever installment exercise and waiting period provisions apply under subsection (b) above, Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at any time in accordance with the applicable Award agreement, by giving written notice of exercise to the Company specifying the number of Non-Tandem Stock Appreciation Rights to be exercised.

 

(e)                                  Payment.  Upon the exercise of a Non-Tandem Stock Appreciation Right a Participant shall be entitled to receive, for each right exercised, up to, but no more than, a number of shares of Common Stock equal in value to the excess of the Fair Market Value of one share of Common Stock on the date the right is exercised over the Fair Market Value of one share of Common Stock on the date the right was awarded to the Participant.

 

(f)                                    Non-Transferability.  No Non-Tandem Stock Appreciation Rights shall be Transferable by the Participant otherwise than by will or by the laws of descent and distribution, and all such rights shall be exercisable, during the Participant’s lifetime, only by the Participant.

 

(g)                                 Termination.  Unless otherwise provided in an Award agreement, upon Termination, Non-Tandem Stock Appreciation Rights shall be exercised in accordance with the provisions of Section 12.2 of this Plan.

 

7.5                                 Limited Stock Appreciation Rights.  The Committee may, in its sole discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as a general Stock Appreciation Right or as a limited stock appreciation right (a “Limited Stock Appreciation Right”).  Limited Stock Appreciation Rights may be exercised only upon the occurrence of a Change in Control or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter.  Upon the exercise of Limited Stock Appreciation Rights, except as otherwise provided in an Award agreement, the Participant shall receive a number of shares of Common Stock equal to the amount (a) set forth in Section 7.2(e) with respect to Tandem Stock Appreciation Rights, or (b) set forth in Section 7.4(e) with respect to Non-Tandem Stock Appreciation Rights, as applicable.

 

ARTICLE VIII

 

RESTRICTED STOCK

 

8.1                                 Awards of Restricted Stock.  Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan.  The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors to whom, and the time or times within which, grants of Restricted Stock will be made, the

 

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number of shares to be awarded, the purchase price (if any) to be paid by the Participant (subject to Section 7.2), the time or times at which such Awards may be subject to forfeiture (if any), the vesting schedule (if any) and rights to acceleration thereof, and all other terms and conditions of the Awards.

 

Unless otherwise determined by the Committee at grant, each Award of Restricted Stock shall provide that in the event the Participant engages in Detrimental Activity prior to, or during the one-year period after, any vesting of Restricted Stock, the Committee may direct that all unvested Restricted Stock shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to the Fair Market Value at the time of vesting of any Restricted Stock that had vested in the period referred to above.

 

The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance criteria (including, the Performance Goals specified in Exhibit A attached hereto) or such other factors as the Committee may determine, in its sole discretion, including to comply with the requirements of Section 162(m) of the Code.

 

8.2                                 Awards and Certificates.  An Eligible Employee, Consultant and Non-Employee Director selected to receive Restricted Stock shall not have any rights with respect to such Award, unless and until such Participant has delivered a fully executed copy of the Award agreement evidencing the Award to the Company and has otherwise complied with the applicable terms and conditions of such Award.  Further, such Award shall be subject to the following conditions:

 

(a)                                  Purchase Price.  The purchase price (if any) of Restricted Stock shall be determined by the Committee, but shall not be less than as permitted under applicable law.

 

(b)                                 Acceptance.  Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period as the Committee may specify at grant) after the grant date, by executing an Award agreement and by paying whatever price (if any) the Committee has designated thereunder and all applicable withholding taxes due upon the granting and acceptance of the Award (if any) in accordance with the provisions of Section 14.4.

 

(c)                                  Legend.  Each Participant receiving Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of Restricted Stock.  Such certificate shall, in addition to such legends required by applicable securities laws, be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:

 

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“The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the GNC Holdings, Inc. (the “Company”) 2011 Stock and Incentive Plan (as the same may be amended or supplemented from time to time), and an Award agreement entered into between the registered owner and the Company dated                         .  Copies of such Plan and Award agreement are on file at the principal office of the Company.”

 

(d)                                 Custody.  The Committee may require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any grant of Restricted Stock, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Award.

 

8.3                                 Restrictions and Conditions.  The shares of Restricted Stock awarded pursuant to this Plan shall be subject to the following restrictions and conditions:

 

(a)                                  Restriction Period.  (i)  The Participant shall not be permitted to Transfer shares of Restricted Stock awarded under this Plan during the period or periods set by the Committee (the “Restriction Period”) commencing on the date of such Award, as set forth in the Restricted Stock Award agreement and such agreement shall set forth a vesting schedule and any events which would accelerate vesting of the shares of Restricted Stock.  Within these limits, based on service, attainment of performance criteria pursuant to Section 8.3(b) below and/or such other factors or criteria as the Committee may determine in its sole discretion, the Committee may condition the grant or provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Restricted Stock Award and/or waive the deferral limitations for all or any part of any Restricted Stock Award.

 

(b)                                 Objective Performance Goals, Formulae or Standards.  If the grant of shares of Restricted Stock or the lapse of restrictions is based on the attainment of performance criteria, the Committee shall, in its sole discretion, establish the objective performance criteria and the applicable vesting percentage of the Restricted Stock applicable to each Participant or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date while the outcome of the Performance Goals are substantially uncertain as otherwise determined by the Committee in its sole discretion and that is permitted under Section 162(m) of the Code with regard to a Restricted Stock Award that is intended to comply with Section 162(m) of the Code.  Such performance criteria may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.  With regard to a Restricted Stock Award that is intended to comply with Section 162(m) of the Code, (A) to the extent any such provision set forth in the prior sentence would create impermissible discretion under Section

 

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162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect and (B) the applicable performance criteria shall be based on one or more of the Performance Goals set forth in Exhibit A hereto.

 

(c)                                  Rights as Stockholder.  Except as provided in this subsection and subsection (a) above and as otherwise determined by the Committee, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including, without limitation, the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares.  Notwithstanding the foregoing, the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period, unless the Committee, in its sole discretion, specifies otherwise at the time of the Award.

 

(d)                                 Termination.  Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, subject to the applicable provisions of the Restricted Stock Award agreement and this Plan, upon a Participant’s Termination for any reason during the relevant Restriction Period, all Restricted Stock still subject to restriction will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter.

 

(e)                                  Lapse of Restrictions.  If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Participant.  All legends shall be removed from said certificates at the time of delivery to the Participant except as otherwise required by applicable law.  Notwithstanding the foregoing, actual certificates shall not be issued to the extent that book entry recordkeeping is used.

 

ARTICLE IX

 

PERFORMANCE SHARES

 

9.1                                 Award of Performance Shares.  Performance Shares may be awarded either alone or in addition to other Awards granted under this Plan.  The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, to whom, and the time or times at which, Performance Shares shall be awarded, the number of Performance Shares to be awarded to any person, the duration of the applicable Performance Period during which, and the conditions under which, receipt of the Shares will be deferred, and the other terms and conditions of the Award in addition to those set forth in Section 9.2.

 

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Unless otherwise determined by the Committee at grant, each Award of Performance Shares shall provide that in the event the Participant engages in Detrimental Activity prior to, or during the one year period after, any vesting of Performance Shares, the Committee may direct (at any time within one year thereafter) that all unvested Performance Shares shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to any gain the Participant realized from any Performance Shares which had vested in the period referred to above.

 

Except as otherwise provided herein, the Committee shall condition the right to payment of any Performance Share upon the attainment of specified objective performance criteria (including, the Performance Goals specified in Exhibit A attached hereto) established pursuant to Section 9.2(c) below and such other factors as the Committee may determine, in its sole discretion, including to comply with the requirements of Section 162(m) of the Code.

 

9.2                                 Terms and Conditions.  Performance Shares awarded pursuant to this Article IX shall be subject to the following terms and conditions:

 

(a)                                  Earning of Performance Share Award.  At the expiration of the applicable Performance Period, the Committee shall determine the extent to which the performance criteria established pursuant to Section 9.2(c) are achieved and the percentage of each Performance Share Award that has been earned.

 

(b)                                 Non-Transferability.  Subject to the applicable provisions of the Award agreement and this Plan, Performance Shares may not be Transferred during the Performance Period.

 

(c)                                  Objective Performance Goals, Formulae or Standards.  The Committee shall, in its sole discretion, establish the objective performance criteria for the earning of Performance Shares based on a Performance Period applicable to each Participant or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date while the outcome of the Performance Goals are substantially uncertain as otherwise determined by the Committee in its sole discretion and that is permitted under Section 162(m) of the Code with regard to a Performance Share Award that is intended to comply with Section 162(m) of the Code.  Such performance criteria may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.  With regard to a Performance Share Award that is intended to comply with Section 162(m) of the Code, (A) to the extent any such provision set forth in the prior sentence would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect and (B) the applicable performance criteria shall be based on one or more of the Performance Goals set forth in Exhibit A hereto.

 

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(d)                                 Dividends.  Unless otherwise determined by the Committee at the time of grant, amounts equal to any dividends declared during the Performance Period with respect to the number of shares of Common Stock covered by a Performance Share will not be paid to the Participant.

 

(e)                                  Payment.  Following the Committee’s determination in accordance with subsection (a) above, shares of Common Stock or, as determined by the Committee in its sole discretion, the cash equivalent of such shares shall be delivered to the Eligible Employee, Consultant or Non-Employee Director, or his legal representative, in an amount equal to such individual’s earned Performance Share.  Notwithstanding the foregoing, the Committee may, in its sole discretion, award an amount less than the earned Performance Share and/or subject the payment of all or part of any Performance Share to additional vesting, forfeiture and deferral conditions as it deems appropriate.

 

(f)                                    Termination.  Subject to the applicable provisions of the Award agreement and this Plan, upon a Participant’s Termination for any reason during the Performance Period for a given Award, the Performance Shares in question will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant.

 

(g)                                 Accelerated Vesting.  Based on service, performance and/or such other factors or criteria, if any, as the Committee may determine, the Committee may, in its sole discretion, at or after grant, accelerate the vesting of all or any part of any Performance Share Award and/or waive the deferral limitations for all or any part of such Award.

 

ARTICLE X

 

OTHER STOCK-BASED AWARDS

 

10.1                           Other Awards.  Other Stock-Based Awards (including, without limitation, restricted stock units and performance share awards) may be granted either alone or in addition to or other Awards granted under the Plan to all eligible Participants pursuant to Article V.  Unless otherwise determined by the Committee at grant, each Other Stock-Based Award shall provide that in the event the Participant engages in Detrimental Activity prior to, or during the one-year period after the later of the date of any vesting of Other-Stock Based Award or the date of the Participant’s Termination, the Committee may direct (at any time within one year thereafter) that any unvested portion of such Award shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to any gain the Participant realized from any such Award that had vested in the period referred to above.

 

10.2                           Committee.  Subject to the provisions of the Plan, the Committee shall have authority to determine the Eligible Employees, Consultants and Non-Employee

 

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Directors to whom, and the time or times at which, Other Stock-Based Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards.  The Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified performance criteria (including, the Performance Goals specified in Exhibit A attached hereto) or such other factors as the Committee may determine, in its sole discretion, including to comply with the requirements of Section 162(m) of the Code.  If the grant or vesting of an Other Stock-Based Award is based on the attainment of performance criteria, the Committee shall, in its sole discretion, establish the objective performance criteria and the applicable vesting percentage of the Other Stock-Based Award applicable to each Participant or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date while the outcome of the Performance Goals are substantially uncertain as otherwise determined by the Committee in its sole discretion and that is permitted under Section 162(m) of the Code with regard to an Other Stock-Based Award that is intended to comply with Section 162(m) of the Code.  Such performance criteria may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.  With regard to an Other Stock-Based Award that is intended to comply with Section 162(m) of the Code, (A) to the extent any such provision set forth in the prior sentence would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect and (B) the applicable performance criteria shall be based on one or more of the Performance Goals set forth in Exhibit A hereto.

 

10.3                           Terms and Conditions.  Other Stock-Based Awards made pursuant to this Article X shall be subject to the following terms and conditions:

 

(a)                                  Non-Transferability.  Subject to the applicable provisions of the Award agreement and this Plan, shares of Common Stock subject to Awards made under this Article X may not be Transferred prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

 

(b)                                 Dividends.  Unless otherwise determined by the Committee at the time of award, subject to the provisions of the Award agreement or grant letter and the Plan, the recipient of an Award under this Article X shall be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares of Common Stock covered by the Award, as determined at the time of the Award by the Committee, in its sole discretion.

 

(c)                                  Vesting.  Any Award under this Article X and any Common Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award agreement, as determined by the Committee, in its sole discretion.  In the event that a written employment agreement between the Company and a Participant provides for a vesting schedule that is more favorable than the vesting

 

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schedule provided in the form of Award agreement, the vesting schedule in such employment agreement shall govern, provided that such agreement is in effect on the date of grant and applicable to the specific Award.

 

(d)           Waiver of Limitation.  The Committee may, in its sole discretion, waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to all or any portion of an Award under this Article X.

 

(e)           Price.  Common Stock or Other Stock-Based Awards issued on a bonus basis under this Article X may be issued for no cash consideration; Common Stock or Other Stock-Based Awards purchased pursuant to a purchase right awarded under this Article X shall be priced as determined by the Committee.  Subject to Section 4.3, the purchase price of shares of Common Stock or Other Stock-Based Awards may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value.  The purchase of shares of Common Stock or Other Stock-Based Awards may be made on either an after-tax or pre-tax basis, as determined by the Committee; provided, however, that if the purchase is made on a pre-tax basis, such purchase shall be made pursuant to a deferred compensation program established by the Committee, which will be deemed a part of the Plan.

 

(f)            Payment.  The form of payment for the Other Stock-Based Awards shall be specified in the Award agreement.

 

ARTICLE XI

 

PERFORMANCE-BASED CASH AWARDS

 

11.1         Performance-Based Cash Awards.  Performance-Based Cash Awards may be granted either alone or in addition to or in tandem with other Awards granted under this Plan.  Subject to the provisions of this Plan, the Committee shall, in its sole discretion, have authority to determine the Eligible Employees and Consultants to whom, and the time or times at which, Performance-Based Cash Awards shall be made, the dollar amount to be awarded pursuant to such Performance-Based Cash Award, and all other conditions for the payment of the Performance-Based Cash Award.  The Committee may also provide for the payment of a dollar amount under a Performance-Based Cash Award upon the completion of a specified Performance Period.

 

Except as otherwise provided herein, the Committee shall condition the right to payment of any Performance-Based Cash Award upon the attainment of specified objective performance criteria (including, the Performance Goals specified in Exhibit A attached hereto) established pursuant to Section 11.2(c) below and such other factors as the Committee may determine, in its sole discretion, including to comply with the requirements of Section 162(m) of the Code.

 

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Subject to Section 11.2(c), for any Participant the Committee may, in its sole discretion, specify a targeted Performance-Based Cash Award for a Performance Period (each an “Individual Target Award”).  An Individual Target Award may be expressed, at the Committee’s sole discretion, as a fixed dollar amount, a percentage of the Participant’s base pay, as a percentage of a bonus pool funded by a formula as determined by the Committee based on achievement of performance criteria, or an amount determined pursuant to an objective formula or standard.  The Committee’s establishment of an Individual Target Award for a Participant for a Performance Period shall not imply or require that the same level or any Individual Target Award be established for the Participant for any subsequent Performance Period or for or any other Participant for that Performance Period or any subsequent Performance Period.  At the time the performance criteria are established (as provided in Section 11.2(c)), the Committee shall prescribe a formula to be used to determine the maximum and minimum percentages (which may be greater or less than one-hundred percent (100%), as applicable) of an Individual Target Award that may be earned or payable based upon the degree of attainment of the performance criteria during the Performance Period.  Notwithstanding anything else herein, unless otherwise specified by the Committee with respect to an Individual Target Award, the Committee may, in its sole discretion, elect to pay a Participant an amount that is less than the Participant’s Individual Target Award (or attained percentages thereof) regardless of the degree of attainment of the performance criteria; provided that, except as otherwise specified by the Committee with respect to an Individual Target Award, no discretion to reduce a Performance-Based Cash Award earned based on achievement of the applicable performance criteria shall be permitted for any Performance Period in which a Change of Control occurs, or during such Performance Period with regard to the prior Performance Periods if the Performance-Based Cash Awards for the prior Performance Periods have not been paid by the time of the Change of Control, with regard to individuals who were Participants at the time of the Change of Control.

 

11.2         Terms and Conditions.  Performance-Based Cash Awards made pursuant to this Article XI shall be subject to the following terms and conditions:

 

(a)           Committee Certification.  At the expiration of the applicable Performance Period, the Committee shall determine and certify in writing the extent to which the performance criteria established pursuant to Section 11.2(c) are achieved and, if applicable, the percentage of the Participant’s Individual Target Award that has been vested and earned.

 

(b)           Waiver of Limitation.  In the event of the Participant’s retirement (other than with respect to Performance-Based Cash Awards that are intended to comply with Section 162(m) of the Code), Disability or death, or in cases of special circumstances (to the extent permitted under Section 162(m) of the Code with regard to a Performance-Based Cash Award that is intended to comply with Section 162(m) of the Code), the Committee may, in its sole discretion, waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to any or all of an Award under this Article XI.

 

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(c)           Objective Performance Goals, Formulae or Standards.  The Committee shall, in its sole discretion, establish the objective performance criteria for the earning of Performance-Based Cash Awards based on a Performance Period applicable to each Participant or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date while the outcome of the Performance Goals are substantially uncertain as otherwise determined by the Committee in its sole discretion and that is permitted under Section 162(m) of the Code with regard to a Performance Share Award that is intended to comply with Section 162(m) of the Code.  Such performance criteria may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.  With regard to a Performance-Based Cash Award that is intended to comply with Section 162(m) of the Code, (A) to the extent any such provision set forth in the prior sentence would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect and (B) the applicable performance criteria shall be based on one or more of the Performance Goals set forth in Exhibit A hereto.

 

(d)           Payment.  Following the Committee’s determination and certification in accordance with subsection (a) above, the Performance-Based Cash Award amount shall be paid to the Eligible Employee or his legal representative, in accordance with the terms and conditions set forth in Performance-Based Cash Award agreement, but in no event, except as provided in the next sentence, shall such amount be paid by no later than the later of: (i) March 15 of the year following the year in which the applicable Performance Period ends; or (ii) two and one-half (21⁄2) months after the expiration of the fiscal year of the Company in which the applicable Performance Period ends.  Notwithstanding the foregoing, the Committee may place such conditions on the payment of the payment of all or any portion of any Performance-Based Cash Award as the Committee may determine and prior to the beginning of a Performance Period the Committee may (x) provide that the payment of all or any portion of any Performance-Based Cash Award shall be deferred and (y) permit a Participant to elect to defer receipt of all or a portion of any Performance-Based Cash Award.  Any Performance-Based Cash Award deferred by a Participant in accordance with the terms and conditions established by the Committee shall not increase (between the date on which the Performance-Based Cash Award is credited to any deferred compensation program applicable to such Participant and the payment date) by an amount that would result in such deferral being deemed as an “increase in the amount of compensation” under Code Section 162(m).  To the extent applicable, any deferral under this Section 11.2(d) shall be made in a manner intended to comply with the applicable requirements of Section 409A of the Code.

 

(e)           Termination.  Unless otherwise determined by the Committee, in its sole discretion, no Performance-Based Cash Award or pro rata portion thereof

 

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shall be payable to any Participant who incurs a Termination prior to the date such Performance-Based Cash Award is paid.

 

(f)            Maximum Payments.  The maximum payment under any Performance-Based Cash Award payable with respect to any fiscal year of the Company and for which the grant of such Award is subject to the attainment of performance criteria in accordance with Section 11.2(c) which may be granted under this Plan with respect to any fiscal year of the Company to each Eligible Employee or Consultant shall be $5,000,000; provided, however, that the foregoing limit shall be adjusted on a proportionate basis for any Performance-Based Cash Award with a Performance Period that is not based on one (1) fiscal year of the Company.

 

ARTICLE XII

 

NON-TRANSFERABILITY AND TERMINATION OF
 EMPLOYMENT/CONSULTANCY/DIRECTORSHIP WITH RESPECT TO STOCK OPTIONS

 

12.1         Non-Transferability

 

(a)           Except as otherwise specifically provided herein, no Stock Option shall be Transferable by the Participant otherwise than by will or by the laws of descent and distribution.  All Stock Options shall be exercisable, during the Participant’s lifetime, only by the Participant.

 

(b)           Notwithstanding the foregoing, the Committee may determine, in its sole discretion, at the time of grant or thereafter that a Non-Qualified Stock Option that is otherwise not Transferable pursuant to this Section 12.1 is Transferable to a Family Member in whole or in part and in such circumstances, and under such conditions, as specified by the Committee.  A Non-Qualified Stock Option that is Transferred to a Family Member pursuant to the preceding sentence (i) may not be subsequently Transferred otherwise than by will or by the laws of descent and distribution and (ii) remains subject to the terms of the Plan and the Stock Option agreement.  Any shares of Common Stock acquired upon the exercise of a Stock Option by a Permissible Transferee of a Stock Option or a Permissible Transferee pursuant to a Transfer after the exercise of the Stock Option shall be subject to the terms of the Plan and the Stock Option agreement.

 

12.2         Termination.  The following rules apply with regard to the Termination of a Participant.

 

(a)           Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter:

 

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(i)           Termination by Reason of Death or Disability.  If a Participant’s Termination is by reason of death or Disability, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant (or, in the case of death, by the legal representative of the Participant’s estate) at any time within a period of one year from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options.

 

(ii)          Involuntary Termination Without Cause.  If a Participant’s Termination is by involuntary termination without Cause, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of 60 days from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options.

 

(iii)         Voluntary Termination.  If a Participant’s Termination is voluntary (other than a voluntary termination described in Section 12.2(a)(iv)(2)), all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of 60 days from the date of such Termination, but in no event beyond the expiration of the stated terms of such Stock Options.

 

(iv)         Termination for Cause.  If a Participant’s Termination: (1) is for Cause or (2) is a voluntary Termination (as provided in subsection (iii) above) after the occurrence of an event that would be grounds for a Termination for Cause, all Stock Options, whether vested or not vested, that are held by such Participant shall thereupon terminate and expire as of the date of such Termination.

 

(v)          Unvested Stock Options.  Stock Options that are not vested as of the date of a Participant’s Termination for any reason shall terminate and expire as of the date of such Termination.

 

ARTICLE XIII

 

CHANGE IN CONTROL PROVISIONS

 

Except as otherwise provided by the Committee in an Award agreement, in the event of a Change in Control of the Company after the Effective Date, the Committee may, but shall not be obligated to:

 

(a)           accelerate, vest or cause the restrictions to lapse with respect to all or any portion of an Award;

 

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(b)           provide for the cancellation of any Appreciation Awards without payment if the Change in Control Price is less than the exercise price of such Appreciation Awards;

 

(c)           provide for the purchase of any Awards by the Company or an Affiliate for an amount of cash equal to the excess of the Change in Control Price (as defined below) of the shares of Common Stock covered by such Awards, over the aggregate exercise price of such Awards.  For purposes of this Article XIII, “Change in Control Price” shall mean the highest price per share of Common Stock paid in any transaction related to a Change in Control of the Company; provided, however, that such price shall not exceed the fair market value of the Common Stock at the time of purchase as determined in accordance Section 409A of the Code; or

 

(d)           provide for the issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted hereunder as determined by the Committee in its sole discretion.  Notwithstanding anything to the contrary herein, for purposes of Incentive Stock Options, any assumed or substituted Stock Option shall comply with the requirements of Treasury Regulation §  1.424-1 (and any amendments thereto).

 

ARTICLE XIV

 

TERMINATION OR AMENDMENT OF PLAN

 

Notwithstanding any other provision of the Plan, the Board or the Committee may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Article XIV or Section 409A of the Code as described below), or suspend or terminate it entirely, retroactively or otherwise; provided, however, that if the Committee, in its sole discretion, determines that the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may be adversely impaired, the consent of such Participant shall be required; and provided further, without the approval of the stockholders of the Company entitled to vote in accordance with applicable law, no amendment may be made that would:

 

(a)           increase the aggregate number of shares of Common Stock that may be issued under the Plan (other than due to an adjustment under Section 4.2);

 

(b)           increase the maximum individual Participant limitations for a fiscal year under Section 4.1(b) (except by operation of Section 4.2) and Section 11.2(f);

 

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(c)           change the classification of individuals eligible to receive Awards under the Plan;

 

(d)           other than adjustments or substitutions in accordance with Section 4.2, amend the terms of outstanding Awards to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or to cancel outstanding Stock Options or Stock Appreciation Rights (where prior to the reduction or cancellation the exercise price equals or exceeds the fair market value of the shares of Common Stock underlying such Awards) in exchange for cash, other Awards or Stock Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Options or Stock Appreciation Rights;

 

(e)           extend the maximum Stock Option period under Section 6.3;

 

(f)                                    alter the Performance Goals set forth in Exhibit A;

 

(g)           award any Stock Option or Stock Appreciation Right in replacement of a canceled Stock Option or Stock Appreciation Right with a higher exercise price, except in accordance with Section 6.3(l); or

 

(h)           require stockholder approval in order for the Plan to continue to comply with the applicable provisions of Section 162(m) of the Code or Section 422 of the Code to the extent applicable to Incentive Stock Options or the rules of any exchange or system on which the Company’s securities are listed or traded at the request of the Company.

 

The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Article IV or as otherwise specifically provided herein, no such amendment or other action by the Committee shall adversely impair the rights of any holder without the holder’s consent.  Notwithstanding anything herein to the contrary, the Board or the Committee may amend the Plan or any Award granted hereunder at any time without a Participant’s consent to comply with Section 409A of the Code or any other applicable law.  Nothing in the Plan is intended to provide a guarantee of particular tax treatment to any Participant.

 

ARTICLE XV

 

UNFUNDED PLAN

 

The Plan is an “unfunded” plan for incentive and deferred compensation.  With respect to any payments as to which a Participant has a fixed and vested interest but that are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company.

 

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ARTICLE XVI

 

GENERAL PROVISIONS

 

16.1         Legend.  The Committee may require each person receiving shares of Common Stock pursuant to an Award granted under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof and such other securities law related representations as the Committee shall request.  In addition to any legend required by the Plan, the certificates and/or book entry accounts for such shares may include any legend that the Committee, in its sole discretion, deems appropriate to reflect any restrictions on Transfer.

 

All certificates and/or book entry accounts for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may, in its sole discretion, deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national automated quotation system on which the Common Stock is then quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

16.2         Other Plans.  Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

 

16.3         No Right to Employment/Consultancy/Directorship.  Neither the Plan nor the grant of any Award hereunder shall give any Participant or other employee, Consultant or Non-Employee Director any right with respect to continuance of employment, consultancy or directorship by the Company or any Affiliate, nor shall they be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed or a Consultant or Non-Employee Director is retained to terminate his or her employment, consultancy or directorship at any time.

 

16.4         Withholding of Taxes.  The Company shall have the right to deduct from any payment to be made to a Participant, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld.  Upon the vesting of Restricted Stock (or other Award that is taxable upon vesting), or upon making an election under Section 83(b) of the Code, a Participant shall pay all required withholding to the Company.  Any statutorily required withholding obligation with regard to any Eligible Employee may be satisfied, subject to the advanced consent of the Committee, by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned.   Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant.

 

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16.5         Listing and Other Conditions.

 

(a)           Unless otherwise determined by the Committee, as long as the Common Stock is listed on a national securities exchange or system sponsored by a national securities association, the issue of any shares of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on such exchange or system.  The Company shall have no obligation to issue such shares unless and until such shares are so listed, and the right to exercise any Award with respect to such shares shall be suspended until such listing has been effected.

 

(b)           If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an Award is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act or otherwise with respect to shares of Common Stock or Awards, and the right to exercise any Award shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful and will not result in the imposition of excise taxes on the Company.

 

(c)           Upon termination of any period of suspension under this Section 16.5, an Award affected by such suspension that shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares that would otherwise have become available during the period of such suspension, but no such suspension shall extend the term of any Award.

 

(d)           A Participant shall be required to supply the Company with any certificates, representations and information that the Company requests and otherwise cooperate with the Company in obtaining any listing, registration, qualification, exemption, consent or approval the Company deems necessary or appropriate.

 

16.6         Governing Law.  The Plan and the actions taken in connection herewith shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its principles of conflict of laws.

 

16.7         Construction.  Wherever any words are used in the Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply.

 

16.8         Other Benefits.  No Award granted or paid out under the Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its Affiliates nor affect any benefits under any other benefit plan now or

 

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subsequently in effect under which the availability or amount of benefits is related to the level of compensation.

 

16.9         Costs.  The Company shall bear all expenses associated with administering the Plan, including expenses of issuing Common Stock pursuant to any Award granted hereunder.

 

16.10       No Right to Same Benefits.  The provisions of Awards need not be the same with respect to each Participant, and Awards granted to individual Participants need not be the same.

 

16.11       Death/Disability.  The Committee may in its sole discretion require the transferee of a Participant to supply it with written notice of the Participant’s death or Disability and to supply it with a copy of the will (in the case of the Participant’s death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Award.  The Committee may, in its sole discretion, also require the agreement of the transferee to be bound by all of the terms and conditions of the Plan.

 

16.12       Section 16(b) of the Exchange Act.  On and after the Registration Date, all elections and transactions under the Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under Rule 16b-3.  The Committee may, in its sole discretion, establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder.

 

16.13       Severability of Provisions.  If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.

 

16.14       Headings and Captions.  The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

 

16.15       Successors and Assigns.  The Plan shall be binding on all successors and permitted assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate.

 

16.16       Payment to Minors, Etc.  Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipt thereof shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, the Board, the Company, its Affiliates and their employees, agents and representatives with respect thereto.

 

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16.17       Agreement. As a condition to the grant of an Award, if requested by the Company and the lead underwriter of any public offering of the Common Stock (the “Lead Underwriter”), a Participant shall irrevocably agree not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of, any interest in any Common Stock or any securities convertible into, derivative of, or exchangeable or exercisable for, or any other rights to purchase or acquire Common Stock  (except Common Stock included in such public offering or acquired on the public market after such offering) during such period of time following the effective date of a registration statement of the Company filed under the Securities Act that the Lead Underwriter shall specify (the “Lock-up Period”).  The Participant shall further agree to sign such documents as may be requested by the Lead Underwriter to effect the foregoing and agree that the Company may impose stop-transfer instructions with respect to Common Stock acquired pursuant to an Award until the end of such Lock-up Period.

 

16.18       No Rights as Stockholder.  Except as provided in Article VIII with respect to Restricted Stock or Article X with respect to Other Stock-Based Awards, subject to the provisions of the Award agreement, no Participant or Permissible Transferee shall have any rights as a stockholder of the Company with respect to any Award until such individual becomes the holder of record of the shares of Common Stock underlying the Award.

 

16.19       Section 409A of the Code.  Although the Company does not guarantee the particular tax treatment of an Award granted under this Plan, Awards made under this Plan are intended to comply with, or be exempt from, the applicable requirements of Section 409A of the Code and this Plan and any Award agreement hereunder shall be limited, construed and interpreted in accordance with such intent.  In no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest or penalties that may be imposed on a Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.

 

16.20       Consideration.  Awards may be awarded in consideration for past services actually rendered to the Company or an Affiliate for its benefit; provided, however, that in the case of an Award to be made to a new Eligible Employee, Non-Employee Director, or Consultant who has not performed prior services for the Company, the Company will require payment of the par value of the Common Stock by cash or check in order to ensure proper issuance of the shares in compliance with Delaware General Corporation Law.

 

16.21       Transition Period.  The Plan has been adopted by the Board prior to the occurrence of a Registration Date.  The Plan is intended to constitute a plan described in Treasury Regulation Section 1.162-27(f)(1), pursuant to which the deduction limits under Section 162(m) of the Code do not apply during the applicable reliance period.

 

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ARTICLE XVII

 

EFFECTIVE DATE OF PLAN

 

This Plan shall become effective upon the date specified by the Board in its resolution adopting the Plan, subject to the approval of the Plan by the stockholders of the Company in accordance with the requirements of the laws of the State of Delaware.

 

ARTICLE XVIII

 

TERM OF PLAN

 

No Award shall be granted pursuant to the Plan on or after the earlier of the tenth anniversary of (x) the date the Plan is adopted or (y) the date of stockholder approval (although Awards granted prior to such tenth anniversary may extend beyond that date in accordance with the terms of the Plan); provided that no Award (other than Stock Options or Stock Appreciation Rights) that is intended to be “performance-based” under Section 162(m) of the Code shall be granted on or after the first meeting of the Company’s stockholders that occurs in the fifth year following the year of stockholder approval of the Amended and Restated Plan unless the Performance Goals set forth on Exhibit A are reapproved (or other designated performance criteria are approved) by the stockholders.  In the event that any such Award is granted, the Award shall be a valid Award but it shall not qualify for the “performance-based compensation” exception under Section 162(m) of the Code unless it is granted subject to the approval of, and is approved by, the stockholders at the first stockholder meeting following such grant.

 

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EXHIBIT A

 

PERFORMANCE GOALS

 

A.  Performance Goals.  Performance goals established for purposes of the grant, vesting or payment of Awards of Restricted Stock, Performance Shares, Other Stock-Based Awards, or Performance-Based Cash Awards that are intended to be “performance-based” under Section 162(m) of the Code shall be based on the attainment of certain target levels of, or a specified increase or decrease (as applicable) in one or more of the following criteria (“Performance Goals”):

 

(a)                                  enterprise value or value creation targets;

 

(b)                                 after-tax or pre-tax profits, including without limitation as attributable to continuing and/or other operations of the Company;

 

(c)                                  operational cash flow or economic value added;

 

(d)                                 specified objectives with regard to limiting the level of increase in all or a portion of, the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company, or other capital structure improvements, which may be calculated net of cash balances and/or other offsets and adjustments as may be established by the Committee;

 

(e)                                  earnings per share or earnings per share from continuing operations;

 

(f)                                    sales (domestic and/or international), operating performance and revenues, net income, gross margin, operating income or earnings before income tax or other exclusions;

 

(g)                                 return on capital employed, return on invested capital, or return on assets;

 

(h)                                 total shareholder return, including after-tax or pre-tax return on stockholder equity;

 

(i)                                     the fair market value or book value of the shares of the Company’s Common Stock;

 

(j)                                     the growth in the value of an investment in the Company’s Common Stock assuming the reinvestment of dividends, dividend growth or market capitalization;

 

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(k)                                  a transaction that results in the sale of stock or assets of the Company;

 

(l)                                     earnings before interest, taxes plus amortization and depreciation;

 

(m)                               reduction in expenses or cost savings;

 

(n)                                 strategic objectives including management development, new product development and introduction;

 

(o)                                 individual Participant goals and objectives, including management development, new product development and introduction, or

 

(p)                                 any financial metric set forth herein or in the Company’s financial statements as a percentage of another financial metric.

 

To the extent permitted under Section 162(m) of the Code, unless the Committee otherwise determines, in its sole discretion, that appropriate adjustment should be made to reflect the impact of an event or occurrence, the Committee shall exclude the impact of any of the following events or occurrences:

 

(i)                                     restructurings, discontinued operations, extraordinary items or events, and other unusual or non-recurring charges;

 

(ii)                                  an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management;

 

(iii)                               a change in tax law or accounting standards required by generally accepted accounting principles; or

 

(iv)                              a change in the Company’s fiscal year.

 

Performance Goals may also be based upon individual Participant performance criteria, as determined by the Committee, in its sole discretion.

 

In addition, such Performance Goals may be based upon the attainment of specified levels of Company (or affiliate, subsidiary, division, other operational unit, business segment or administrative department of the Company) performance under one or more of the measures described above relative to the performance of other corporations (or an affiliate, subsidiary, division, other operational unit, business segment or administrative department of another corporation).  To the extent permitted under Section 162(m) of the Code, but only to the extent permitted under Section 162(m) of the Code (including, without limitation, compliance with any requirements for stockholder approval), the Committee may:

 

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(x)                                   designate additional business criteria on which the performance criteria may be based; or

 

(y)           adjust, modify or amend the aforementioned business criteria.

 

B.  GAAP.  Except as otherwise provided herein, the measures used in Performance Goals shall be determined in accordance with generally accepted accounting principles (“GAAP”) and in a manner consistent with the methods used in the Company’s regular reports on Forms 10-K and 10-Q.

 

C.  Deviations from GAAP.  To the extent any objective Performance Goals are expressed using any measures that require deviations from GAAP, such deviations shall be at the discretion of the Committee as exercised at the time the Performance Goals are set.

 

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