Document:

Exhibit 10.31

 

STANDARD MULTI-TENANT OFFICE LEASE

 

		1.	Basic Provisions ("Basic Provisions").

 

		1.1	Parties. This Lease ("Lease"),
                                            dated for reference purposes only November 15, 2021, is made by and between AusLo
                                            Properties LLC ("Lessor") and Energy Vault Inc. ("Lessee"), (collectively
                                            the "Parties", or individually a "Party"). This Lease supersedes any previous lease and agreements.

 

	 	1.2(a) Premises: That certain Portion of the Project (as defined below), commonly known as (street address,
  suite, city, state): 4360 Park Terrace Drive, Suites 100, 150 & 210, Westlake Village, California 91361 ("Premises").
  The Premises are located in the County of Los Angeles, and consist of approximately 15,767 rentable square feet. In addition
  to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the common Areas
  (as defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, the exterior walls, the area
  above the dropped ceilings, or the utility raceways of the building containing the Premises ("Building") or to any
  other buildings in the Project. The Premises, the Building, the Common Areas, the land upon which they are located along with all other
  buildings and improvements thereon are herein collectively referred to as the "Project". The Project consists of approximately
  45,802 rentable square feet. (See also Paragraph 2)

 

	 	1.2(b) Parking: 43 unreserved and 0 reserved vehicle parking spaces at a monthly cost of
  zero per unreserved space and N/A per reserved space.

  (See Paragraph 2.6)

 

		1.3	Term: 7 years and 0 months
                                            ("Original Term") commencing December 1, 2021 ("Commencement
                                            Date") and ending November 30, 2028 ("Expiration Date").
                                            (See also Paragraph 3 and Lease Addendum, Paragraph B)

 

		1.4	Early Possession: If the Premises are available
                                            Lessee may have non-exclusive possession of the Premises commencing November 15, 2021
                                            ("Early Possession Date"). (See also Paragraphs 3.2 and 3.3)

 

		1.5	Base Rent: $39,363 per month ("Base
                                            Rent"), payable on the 1st day of each month commencing December
                                            1, 2021. The Base Rent shall increase each and every year on the anniversary of the Commencement
                                            Date by a fixed 3% per annum. (See also Paragraph 4)

 

		1.6	Lessee's Share of Operating Expense Increase: 0
                                            % ("Lessee's Share"). In the event that the size of the Premises and/or
                                            the Project are modified during the term of this Lease, Lessor shall recalculate Lessee's
                                            Share to reflect such modification.

 

		1.7	Base Rent and Other Monies Paid Upon Execution:

 

(a)       Base
Rent: $39,363 for the period December 2022.

(b)       Security
Deposit: $78,727 ("Security Deposit"). (See also Paragraph 5)

(c)       Parking:
N/A for the period N/A.

(d)       Other:
N/A for N/A.

(e)       Total
Due Upon Execution of this Lease $61,009.90 (Base Rent $39,363 plus Security Deposit $78,727 - $57,080.10
existing deposit from previous lease).

 

		1.8	Agreed Use: Class A office uses including
                                            general business and any lawful permitted use consistent with the zoning for the Premises.
                                            (See also Paragraph 6)

 

		1.9	Base Year; Insuring Party. The Base Year
                                            is 2022. Lessor is the "Insuring Party". (See also Paragraphs 4.2
                                            and 8)

 

		1.10	Real Estate Brokers. (See also Paragraph
                                            15 and 25)

 

(a)       Representation:
Each Party acknowledges receiving a Disclosure Regarding Real Estate Agency Relationship, confirms and consents to the following
agency relationships in this Lease with the following real estate brokers ("Broker(s)") and/or their agents ("Agent(s)"):

Lessor's Brokerage Firm None License No. N/A
is the broker of the N/A.

Lessor's Agent None License No. N/A
is the N/A.

Lessee's Brokerage Firm None License No.
N/A is the broker of N/A.

Lessee's Agent None License No. N/A
is the N/A.

 

(b)       Payment
to Brokers. Upon execution and delivery of this Lease by both parties, Lessor shall pay to the Brokers the brokerage fee agreed

to in a separate written agreement (or if there is no such agreement, the sum of zero or zero % of the total Base Rent)
for the brokerage for services rendered by the Brokers.

 

		1.11	Guarantor. The obligations of the Lessee
                                            under this Lease are to be guaranteed by None ("Guarantor"). (See also Paragraph
                                            37)

 

		1.12	Business Hours for the Building: 8:00
                                            a.m.to 5:00 p.m., Mondays through Fridays (except Building Holidays) and N/A
                                            a.m.to N/A p.m. on Saturdays (except Building Holidays). "Building Holidays"
                                            shall mean the dates of observation of New Year's Day, President's Day, Memorial Day, Independence
                                            Day, Labor Day, Thanksgiving Day and Christmas Day.

 

		1.13	Lessor Supplied Services. Notwithstanding
                                            the provisions of Paragraph 11.1, Lessor is NOT obligated to provide the following within
                                            the Premises: N/A

 

		1.14	Attachments. Attached hereto are the following,
                                            all of which constitute a part of this Lease: Addendum titled Lease Addendum

 

		2.	Premises.

 

	 	2.1       Letting. Lessor hereby leases to Lessee, and Lessee hereby
  leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this
  Lease. While the approximate square footage of the Premises may have been used in the marketing of the Premises for purposes of comparison,
  the Base Rent stated herein is NOT tied to square footage and is not subject to adjustment should the actual size be determined to
  be different. Lessee is advised to verify the actual size prior to executing this Lease.

 

	 	2.2       Condition. Lessor shall deliver the Premises to Lessee in
  a clean condition on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and
  warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"),
  and all other items which the Lessor is obligated to construct pursuant to the Work Letter attached hereto, if any, other than those constructed by Lessee, shall be in
good operating condition on said date, that the structural elements of the roof, bearing walls 

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	1

     

    

 

	 	and foundation of the Unit shall be free of material defects, and that the Premises do not contain hazardous levels of any mold or fungi
defined as toxic under applicable state or federal law. Lessor also warrants, that unless otherwise specified in writing, Lessor is unaware
of (i) any recorded Notices of Default affecting the Premise; (ii) any delinquent amounts due under any loan secured by the Premises;
and (iii) any bankruptcy proceeding affecting the Premises.

 

	 	2.3       Compliance. Lessor warrants that to the best of its knowledge
  the improvements on the Premises and the Common Areas comply with the building codes, applicable laws, covenants or restrictions of
  record, regulations, and ordinances (“Applicable Requirements") that were in effect at the time that each improvement,
  or portion thereof, was constructed. Said warranty does not apply to the use to which lessee will put the Premises, modifications which
  may be required by the Americans with Disabilities Act or any similar laws as a result of Lessee's use (see Paragraph 49), or to any
  Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible
  for determining whether or not the zoning and other Applicable Requirements are appropriate for Lessee's intended use, and acknowledges
  that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except
  as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of
  such non-compliance, rectify the same. If the Applicable Requirements are hereafter changed so as to require during the term of this
  Lease the construction of an addition to or an alteration of the Premises, the remediation of any Hazardous Substance, or the reinforcement
  or other physical modification of the Premises ("Capital Expenditure"), Lessor and Lessee shall allocate the cost
  of such work as follows:

 

		(a)	Subject to Paragraph 2.3(c) below, if such capital Expenditures
                                            are required as a result of the specific and unique use of the Premises by Lessee as compared
                                            with uses by tenants in general, Lessee shall be fully responsible for the cost thereof,
                                            provided, however, that if such Capital Expenditure is required during the last 2 years of
                                            this Lease and the cost thereof exceeds 6 months' Base Rent, Lessee may instead terminate
                                            this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee's
                                            termination notice that Lessor has elected to pay the difference between the actual cost
                                            thereof and the amount equal to 6 months' Base Rent. If Lessee elects termination, Lessee
                                            shall immediately cease the use of the Premises which requires such Capital Expenditure and
                                            deliver to Lessor written notice specifying a termination date at least 90 days thereafter.
                                            Such termination date shall, however, in no event be earlier than the last day that Lessee
                                            could legally utilize the Premises without commencing such Capital Expenditure.

 

		(b)	If such Capital Expenditure is not the result of the
                                            specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic
                                            modifications), then Lesser shall pay for such Capital Expenditure and Lessee shall only
                                            be obligated to pay, each month during the remainder of the term of this Lease or any extension
                                            thereof, oh the date that on which the Base Rent is due, an amount equal to 1/144th of the
                                            portion of such costs reasonably attributable to the Premises. Lessee shall pay Interest
                                            on the balance but may prepay its obligation at any time. If, however, such Capital Expenditure
                                            is required during the last 2 years of this Lease or if lessor reasonably determines that
                                            it is not economically feasible to pay its share thereof, Lessor shall have the option to
                                            terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor,
                                            in writing, within 10 days after receipt of Lessor's termination notice that Lessee will
                                            pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender
                                            its share of any such Capital Expenditure, Lessee may advance such funds and deduct same
                                            with Interest, from Rent until Lessor's share of such costs have been fully paid. If Lessee
                                            is unable to finance Lessor's share, or if the balance of the Rent due and payable for the
                                            remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee
                                            shall have the right to terminate this Lease upon 30 days written notice to Lessor.

 

		(c)	Notwithstanding the above, the provisions concerning
                                            Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable
                                            Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of
                                            an actual or proposed change in use, change in intensity of use, or modification to the Premises
                                            then, and in that event, Lessee shall either: (i) immediately cease such changed use or intensity
                                            of use and/or take such other steps as may be necessary to eliminate the requirement for
                                            such Capital Expenditure, or (ii) complete such Capital Expenditure at its own expense. Lessee
                                            shall not have any right to terminate this Lease.

 

		2.4	Acknowledgements. Lessee acknowledges that:
                                            (a) it has been given an opportunity to inspect and measure the Premises, (b) Lessee has
                                            been advised by Lessor and/or Brokers to satisfy itself with respect to the size and condition
                                            of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems,
                                            security, environmental aspects, and compliance with Applicable Requirements), and their
                                            suitability for Lessee's intended use, (c) Lessee has made such investigation as it deems
                                            necessary with reference to such matters and assumes all responsibility therefor as the same
                                            relate to its occupancy of the Premises, (d) it is not relying on any representation as to
                                            the size of the Premises made by Brokers or Lessor, (e) the square footage of the Premises
                                            was not material to Lessee's decision to lease the Premises and pay the Rent stated herein,
                                            and (f) neither Lessor, Lessor's agents, nor Brokers have made any oral or written representations
                                            or warranties with respect to said matters other than as set forth in this Lease. In addition,
                                            Lessor acknowledges that: (i) Brokers have made no representations, promises or warranties
                                            concerning Lessee's ability to honor the Lease or suitability to occupy the Premises, and
                                            (ii) it is Lessor's sole responsibility to investigate the financial capability and/or suitability
                                            of all proposed tenants.

 

		2.5	Lessee as Prior Owner/Occupant. The warranties
                                            made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the
                                            Start

                                            Date, Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible
                                            for any necessary corrective work.

 

		2.6	Vehicle Parking. So long as Lessee is not
                                            in default, and subject to the Rules and Regulations attached hereto, and as established
                                            by Lessor from time to time, Lessee shall be entitled to rent and use the number of parking
                                            spaces specified in Paragraph 1.2(b) at the rental rate applicable from time to time for
                                            monthly parking as set by Lessor and/or its licensee.

 

		(a)	If Lessee commits, permits or allows any of the prohibited activities
                                            described in the Lease or the rules then in effect, then Lesser shall have the right, without
                                            notice, in addition to such other rights and remedies that it may have, to remove or tow
                                            away the vehicle involved and charge the cost to Lessee, which cost shall be immediately
                                            payable upon demand by Lessor.

 

		(b)	The monthly rent per parking space specified
                                            in Paragraph 1.2(b) is subject to change upon 30 days prior written notice to Lessee. The
                                            rent for the parking is payable one month in advance prior to the first day of each calendar
                                            month.

 

		2.7	Common Areas - Definition. The term "Common
                                            Areas" is defined as all areas and facilities outside the Premises and within the
                                            exterior boundary line of the Project and interior utility raceways and installations within
                                            the Premises that are provided and designated by the Lessor from time to time for the general
                                            nonexclusive use of Lessor, Lessee and other tenants of the Project and their respective
                                            employees, suppliers, 

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	2

     

    

 

	 	 	shippers, customers, contractors and invitees, including, but not limited to, common entrances, lobbies, corridors, stairwells, public
restrooms, elevators, parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.

 

		2.8	Common Areas - Lessee's Rights. Lessor
                                            grants to Lessee, for the benefit of Lessee and its employees suppliers, Shippers, contractors,
                                            customers and invitees, during the term of this Lease, the non-exclusive right to use, in
                                            common with others entitled to such us the Common Areas as they exist from time to time,
                                            subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or
                                            under the terms of any rules and regulations or restrictions governing the use of the Project.
                                            Under no circumstances shall the right herein granted to use the Common Areas be deemed to
                                            include the right to store any property, temporarily or permanently, in the Common Areas.
                                            Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's
                                            designated agent, which consent may be revoked at any time. In the event that any unauthorized
                                            storage shall occur, then Lessor shall have the right, without notice, in addition to such
                                            other rights and remedies that it may have, to remove the property and charge the cost to
                                            Lessee, which cost shall be immediately payable upon demand by Lessor.

 

		2.9	Common Areas - Rules and Regulations. Lessor
                                            or such other person(s) as Lessor may appoint shall have the exclusive control and management
                                            of the Common Areas and shall have the right, from time to time, to adopt, modify, amend
                                            and enforce reasonable rules and regulations ("Rules and Regulations") for
                                            the management, safety, care, and cleanliness of the grounds, the parking and unloading of
                                            vehicles and the preservation of good order, as well as for the convenience of other occupants
                                            or tenants of the Building and the Project and their invitees. The lessee agrees to abide
                                            by and conform to all such Rules and Regulations, and shall use its best efforts to cause
                                            its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform.
                                            Lessor shall not be responsible to Lessee for the noncompliance with said Rules and Regulations
                                            by other tenants of the Project.

 

		2.10	Common Areas - Changes. Lessor shall have
                                            the right, in Lessor's sole discretion from time to time:

 

		(a)	To make changes to the Common Areas,
                                            including, without limitation, changes in the location, size, shape and number of the lobbies,
                                            windows, stairways, air shafts, elevators, escalators, restrooms, driveways, entrances, parking
                                            spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic,
                                            landscaped areas, walkways and utility raceways;

 

		(b)	To close temporarily any of the Common Areas for maintenance
                                            purposes so long as reasonable access to the Premises remains available;

 

		(c)	To designate other land outside the boundaries of the
                                            project to be a part of the Common Areas;

 

		(d)	To add additional buildings and improvements to the common
                                            Areas;

 

		(e)	To use the Common Areas while engaged in making additional
                                            improvements, repairs or alterations to the Project, or any portion thereof; and

 

		(f)	To do and perform such other acts
                                            and make such other changes in, to or with respect to the Common Areas and Project as Lessor
                                            may, in the exercise of sound business judgment, deem to be appropriate.

 

3.       Term.

 

3.1 Term. The Commencement Date, Expiration Date
and Original Term of this Lease are as specified in Paragraph 1.3.

 

		3.2	Early Possession. Any provision herein
                                            granting Lessee Early Possession of the Premises is subject to and conditioned upon the Premises
                                            being available for such possession prior to the Commencement Date. Any grant of Early Possession
                                            only conveys a non-exclusive right to occupy the Premises. If Lessee totally or partially
                                            occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall
                                            be abated for the period of such Early Possession. All other terms of this Lease (including
                                            but not limited to the obligations to pay Lessee's Share of the Operating Expense Increase)
                                            shall be in effect during such period. Any such Early Possession shall not affect the Expiration
                                            Date.

 

		3.3	Delay In Possession. Lessor agrees to use
                                            its best commercially reasonable efforts to deliver possession of the Premises to Lessee
                                            by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession
                                            by such date, Lessor shall not be subject to any liability therefor, nor shall such failure
                                            affect the validity of this Lease or change the Expiration Date. Lessee shall not, however,
                                            be obligated to pay Rent or perform its other obligations until Lessor delivers possession
                                            of the Premises and any period of rent abatement that Lessee would otherwise have enjoyed
                                            shall run from the date of delivery of possession and continue for a period equal to what
                                            Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused
                                            by the acts or omissions of Lessee. If possessions not delivered within 60 days after the
                                            Commencement Date, as the same may be extended under the terms of any Work Letter executed
                                            by Parties, Lessee may at its option, by notice in writing within 10 days after the end of
                                            such 60 day period, cancel this Lease, in which event the Parties shall be discharged from
                                            all obligations hereunder. If such written notice is not received by Lessor within said 10
                                            day period, Lessee's right to cancel shall terminate. If possession of the Premises is not
                                            delivered within 120 days after the Commencement Date, this Lease shall terminate unless
                                            other agreements are reached between Lessor and Lessee, in writing.

 

		3.4	Lessee Compliance. Lessor shall not be
                                            required to deliver possession of the Premises to Lessee until Lessee complies with its obligation
                                            to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
                                            shall be required to perform all of its obligations under this Lease from and after the Start
                                            Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession
                                            pending receipt of such evidence of insurance. Further, if Lessee is required to perform
                                            any other conditions prior to or concurrent with the Start Date, the Start Date shall occur,
                                            but Lessor may elect to withhold possession until such conditions are satisfied.

 

4.       Rent.

 

		4.1	Rent Defined. All
                                            monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security
                                            Deposit) are deemed to be rent ("Rent").

 

		4.2	Operating Expense Increase.
                                            Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee's
                                            Share of the amount by which all Operating Expenses for each Comparison Year exceeds the
                                            amount of all Operating Expenses for the Base Year, such excess being hereinafter referred
                                            to as the "Operating Expense Increase", in accordance with the following
                                            provisions:

 

		(a)	"Base Year" is as specified in Paragraph 1.9.

 

		(b)	"Comparison Year" is
                                            defined as each calendar year during the term of this Lease subsequent to the Base Year;
                                            provided, however, Lessee shall have no obligation to pay a share of the Operating Expense
                                            Increase applicable to the first 12 months of the Lease Term (other than 

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	3

     

    

 

	 	 	such as are mandated by a governmental authority, as to which government mandated expenses Lessee shall pay Lessee's Share, notwithstanding
they occur during the first twelve (12) months). Lessee's Share of the Operating Expense Increase for the first and last Comparison Years
of the Lease Term shall be prorated according to that portion of Such Comparison Year as to which Lessee is responsible for a share of
such increase.

 

		(c)	The following costs relating to
                                            the ownership and operation of the Project, calculated as if the Project was at least 95%
                                            occupied, are defined as "Operating Expenses":

 

		(i)	Costs relating to the operation,
                                            repair, and maintenance in neat, clean, safe, good order and condition, but not the replacement
                                            (see subparagraph (g)), of the following:

 

	 	(ia)	The Common Areas, including their surfaces, coverings, decorative items, carpets, drapes and window coverings
  and including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, stairways, parkways, driveways,
  landscaped areas, striping, bumpers, irrigation systems, Common Area lighting facilities, building exteriors and roofs, fences and
  gates;

 

	 	(ib)	All heating, air conditioning, plumbing, electrical systems, life safety equipment, communication systems and
  other equipment used in common by, or for the benefit of, tenants or occupants of the Project, including elevators and escalators,
  tenant directories, fire detection systems including sprinkler system maintenance and repair.

 

	 	(ic)	All other areas and improvements that are within the exterior boundaries of the Project but outside of the Premises
  and/or any other space occupied by a tenant.

 

		(ii)	The cost of trash disposal, janitorial and security
                                            services, pest control services, and the cost of any environmental inspections;

 

		(iii)	The cost of any other service to be provided by Lessor
                                            that is elsewhere in this Lease stated to be an "Operating Expense";

 

		(iv)	The cost of the premiums for the
                                            insurance policies maintained by Lessor pursuant to paragraph 8 and any deductible portion
                                            of an insured loss concerning the Building or the Common Areas;

 

		(v)	The amount of the Real Property Taxes payable by Lessor
                                            pursuant to paragraph 10;

 

		(vi)	The cost of water, sewer, gas, electricity, and other
                                            publicly mandated services not separately metered;

 

		(vii)	Labor, salaries, and applicable
                                            fringe benefits and costs, materials, supplies and tools, used in maintaining and/or cleaning
                                            the Project and accounting and management fees attributable to the operation of the Project;

 

		(viii)	The cost of any capital improvement
                                            to the Building or the Project not covered under the provisions of Paragraph 2.3 provided;
                                            however, that Lessor shall allocate the cost of any such capital improvement over a 12 year
                                            period and Lessee shall not be required to pay more than Lessee's Share of 1/144th of the
                                            cost of such Capital Expenditure in any given month;

 

		(ix)	The cost to replace equipment or improvements that are
                                            a useful life for accounting purposes of 5 years or less.

 

		(x)	Reserves set aside for maintenance, repair and/or replacement
                                            of Common Area improvements and equipment.

 

		(d)	Any item of Operating Expense that
                                            is specifically attributable to the Premises, the Building or to any other building in the
                                            Project or to the operation, repair and maintenance thereof, shall be allocated entirely
                                            to such premises, Building, or other building. However, any such item that is not specifically
                                            attributable to the Building or to any other building or to the operation, repair and maintenance
                                            thereof, shall be equitably allocated by Lessor to all buildings in the Project.

 

		(e)	The inclusion of the improvements,
                                            facilities and Services set forth in Subparagraph 4.2(c) shall not be deemed to impose an
                                            obligation upon Lessor to either have said improvements or facilities or to provide those
                                            service unless the Project already has the same, Lessor already provides the services, or
                                            Lessor has agreed elsewhere in this Lease to provide the same or some of them

 

		(f)	Lessee's Share of Operating Expense
                                            increase is payable monthly on the same day as the Base Rent is due hereunder. The amount
                                            of such payments shall be based on Lessor's estimate of the Operating Expense Expenses. Within
                                            60 days after written request (but not more than once each year) Lessor shall deliver to
                                            Lessee a reasonably detailed statement showing Lessee's Share of the actual Common Area Operating
                                            Expenses for the preceding year. If Lessee's payments during such Year exceed Lessee's Share,
                                            Lessee shall credit the amount of such over-payment against Lessee's future payments. If
                                            Lessee's payments during such Year were less than Lessee's Share, Lessee shall pay to Lessor
                                            the amount of the deficiency within 10 days after delivery by Lessor to Lessee of said statement.
                                            Lessor and Lessee shall forthwith adjust between then by cash payment any balance determined
                                            to exist with respect to that portion of the last Comparison Year for which Lessee is responsible
                                            as to Operating Expense increases, notwithstanding that the Lease term may have terminated
                                            before the end of such Comparison Year.

 

		(g)	Operating Expenses shall not include
                                            the costs of replacement for equipment or capital components such as the roof, foundations,
                                            exterior walls or a Common Area capital improvement, such as the parking lot paving, elevators,
                                            fences that have a useful life for accounting purposes of 5 years or more.

 

		(h)	Operating Expenses shall not include
                                            any expenses paid by any tenant directly to third parties, or as to which Lessor is otherwise
                                            reimbursed by any third party, other tenant, or by insurance proceeds.

 

		4.3	Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful
                                                                money of the United States on or before the day on which it is due, without offset or deduction (except as specifically permitted in
                                                                this Lease). All monetary amounts shall be rounded to the nearest whole dollar. In the event that any invoice prepared by Lessor is
                                                                inaccurate such inaccuracy shall not constitute a waiver and Lessee shall be obligated to pay the amount set forth in this Lease.
                                                                Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual
                                                                number of days of said month. Payment of Rent shall be made to lessor at its address stated herein or to such other persons or place
                                                                as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a
                                                                waiver of Lessor's rights to the balance of such Rent, regardless of Lessor's endorsement of any check so stating the event that
                                                                any check, draft, or other 

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	4

     

    

 

	 	 	instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition
to any Late Charge and Lessor, at its option, may require all future Rent be paid by cashier's check. Payments will be applied first
to accrued late charges and attorney's fees, second to accrued interest, then to Base Rent and Common Area Operating Expenses, and any
remaining amount to any other outstanding charges or costs.

 

		5.	Security Deposit. Lessee shall deposit with Lessor upon
                                            execution hereof the Security Deposit as security for Lessee's faithful performance of its
                                            obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this
                                            Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the
                                            payment of any amount already due Lessor, for Rents which will be due in the future, and/
                                            or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor
                                            may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the
                                            Security Deposit, Lessee shall within 10 days after written request therefor deposit monies
                                            with Lessor sufficient to restore said Security Deposit to the full amount required by this
                                            Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written
                                            request from Lessor, deposit additional monies with Lessor so that the total amount of the
                                            Security Deposit shall at all times bear the same proportion to the increased Base Rent as
                                            the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended
                                            to accommodate a material change in the business of Lessee or to accommodate a sublessee
                                            or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary,
                                            in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises
                                            may suffer as a result thereof. If a change in control of Lessee occurs during this Lease
                                            and following such change the financial condition of Lessee is, in Lessor's reasonable judgment,
                                            significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be
                                            sufficient to cause the Security Deposit to be at a commercially reasonable level based on
                                            such change in financial condition. Lessor shall not be required to keep the Security Deposit
                                            separate from its general accounts. Within 90 days after the expiration or termination of
                                            this Lease, Lessor shall return that portion of the Security Deposit not used or applied
                                            by Lessor. Lessor shall upon written request provide Lessee with an accounting showing how
                                            that portion of the Security Deposit that was not returned was applied. No part of the Security
                                            Deposit shall be considered to be held in trust, to bear interest or to be prepayment for
                                            any monies to be paid by Lessee under this Lease. THE SECURITY DEPOSIT SHALL NOT BE USED
                                            BY LESSEE IN LIEU OF PAYMENT OF THE LAST MONTH'S RENT.

 

		6.	Use.

 

		6.1	Use. Lessee shall use and occupy the Premises
                                            only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and
                                            for

                                            no other purpose. Lessee shall not use or permit the use of the Premises in a manner that
                                            is unlawful, creates damage, waste or a nuisance, or

                                            that disturbs occupants of or causes damage to neighboring premises or properties. Other
                                            than guide, signal and seeing eye dogs, Lessee shall not keep or allow in the Premises any
                                            pets, animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or delay
                                            its consent to any written request for a modification of the agreed use, so long as the same
                                            will not impair the structural integrity of the improvements of the Building, will not adversely
                                            affect the mechanical, electrical, HVAC, and other systems of the Building, and/or will not
                                            affect the exterior appearance of the Building. If Lessor elects to withhold consent, Lessor
                                            shall within 7 days after such request give written notification of same, which notice shall
                                            include an explanation of Lessor's objections to the change in the Agreed Use.

 

	 	6.2	       Hazardous Substances.

 

		(a)	Reportable Uses Require Consent.
                                            The term "Hazardous Substance" as used in this Lease shall mean any
                                            product, Substance, or waste whose presence, use, manufacture, disposal, transportation,
                                            or release, either by itself or in combination with other materials expected to be on the
                                            Premises, is either: (i) potentially injurious to the public health, safety or welfare, the
                                            environment or the Premises, (ii) regulated or monitored by any governmental authority, or
                                            (iii) a basis for potential liability of Lessor to any governmental agency or third party
                                            under any applicable statute or common law the theory. Hazardous Substances shall include,
                                            but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products,
                                            byproducts or fractions thereof. Lessee shall not engage in any activity in or on the Premises
                                            which constitutes a Reportable Use of Hazardous Substances without the express prior written
                                            consent of Lessor and timely compliance (at Lessee's expense) with all Applicable
                                            Requirements. "Reportable Use" shall mean (i) the installation or use of
                                            any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation,
                                            or disposal of a Hazardous Substance that requires a permit from, or with respect to which
                                            a report, notice, registration or business plan is required to be filed with, any governmental
                                            authority, and/or (iii) the presence at the premises of a Hazardous Substance with respect
                                            to which any Applicable Requirements requires that a notice be given to persons entering
                                            or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
                                            may use any ordinary and customary materials reasonably required to be used in the normal
                                            course of the Agreed Use such as ordinary office supplies (copier toner, liquid paper, glue,
                                            etc.) and common household cleaning materials, so long as such use is in compliance with
                                            all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or
                                            neighboring property to any meaningful risk of contamination or damage or expose Lessor to
                                            any liability therefor. In addition, Lessor may condition its consent to any Reportable Use
                                            upon receiving such additional assurances as Lessor reasonably deems necessary to protect
                                            itself, the public, the Premises and/or the environment against damage, contamination, Injury
                                            and/or liability, including, but not limited to, the installation (and removal on or before
                                            Lease expiration or termination) of protective modifications (such as concrete encasements)
                                            and/or increasing the Security Deposit.

 

		(b)	Duty to Inform Lessor. If
                                            Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to
                                            be located in, on, under or about the Premises, other than as previously consented to by
                                            Lessor Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor
                                            with a copy of any report, notice, claim or other documentation which has concerning the
                                            presence of such Hazardous Substance.

 

		(c)	Lessee Remediation. Lessee
                                            shall not cause or permit any Hazardous Substance to be spilled or released in, on, under,
                                            or about the Premises (including through the plumbing or sanitary sewer system) and shall
                                            promptly, at Lessee's expense, comply with all Applicable Requirements and take all investigatory
                                            and/or remedial action reasonably recommended, whether or not formally ordered or required,
                                            for the cleanup of any contamination of, and for the maintenance, security and/or monitoring
                                            of the Premises or neighboring properties, that was caused or materially contributed to by
                                            Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during
                                            the term of this Lease, by or for Lessee, or any third party.

 

		(d)	Lessee Indemnification. Lessee shall indemnify,
                                            defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless
                                            from and against any and all loss of rents and/or damages, liabilities, judgments, claims,
                                            expenses, penalties, and attorneys' and consultants' fees arising out of or involving any
                                            Hazardous Substance brought onto the premises by or for Lessee, or any third party (provided,
                                            however, 

 

    
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	 	 	that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises
from areas outside of the Project not caused or contributed to by Lessee). Lessee's obligations shall include, but not be limited to
the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation
removal remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation
or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed By Lessor in writing at the time of such agreement.

 

		(e)	Lessor Indemnification. Except as otherwise provided
                                            in paragraph 8.7, Lessor and its successors and assigns shall indemnify, defend, reimburse
                                            and hold Lessee, its employees and lenders, harmless from and against any and all environmental
                                            damages, including the cost of remediation, which result from Hazardous Substances which
                                            existed on the Premises prior to Lessee's occupancy or which are caused by the gross negligence
                                            or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when
                                            required by the Applicable Requirements, shall include, but not be limited to, the cost of
                                            investigation, removal, remediation, restoration and/or abatement, and shall survive the
                                            expiration or termination of this Lease.

 

		(f)	Investigations and Remediations. Lessor shall
                                            retain the responsibility and pay for any investigations or remediation measures required
                                            by governmental entities having jurisdiction with respect to the existence of Hazardous Substances
                                            on the Premises prior to Lessee's occupancy, unless such remediation measures required as
                                            a result of Lessee's use (including "Alterations", as defined in paragraph 7.3(a)
                                            below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee
                                            shall cooperate fully in any such activities at the request of Lessor, including allowing
                                            Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times
                                            in order to carry out Lessor's investigative and remedial responsibilities.

 

		(g)	Lessor Termination Option. If a Hazardous Substance
                                            Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally
                                            responsible therefor (in which case Lessee shall make the investigation and remediation thereof
                                            required by the Applicable Requirements and this Lease shall continue in full force and effect,
                                            but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's
                                            option, either (i) investigate and remediate such Hazardous Substance Condition, if required,
                                            as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue
                                            in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds
                                            12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice
                                            to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such
                                            Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date
                                            60 days following the date of such notice. In the event Lessor elects to give a termination
                                            notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee's
                                            commitment to pay the amount by which the cost of the remediation of such Hazardous Substance
                                            Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever
                                            is greater. Lessee shall provide Lessor

                                            with said funds or satisfactory assurance thereof within 30 days following such commitment.
                                            In such event, this Lease shall continue in full

                                            force and effect, and Lessor shall proceed to make such remediation as soon as reasonably
                                            possible after the required funds are available. If Lessee does not give such notice and
                                            provide the required funds or assurance thereof within the time provided, this Lease shall
                                            terminate as

                                            of the date specified in Lessor's notice of termination.

 

		6.3	Lessee's Compliance with Applicable Requirements.
                                            Except as otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
                                            diligently and in a timely manner, materially comply with all Applicable Requirements, the
                                            requirements of any applicable fire insurance underwriter

                                            or rating bureau, and the recommendations of Lessor's engineers and/or consultants which
                                            relate in any manner to the Premises, without regard to whether said Applicable Requirements
                                            are now in effect or become effective after the Start Date. Lessee shall, within 10 days
                                            after receipt of

                                            Lessor's written request, provide Lessor with copies of all permits and other documents,
                                            and other information evidencing Lessee's compliance with any Applicable Requirements specified
                                            by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any
                                            documents

                                            involved) of any threatened or actual claim, notice, citation, warning, complaint on report
                                            pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable
                                            Requirements. Likewise, Lessee shall immediately give written notice to Lessor of: (i) any
                                            water damage to the Premises and any suspected seepage, pooling, dampness or other condition
                                            conducive to the production of mold; on (ii) any mustiness or other odors that might indicate
                                            the presence of mold in the Premises.

 

		6.4	Inspection; Compliance. Lessor and Lessor's
                                            "Lender" (as defined in Paragraph 30) and consultants authorized by Lessor
                                            shall have the right to enter into Premises at any time, in the case of an emergency, and
                                            otherwise at reasonable times, after reasonable notice, for the purpose of inspecting and/or
                                            testing the condition of the Premises and/or for verifying compliance by Lessee with this
                                            Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable
                                            Requirements, or a Hazardous Substance Condition (see Paragraph 9.1e) is found to exist

                                            or be imminent on the inspection is requested or ordered by a governmental authority. In
                                            such case, Lessee shall upon request reimburse Lessor

                                            for the cost of such inspection so long as such inspection is reasonably related to the violation
                                            or contamination. In addition, Lessee shall provide copies of all relevant material safety
                                            data sheets (MSDS) to Lessor within 10 days of the receipt of written request therefor.
                                            Lessee acknowledges that any failure on its part to allow such inspections or testing will
                                            expose Lessor to risks and potentially cause Lessor to incur costs not

                                            contemplated by this Lease, the extent of which will be extremely difficult to ascertain.
                                            Accordingly, should the Lessee fail to allow such inspections and/or testing in a timely
                                            fashion the Base Rent shall be automatically increased, without any requirement for notice
                                            to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is
                                            greater for the remainder to the Lease. The Parties agree that such increase in Base Rent
                                            represents fair and reasonable compensation for the additional risk/costs that Lessor will
                                            incur by reason of Lessee's failure to allow such inspection and/or testing. Such increase
                                            in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect
                                            to such

                                            failure nor prevent the exercise of any of the other rights and remedies granted hereunder.

 

7.       Maintenance; Repairs;
Utility Installations; Trade Fixtures and Alterations.

 

	 	7.1	Lessee's Obligations. Notwithstanding Lessor's obligation to keep the Premises in good condition and
  repair, Lessee shall be responsible for payment of the cost thereof to Lessor as additional rent for that portion of the cost of any
  maintenance and repair of the Premises, or any equipment (wherever located) that serves only Lessee or the Premises, to the extent
  such cost is attributable to abuse or misuse. In addition, Lessee rather than the Lessor shall be responsible for the cost of painting, repairing or replacing wall coverings,
  and to repair or replace any similar improvements within the Premises. Lessor may, at its option, upon reasonable notice, elect to
  have Lessee perform any particular such maintenance or repairs the cost of which is otherwise Lessee's responsibility hereunder.

 

    
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	 	Lessee Initials_____	6

     

    

 

	 	7.2 	Lessor's Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2
  (Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation) Lessor, subject to reimbursement
  pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of
  interior bearing walls, exterior roof, fire sprinkler system, fire alarm and/or smoke detection systems, fire hydrants, and the Common
  Areas.

 

	 	7.3 	Utility Installations; Trade Fixtures; Alterations.

 

		(a)	Definitions. The term "Utility
                                            Installations" refers to all floor and window coverings, air lines, vacuum lines,
                                            power panels, electrical distribution, security and fire protection systems, communication
                                            cabling, lighting fixtures, HVAC equipment, and plumbing in or on the Premises. The term
                                            "Trade Fixtures" shall mean Lessee's machinery and equipment that can be
                                            removed without doing material damage to the Premises. The term "Alterations"
                                            shall mean any modification of the improvements, other than Utility Installations or Trade
                                            Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or Utility
                                            Installations" are defined as Alterations and/or Utility Installations made by Lessee
                                            that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

 

		(b)	Consent. Lessee
                                            shall not make any Alterations or Utility Installations to the Premises without Lessor's
                                            prior written consent. Lessee may, however, make non-structural Alterations of Utility Installations
                                            to the interior of the Premises (excluding the roof) without such consent but upon notice
                                            to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating
                                            or removing the roof, ceilings, floors or any existing walls, will not affect the electrical,
                                            plumbing, HVAC, and/or life safety systems, do not trigger the requirement for additional
                                            modifications and/or improvements to the Premises resulting from Applicable Requirements
                                            such as compliance with Title 24, and the cumulative cost thereof during this Lease as extended
                                            does not exceed $2000. Notwithstanding the foregoing, Lessee shall not make or permit any
                                            roof penetrations and/or install anything on the roof without the prior written approval
                                            of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize
                                            a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that
                                            Lessee shall desire to make and which require the consent of the Lessor shall be presented
                                            to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee’s:
                                            (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of
                                            both the permits and the plans and specifications prior to commencement of the work, and
                                            (iii) compliance with all conditions of said permits and other Applicable Requirements in
                                            a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed
                                            in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion
                                            furnish Lessor with as-built plans and specifications. For work which costs an amount in
                                            excess of one month's Base Rent, Lessor may condition its consent upon Lessee providing a
                                            lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration
                                            or Utility Installation and/or upon Lessee's posting an additional Security Deposit with
                                            Lessor.

 

		(c)	Liens; Bonds. Lessee
                                            shall pay, when due, all claims for labor or materials furnished or alleged to have been
                                            furnished to or for Lessee at or for use on the Premises, which claims are or may be secured
                                            by any mechanic's or materialmen's lien against the Premises or any interest therein. Lessee
                                            shall give Lessor not less than 10 days notice prior to the commencement of any work in,
                                            on or about the Premises, and Lessor shall have the right to post notices of non-responsibility.
                                            If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall,
                                            at its sole expense defend and protect itself, Lessor and the Premises against the same and
                                            shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement
                                            thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to
                                            150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability
                                            for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's
                                            attorneys' fees and costs.

 

	 	7.4 	Ownership; Removal; Surrender; and Restoration.

 

		(a)	Ownership. Subject to Lessor's right to
                                            require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations
                                            made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor
                                            may, at any time, elect in writing to be the owner of all or any specified part of the Lessee
                                            Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b)
                                            hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or
                                            termination of this lease, become the property of Lessor and be surrendered by Lessee with
                                            the Premises.

 

		(b)	Removal. By delivery
                                            to lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior
                                            to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations
                                            or Utility Installations be removed by the expiration or termination of this Lease. Lessor
                                            may require the removal at any time of all or any part of any Lessee Owned Alterations or
                                            Utility Installations made without the required consent.

 

		(c)	Surrender; Restoration. Lessee shall surrender
                                            the Premises by the Expiration Date or any earlier termination date, with all of the improvements,
                                            parts and surfaces thereof clean and free of debris, and in good operating order, condition
                                            and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear"
                                            shall not include any damage or deterioration that would have been prevented by good maintenance
                                            practice. Notwithstanding the foregoing, if the Lessee occupies the Premises for 12 months
                                            or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee
                                            on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage
                                            occasioned by the installation, maintenance or removal of Trade Fixtures. Lessee owned Alterations
                                            and/or Utility Installations, furnishings, and equipment as well as the removal of any storage
                                            tank installed by or for Lessee. Lessee shall also remove from the Premises any and all Hazardous
                                            Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous
                                            Substances which were deposited via underground migration from areas outside of the Premises)
                                            to the level specified in Applicable Requirements. Trade Fixtures shall remain the property
                                            of Lessee and shall be removed by Lessee. Any personal property of Lessee not removed on
                                            or before the Expiration Date or any earlier termination date shall be deemed to have been
                                            abandoned by Lessee and may be disposed of or retained by Lessor as Lessor may desire. The
                                            failure by Lessee to timely vacate the premises pursuant to this Paragraph 7.4(c) without
                                            the express written consent of Lessor shall constitute a holdover under the provisions of
                                            Paragraph 26 below.

 

8.       Insurance;
Indemnity.

 

		8.1	Insurance Premiums. The cost of the premiums for the insurance policies maintained by Lessor pursuant to
                                                                paragraph 8 are included as Operating Expenses (see paragraph 4.2 (c)(iv)). Said costs shall include increases in the premiums
                                                                resulting from additional coverage related to requirements of the holder of a mortgage or deed of trust covering the Premises,
                                                                Building and/or Project, increased valuation of the Premises, Building and/or Project, and/or a general premium rate increase. Said
                                                                costs shall not, however, include any premium increases resulting from the nature of the 

 

    
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	 	Lessee Initials_____	7

     

    

 

	 	 	occupancy of any other tenant of the Building. If the Project was not insured for the entirety of the Base Year, then the base premium
shall be the lowest annual premium reasonably obtainable for the required insurance as of the Start Date, assuming the most nominal use
possible of the Building and/or Project. In no event, however, shall Lessee be responsible for any portion of the premium cost attributable
to liability insurance coverage in excess of $2,000,000 procured under Paragraph 8.2(b).

 

	 	8.2   	    Liability Insurance.

 

		(a)	Carried by Lessee. Lessee
                                            shall obtain and keep in force a Commercial General Liability policy of insurance protecting
                                            Lessee and Lessor as an additional insured against claims for bodily injury, personal injury
                                            and property damage based upon arising out of the ownership, use, occupancy or maintenance
                                            of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence
                                            basis providing single limit coverage in an amount not less than $1,000,000 per occurrence
                                            with an annual aggregate of not less than $2,000,000. Lessee shall add Lessor as an additional
                                            insured by means of an endorsement at least as broad as the Insurance Service Organization's
                                            "Additional Insured-Managers or Lessors of Premises" Endorsement and coverage shall
                                            also be extended to include damage caused by heat, smoke or fumes from a hostile fire. The
                                            policy shall not contain any intra-insured exclusions as between insured persons or organizations,
                                            but shall include coverage for liability assumed under this Lease as an "insured contract"
                                            for the performance of Lessee's indemnity obligations under this Lease. The limits of said
                                            insurance shall not, however, limit the liability of Lessee nor relieve lessee of any obligation
                                            hereunder. Lessee shall provide an endorsement on its liability policy(ies) which provides
                                            that its insurance shall be primary to and not contributory with any similar insurance carried
                                            by Lessor, whose insurance shall be considered excess insurance only.

 

		(b)	Carried by Lessor. Lessor
                                            shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and
                                            not in lieu of the insurance required to be maintained by Lessee. Lessee shall not be named
                                            as an additional insured therein.

 

	 	8.3   	    Property Insurance - Building, Improvements and Rental Value.

 

		(a)	Building and Improvements.
                                            Lessor shall obtain and keep in force a policy or policies of insurance in the name of
                                            Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or
                                            damage to the Building and/or Project. The amount of such insurance shall be equal to the
                                            full insurable replacement cost of the Building and/or Project, as the same shall exist from
                                            time to time, or the amount required by any Lender, but in no event more than the commercially
                                            reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations,
                                            Trade Fixtures, and Lessee's personal property shall be insured by Lessee not by Lessor.
                                            If the coverage is available and commercially appropriate, such policy or policies shall
                                            insure against all risks of direct physical loss or damage (except the perils of flood and/or
                                            earthquake unless required by a Lender), including coverage for debris removal and the enforcement
                                            of any Applicable Requirements requiring the upgrading demolition, reconstruction or replacement
                                            of any portion of the Premises as the result of a covered loss. Said policy or policies shall
                                            also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation,
                                            and inflation guard protection causing an increase in the annual property insurance coverage
                                            amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price
                                            Index for All Urban Consumers for the city nearest to where the premises are located. If
                                            such insurance coverage has a deductible clause, the deductible amount shall not exceed $5,000
                                            per occurrence.

 

		(b)	Rental Value Lessor shall
                                            also obtain and keep in force a policy or policies in the name of Lessor with loss payable
                                            to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended
                                            period of indemnity for an additional 180 days ("Rental Value insurance"). Said
                                            insurance shall contain an agreed valuation provision in lieu of any coinsurance clause,
                                            and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise
                                            payable by Lessee, for the next 12 month period.

 

		(c)	Adjacent Premises. Lessee
                                            shall pay for any increase in the premiums for the property insurance of the Building and
                                            for the Common Areas or other buildings in the Project if said increase is caused by Lessee's
                                            acts, omissions, use or occupancy of the Premises.

 

		(d)	Lessee's Improvements. Since
                                            Lessor is the Insuring Party, Lessor shall not be required to insure Lessee Owned Alterations
                                            and Utility Installations unless the item in question has become the property of Lessor under
                                            the terms of this Lease.

 

	 	8.4   	    Lessee's Property; Business Interruption Insurance; Worker's Compensation Insurance.

 

 

		(a)	Property Damage. Lessee
                                            shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade
                                            Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be
                                            full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence.
                                            The proceeds from any such insurance shall be used by Lessee for the replacement of personal
                                            property, Trade Fixtures and Lessee Owned Alterations and Utility Installations.

 

		(b)	Worker's Compensation Insurance.
                                            Lessee shall obtain and maintain Worker's Compensation Insurance in such amount as may
                                            be required by Applicable Requirements. Such policy shall include a 'Waiver of Subrogation'
                                            endorsement. Lessee shall provide Lessor with a copy of such endorsement along with the certificate
                                            of insurance or copy of the policy required by paragraph 8.5.

 

		(c)	Business Interruption. Lessee
                                            shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse
                                            Lessee for direct or indirect loss of earnings attributable to all perils commonly insured
                                            against by prudent lessees in the business of Lessee or attributable to prevention of access
                                            to the Premises as a result of such perils.

 

		(d)	No Representation of Adequate
                                            Coverage. Lessor makes no representation that the limits or forms of coverage of insurance
                                            specified herein are adequate to cover Lessee's property, business operations or obligations
                                            under this Lease.

 

		8.5	Insurance Policies.
                                            Insurance required herein shall be by companies maintaining during the policy term a
                                            "General Policyholders Rating" of at

                                            least A-, VII, as set forth in the most current issue of "Best's Insurance Guide”
                                            or such other rating as may be required by a Lender. Lessee shall

                                            not do or permit to be done anything which invalidates the required insurance policies. Lessee
                                            shall, prior to the Start Date, deliver to Lessor

                                            certified copies of policies of such insurance or certificates with copies of the required
                                            endorsements evidencing the existence and amounts of the required insurance. No such policy
                                            shall be cancelable or subject to modification except after 10 days prior written notice
                                            to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or
  "insurance binders" evidencing renewal thereof, or Lessor may increase his liability insurance coverage and charge the
  cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at
  least one year, or the length of the remaining tern of this Lease, whichever is less. If either Party shall fail to procure and
  maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and 

 

    
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maintain the
  same.

 

		8.6	Waiver of Subrogation. Without
                                            affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve
                                            the other, and waive their entire right to recover damages against the other, for loss of
                                            or damage to its property arising out of or incident to the perils required to be insured
                                            against herein. The effect of such releases and waivers is not limited by the amount of insurance
                                            carried or required, or by any deductibles applicable hereto. The parties agree to have their
                                            respective property damage insurance carriers waive any right to subrogation that such companies
                                            may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated
                                            thereby.

 

		8.7	Indemnity. Except for
                                            Lessor's gross negligence or willful misconduct, Lessee shall indemnify, protect, defend
                                            and hold harmless, the Premises, Lessor and its agents, Lessor's master or ground lessor,
                                            partners and Lenders, from and against any and all claims, loss of rents and/or damages liens
                                            judgments, penalties, attorneys' and consultants' fees, expenses and/or liabilities arising
                                            out of, involving, or in connection with, a Breach of the lease by Lessee and/or the use
                                            and/or occupancy of the Premises and/or Project by Lessee and/or by Lessee's employees, contractors
                                            or invitees. If any action or proceeding is brought against Lessor by reason of any of the
                                            foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel
                                            reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense.
                                            Lessor need not have first paid any such claim in order to be defended or indemnified.

 

		8.8	Exemption of Lessor and its Agents from Liability. Notwithstanding
                                            the negligence or breach of this Lease ay Lessor or its agents, neither Lessor nor its agents
                                            shall be liable under any circumstances for: (i) injury or damage to the person or goods,
                                            wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees,
                                            customers, or any other person in or about the Premises, whether such damage or injury is
                                            caused by or results from fire, steam, electricity, gas, water or rain, indoor air quality,
                                            the presence of mold or from the breakage, leakage, obstruction or other defects of pipes,
                                            fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other
                                            cause, whether the said injury or damage results from conditions arising upon the Premises
                                            or upon other portions of the Building, or from other sources or places, (ii) any damages
                                            arising from any act or neglect of any other tenant of Lessor or from the failure of Lessor
                                            or its agents to enforce the provisions of any other lease in the Project, or (iii) injury
                                            to Lessee's business or for any loss of income or profit therefrom. Instead, it is intended
                                            that Lessee's sole recourse in the event of such damages or injury be to file a claim on
                                            the insurance policy(ies) that Lessee is required to maintain pursuant to the provisions
                                            of paragraph 8.

 

		8.9	Failure to Provide Insurance.
                                            Lessee acknowledges that any failure on its part to obtain or maintain the insurance
                                            required herein will expose Lessor to risks and potentially cause Lessor to incur costs not
                                            contemplated by this Lease, the extent of which will be extremely difficult to ascertain.
                                            Accordingly, for any month or portion thereof that Lessee does not maintain the required
                                            insurance and/or does not provide Lessor with the required binders or certificates evidencing
                                            the existence of the required insurance, the Base Rent shall be automatically increased,
                                            without any requirement for notice to Lessee, by an amount equal to 10% of the then existing
                                            Base Rent or $100, whichever is greater. The parties agree that such increase in Base Rent
                                            represents fair and reasonable compensation for the additional risk/costs that Lessor will
                                            incur by reason of Lessee's failure to maintain the required insurance. Such increase in
                                            Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect
                                            to the failure to maintain such insurance, prevent the exercise of any of the other rights
                                            and remedies granted hereunder, nor relieve Lessee of its obligation to maintain the insurance
                                            specified in this Lease.

 

		9.	Damage or Destruction.

                                            

 

9.1 Definitions.

 

		(a)	"Premises Partial Damage"
                                            shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned
                                            Alterations and Utility Installations, which can reasonably be repaired in 3 months or less
                                            from the date of the damage or destruction, and the cost thereof does not exceed a sum equal
                                            to 6 month's Base Rent. Lessor shall notify Lessee in writing within 30 days from the date
                                            of the damage or destruction as to whether or not the damage is Partial or Total.

 

		(b)	"Premises Total Destruction" shall mean damage or
                                            destruction to the improvements on the Premises, other than Lessee Owned Alterations and
                                            Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months
                                            or less from the date of the damage or destruction and/or the cost thereof exceeds a sum
                                            equal to 6 month's Base Rent. Lessor shall notify Lessee in writing within 30 days from the
                                            date of the damage or destruction as to whether or not the damage is Partial or Total.

 

		(c)	"Insure Loss" shall
                                            mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations
                                            and Utility Installations and Trade Fixtures, which was caused by an event required to be
                                            covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
                                            or coverage limits involved.

 

		(d)	"Replacement Cost"
                                            shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of
                                            the occurrence to their condition existing immediately prior thereto, including demolition,
                                            debris removal and upgrading required by the operation of Applicable Requirements, and without
                                            deduction for depreciation.

 

		(e)	"Hazardous Substance Condition"
                                            shall mean the occurrence or discovery of a condition involving the presence of, or a contamination
                                            by, a Hazardous Substance, in, on, or under the Premises which requires restoration.

 

		9.2	Partial Damage - Insured Loss. If a Premises Partial Damage that is an insured Loss occurs, then Lessor shall, at
                                                                        Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon
                                                                        as reasonably possible and this Lease shall continue in full force and effect; provided however, that Lessee shall, at Lessor's
                                                                        election, make the repair of any damage or destruction the total cost to repair of which is $5,000 or less, and, in such event,
                                                                        Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the
                                                                        foregoing, if the required Insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the
                                                                        Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event,
                                                                        however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance
                                                                        coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance
                                                                        proceeds or to fully restore the unique aspects of the Premises unless
Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written
notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period,
the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full
force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10
days 

 

    
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	 	 	thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which
case this Lease shall remain in full force and effect, or (i) have this Lease terminate 30 days thereafter. Lessee shall not be entitled
to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any
such insurance shall be made available for the repairs if made by either Party.

 

		9.3	Partial Damage - Uninsured
                                            Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused
                                            by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at
                                            Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible
                                            at Lessor's expense (subject to reimbursement pursuant to Paragraph 4.2), in which event
                                            this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving
                                            written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence
                                            of such damage. Such termination shall be effective 60 days following the date of such notice.
                                            In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10
                                            days after receipt of the termination notice to give written notice to Lessor of Lessee's
                                            commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee
                                            shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after
                                            making such commitment. In such event this Lease shall continue in full force and effect,
                                            and Lessor shall proceed to make such repairs as soon as reasonably possible after the required
                                            funds are available. If Lessee does not make the required commitment, this Lease shall terminate
                                            as of the date specified in the termination notice.

 

		9.4	Total Destruction. Notwithstanding
                                            any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate
                                            60 days following such Destruction. If the damage or destruction was caused by the gross
                                            negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor's
                                            damages from Lessee, except as provided in Paragraph 8.6.

 

		9.5	Damage Near End of Term. If at any time during the
                                            last 6 months of this Lease there is damage for which the cost to repair exceeds one month's
                                            Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days
                                            following the date of occurrence of such damage by giving a written termination notice to
                                            Lessee within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing
                                            Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises,
                                            then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor
                                            with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the
                                            repairs on or before the earlier of (i) the date which is 10 days after Lessee's receipt
                                            of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the
                                            date upon which such option expires. If Lessee duly exercises such option during such period
                                            and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance
                                            proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as
                                            soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee
                                            fails to exercise such option and provide such funds or assurance during such period, then
                                            this Lease shall terminate on the date specified in the termination notice and Lessee's option
                                            shall be extinguished.

 

9.6  Abatement of Rent; Lessee's Remedies.

 

		(a)	Abatement. In the event of Premises
                                            Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which
                                            Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required
                                            for the repair, remediation or restoration of such damage shall be abated in proportion to
                                            the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds
                                            received from the Rental Value insurance. All other obligations of Lessee hereunder shall
                                            be performed by Lessee, and Lessor shall have no liability for any such damage, destruction,
                                            remediation, repair or restoration except as provided herein.

 

		(b)	Remedies. If Lessor is obligated
                                            to repair or restore the Premises and does not commence, in a substantial and meaningful
                                            way, such repair or restoration within 90 days after such obligation shall accrue, Lessee
                                            may, at any time prior to the commencement of such repair or restoration, give written notice
                                            to Lessor and to any Lenders of which Lessee has actual notice, of Lessee selection to terminate
                                            this Lease on a date not less than 60 days following the giving of such notice. If Lessee
                                            gives such notice and such repair or restoration is not commenced within 30 days thereafter,
                                            this Lease shall terminate as of the date specified in said notice. If the repair or restoration
                                            is commenced within such 30 days, this lease shall continue in full force and effect. "Commence"
                                            shall mean either the unconditional authorization of the preparation of the required plans
                                            or the beginning of the actual work on the Premises, whichever first occurs.

 

		9.7	Termination; Advance Payments.
                                            Upon termination of this lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable
                                            adjustment shall be made concerning advance Base Rent and any other advance payments made
                                            by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security
                                            Deposit as has not been, or is not then required to be used by Lessor.

 

10.          Real
Property Taxes.

 

10.1 Definitions. As used
herein, the term "Real Property Taxes" shall include any form of assessment; real estate, general, special, ordinary
or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or license fee
imposed upon or levied against any legal or equitable interest of Lessor in the Project, Lessor's right to other income therefrom, and/or
Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference
to the Project address. "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase
therein: (i) imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership
of the Project, (ii) a change in the improvements thereon, and/or (iii) levied or assessed on machinery or equipment provided by Lessor
to Lessee pursuant to this Lease.

 

10.2
Payment of Taxes. Except as otherwise provided in Paragraph 10.3, Lessor shall pay the Real Property Taxes applicable to the Project,
and said payments shall be included in the calculation of Operating Expenses in accordance with the provisions of Paragraph 4.2.

 

10.3 Additional
Improvements. Operating Expenses shall not include Real Property Taxes specified in the tax assessor's records and work sheets
as being caused by additional improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such
other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Operating Expenses are
payable under Paragraph 4.2, the entirety of any increase in Real Property taxes if assessed solely by reason of Alterations, Trade
Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request or by reason of any alterations or
improvements to the Premises made by Lessor subsequent to the execution of this Lease by the Parties.

 

10.4 Joint Assessment. If
the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the

 

    
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Real Property taxes for all of the land and improvements
included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's
work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall
be conclusive.

 

10.5 Personal Property Taxes.
Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility installations,
Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shall cause
its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of Lessor. If any of Lessee's said property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee's property within 10 days after receipt of a written statement setting
forth the taxes applicable to Lessee's property.

 

		11.	Utilities and Services.

 

11.1 Services Provided by Lessor.
Lessor shall provide heating, ventilation, air conditioning, reasonable amounts of electricity for normal lighting and office machines,
water for reasonable and normal drinking and lavatory use in connection with an office, and replacement light bulbs and/or fluorescent
tubes and ballasts for standard overhead fixtures. Lessor shall also provide janitorial services to the Premises and Common Areas 5 times
per week, excluding Building Holidays, or pursuant to the attached janitorial schedule, if any. Lessor shall not, however, be required
to provide janitorial services to kitchens or storage areas included within the Premises.

 

11.2 Services Exclusive to
Lessee. Notwithstanding the provisions of paragraph 11.1, Lessee shall pay for all water, gas, light, power, telephone and other
utilities and services specially or exclusively supplied and/or metered exclusively to the Premises or to Lessee, together with any taxes
thereon. Notwithstanding the provisions of Paragraph 4.2(vi), if a service is deleted by Paragraph 1.13 and such service is not separately
metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a reasonable proportion to be determined by Lessor
of all charges for such jointly metered service.

 

11.3 Hours of Service. Said
services and utilities shall be provided during times set forth in Paragraph 1.12. Utilities and services required at other times shall
be subject to advance request and reimbursement by Lessee to Lessor of the cost thereof.

 

11.4 Excess Usage by Lessee.
Lessee shall not make connection to the utilities except by or through existing outlets and shall not install or use machinery or
equipment in or about the Premises that uses excess water, lighting or power, or suffer or permit any act that causes extra burden upon
the utilities of services, including but not limited to security and trash services, over standard office usage for the Project. Lessor
shall require Lessee to reimburse Lessor for any excess expenses or costs that may arise out of a breach of this subparagraph by Lessee.
Lessor may, in its

sole discretion, install at Lessee's expense supplemental equipment and/or separate metering applicable to Lessee's excess usage or loading.

 

11.5 Interruptions. There
shall be no abatement of rent and Lessor shall not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or
discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.

 

11.6 Within fifteen days
of Lessor's written request, Lessee agrees to deliver to Lessor such information, documents and/or authorization as Lessor needs in order
for Lessor to comply with new or existing Applicable Requirements relating to commercial building energy usage, ratings and/or the reporting
thereof.

 

		12.	Assignment and Subletting.

                                            

 

12.1 Lessor's Consent Required.

 

		(a)	Lessee shall not voluntarily or by operation
                                            of law assign, transfer, mortgage or encumber (collectively, “assign or assignment")
                                            or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's
                                            prior written consent.

 

		(b)	Unless Lessee is a corporation and its stock is publicly traded on
                                            a national stock exchange, a change in the control of Lessee shall constitute an assignment
                                            requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control
                                            of Lessee shall constitute a change in control for this purpose.

 

		(c)	The involvement of Lessee or its assets
                                            in any transaction, or series of transactions (by way of merger, sale, acquisition, financing,
                                            transfer, leveraged buyout or otherwise), whether or not a formal assignment or hypothecation
                                            of this Lease or lessee's assets occurs, which results or will result in a reduction of the
                                            Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented
                                            at the time of the execution of this Lease or at the time of the most recent assignment to
                                            which Lessor has consented, or as it exists immediately prior to said transaction or transactions
                                            constituting such reduction, whichever was or is greater, shall be considered an assignment
                                            of this Lease to which Lessor may withhold it consent. "Net Worth of Lessee"
                                            shall mean the net worth of Lessee (excluding any guarantors) established under generally
                                            accepted accounting principles.

 

		(d)	An assignment or subletting without
                                            consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1(d),
                                            or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects
                                            to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either:
                                            (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base
                                            Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental
                                            adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee
                                            shall be subject to similar adjustment to 110% of the price previously in effect, and (ii)
                                            all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term
                                            shall be increased to 110% of the scheduled adjusted rent.

 

		(e)	Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
                                            be limited to compensatory damages and/or injunctive relief.

 

		(f)	Lessor may reasonably withhold consent to a proposed assignment or
                                            subletting if Lessee is in Default at the time consent is requested.

 

		(g)	Notwithstanding the foregoing, allowing
                                            a de minimis portion of the Premises, ie. 20 square feet or less, to be used by a third party
                                            vendor in connection with the installation of a vending machine or payphone shall not constitute
                                            a subletting.

 

12.2 Terms and Conditions Applicable to Assignment and
Subletting.

 

    
	 	Lessor Initials_____

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		(a)	Regardless of Lessor's consent, no
                                            assignment or subletting shall: (i) be effective without the express written assumption by
                                            such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee
                                            of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment
                                            of Rent or for the performance of any other obligations to be performed by Lessee.

 

		(b)	Lessor may accept Rent or performance
                                            of Lessee's obligations from any person other than Lessee pending approval or disapproval
                                            of an assignment. Neither a delay in the approval or disapproval of such assignment nor the
                                            acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right
                                            to exercise its remedies for Lessee's Default or Breach.

 

		(c)	Lessor's consent to any assignment or subletting shall not constitute
                                            a consent to any subsequent assignment or subletting.

 

		(d)	In the event of any Default or Breach
                                            by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible
                                            for the performance of Lessee’s obligations under this Lease, including any assignee
                                            or sublessee, without first exhausting Lessor's remedies against any other person or entity
                                            responsible therefor to Lessor, or any security held by Lessor.

 

		(e)	Each request for consent to an assignment
                                            or subletting shall be in writing, accompanied by information relevant to Lessor's determination
                                            as to the financial and operational responsibility and appropriateness of the proposed assignee
                                            or sublessee, including but not limited to the intended use and/or required modification
                                            of the premises, if any, together with a fee of $500 as consideration for Lessor's considering
                                            and processing said request. Lessee agrees to provide Lessor with such other or additional
                                            information and/or documentation as may be reasonably requested. (See also Paragraph 36)

 

		(f)	Any assignee of, or sublessee under, this Lease shall, by reason
                                            of accepting such assignment, entering into such sublease, or entering into possession of
                                            the Premises or any portion thereof, be deemed to have assumed and agreed to conform and
                                            comply with each and every term, covenant, condition and obligation herein to be observed
                                            or performed by Lessee during the term of said assignment or sublease, other than such obligations
                                            as are contrary to or inconsistent with provisions of an assignment or sublease to which
                                            Lessor has specifically consented to in writing.

 

		(g)	Lessor's consent to any assignment or
                                            subletting shall not transfer to the assignee or sublessee any Option granted to the original
                                            Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing.
                                            (See Paragraph 39.2)

 

12.3 Additional terms and Conditions
Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises
and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

 

		(a)	Lessee hereby assigns and transfers to Lessor all of Lessee's interest
                                            in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward
                                            Lessee's obligations under this Lease; provided, however, that until a Breach shall occur
                                            in the performance of Lessee's obligations, Lessee may collect said Rent. In the event that
                                            the amount collected by Lessor exceeds Lessee's then outstanding obligations any such excess
                                            shall be refunded to Lessee. Lessor shall not, by reason of the foregoing or any assignment
                                            of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee
                                            for any failure of Lessee to perform and comply with any of Lessee's obligations to such
                                            sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt
                                            of a written notice from Lessor stating that a Breach exists in the performance of Lessee's
                                            obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease.
                                            Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without
                                            any obligation or right to inquire as to whether such Breach exists, notwithstanding any
                                            claim from Lessee to the contrary.

 

		(b)	In the event of a Breach by Lessee,
                                            Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall
                                            undertake the obligations of the sublessor under such sublease from the time of the exercise
                                            of said option to the expiration of such sublease; provided, however, Lessor shall not be
                                            liable for any prepaid rents or security deposit paid by such sublessee to such sublessor
                                            or for any prior Defaults or Breaches of such sublessor.

 

		(c)	Any matter requiring the consent of the sublessor under a sublease
                                            shall also require the consent of Lessor.

 

		(d)	No sublessee shall further assign or sublet all or any part of the
                                            Premises without Lessor's prior written consent.

 

		(e)	Lessor shall deliver a copy of any notice of Default or Breach by
                                            Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the
                                            grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement
                                            and offset from and against Lessee for any such Defaults cured by the sublessee.

 

13.       Default; Breach; Remedies.

 

13.1 Default; Breach. A "Default"
is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations
under this Lease. A "Breach" is defined as the occurrence of one or more of the following Defaults, and the face of
Lessee to cure such Default within any applicable grace period:

 

		(a)	The abandonment of the Premises; or the vacating of the Premises
                                            without providing a commercially reasonable level of security, or where the coverage of the
                                            property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without
                                            providing reasonable assurances to minimize potential vandalism.

 

		(b)	The failure of Lessee to make any payment of Rent or any Security
                                            Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when
                                            due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation
                                            under this Lease which endangers or threatens life or property, where such failure continues
                                            for a period of 3 business days following written notice to Lessee. THE ACCEPTANCE BY LESSOR
                                            OF A PARTIAL PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF
                                            LESSOR'S RIGHTS, INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE PREMISES.

 

		(c)	The failure of Lessee to allow Lessor
                                            and/or its agents access to the Premises or the commission of waste, act or acts constituting
                                            public or private nuisance, and/or an illegal activity on the Premises by Lessee, where such
                                            actions continue for a period of 3 business days following written notice to Lessee. In the event that Lessee
commits waste, a nuisance or an illegal activity a second time then, the Lessor may elect to treat such conduct as a non-curable Breach
rather than a Default.

 

		(d)	The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii) the

 

    
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		 	 rescission of an unauthorized assignment or subletting,
(iv) an Estoppel Certificate or financial statements, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor,
(vii) any document requested under Paragraph 4 (viii) material safety data sheets (MSDS), or (ix) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days
following written notice to Lessee.

 

		(e)	A Default by Lessee as to the terms, covenants
                                            conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof,
                                            other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default
                                            continues for a period of 30 days after written notice; provided, however, that if the nature
                                            of Lessee's Default is such that more than 30 days are reasonably required for its cure,
                                            then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day
                                            period and thereafter diligently prosecutes such cure to completion.

 

		(f)	The occurrence of any of the following
                                            events: (i) the making of any general arrangement or assignment for the benefit of creditors;
                                            (ii) becoming a "debtor" as defined in 11 U.S.C. $ 101 or any successor
                                            statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed
                                            within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially
                                            all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where
                                            possession is not restored to Lessee within 30 days; or (iv) the

                                            attachment, execution or other judicial seizure of substantially all of Lessee's assets located
                                            at the Premises or of Lessee's interest in this tease, where such seizure is not discharged
                                            within 30 days; provided, however, in the event that any provision of this subparagraph is
                                            contrary to any applicable law, such provision shall be of no force or effect, and not affect
                                            the validity of the remaining provisions.

 

		(g)	The discovery that any financial statement of Lessee or of any Guarantor
                                            given to Lessor was materially false.

 

		(h)	If the performance of Lessee's obligations
                                            under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
                                            liability with respect to this Lease other than in accordance with the terms of such guaranty,
                                            (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's
                                            refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on
                                            an anticipatory basis, and Lessee's failure, within 60 days following written notice of any
                                            such event, to provide written alternative assurance or security, which, when coupled with
                                            the then existing resources of Lessee, equals or exceeds the combined financial resources
                                            of Lessee and the Guarantors that existed at the time of execution of this Lease.

 

		13.2	Remedies. If Lessee fails
                                            to perform any of its affirmative duties or obligations, within 10 days after written notice
                                            (or in case of an emergency, without notice), Lessor may, at its option, perform such duty
                                            or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably
                                            required bonds, insurance policies, or governmental licenses, permits or approvals. Lessee
                                            shall pay to Lessor an amount equal to 115% of the costs and expenses incurred by Lessor
                                            in such performance upon receipt of an invoice therefor. In the event of a Breach, Lessor
                                            may, with or without further notice or demand, and without limiting Lessor in the exercise
                                            of any right or remedy which Lessor may have by reason of such Breach:

 

		(a)	Terminate Lessee's right to possession of the Premises by any lawful means, in which case this
                                                                lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover
                                                                from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount
                                                                by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount such rental
                                                                loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the
                                                                unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could
                                                                be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the
                                                                Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result
                                                                therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including
                                                                necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid
                                                                by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount
                                                                referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount
                                                                rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent.
                                                                Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not waive Lessor's right to recover any damages
                                                                to which Lessor is otherwise entitled. If termination of this Lease is obtained through the provisional remedy of unlawful
                                                                detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or
                                                                Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under
                                                                Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful
                                                                detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required
                                                                by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the
                                                                greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to
                                                                the remedies provided for in this Lease and/or by said statute.

 

		(b)	Continue the Lease and Lessee's right
                                            to possession and recover the Rent as it becomes due, in which event Lessee may sublet or
                                            assign subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
                                            the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination
                                            of the Lessee's right to possession.

 

		(c)	Pursue any other remedy now or hereafter
                                            available under the laws or judicial decisions of the state wherein the Premises are located.
                                            The expiration or termination of this Lease and/or the termination of Lessee's right to possession
                                            shall not relieve Lessee from liability under any indemnity provisions of this Lease as to
                                            matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of
                                            the Premises.

 

		13.3	Inducement Recapture. Any
                                            agreement for free or abated rent or other charges, the cost of tenant improvements for Lesse
                                            paid for or performed

                                            by Lessor, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus,
                                            inducement or consideration for Lessee's entering into this Lease, all of which concessions
                                            are hereinafter referred to as "Inducement Provisions," shall be deemed
                                            conditioned upon Lessee's full and faithful performance of all of the terms, covenants and
                                            conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from
this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given
or paid by Lesser under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent
cure of said Breach by lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated 

 

    
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	 	 	the operation of this paragraph shall not be deemed a waiver by Lessor at the provisions of this paragraph unless specifically so stated
in writing by Lessor at the time of such acceptance.

 

		13.4	Late Charges. Lessee hereby acknowledges that late
                                            payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
                                            the exact amount of which will be extremely difficult to ascertain. Such costs include, but
                                            are not limited to, processing and accounting charges, and late charges which may be imposed
                                            upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within
                                            5 days after such amount shall be due, then, without any requirement for notice to Lessee,
                                            Lessee shall immediately pay to Lessor a one-time late charge equal to

                                            10% of each such overdue amount or $100, whichever is greater. The parties hereby agree that
                                            such late charge represents a fair and reasonable estimate of the costs Lessor will incur
                                            by reason of such late payment. Acceptance of such late charge by Lessor shall in no event
                                            constitute a

                                            waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the
                                            exercise of any of the other rights and remedies granted hereunder. In the event that a late
                                            change is payable hereunder, whether or not collected, for 3 consecutive installments of
                                            Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall,
                                            at Lessor's option, become due and payable quarterly in advance.

 

		13.5	Interest. Any monetary payment due Lessor hereunder,
                                            other than late charges, got received by Lessor, when due shall bear interest from the 31st
                                            day after it was due. The interest ("Interest") charged shall be computed
                                            at the rate of 10% per annum but shall not exceed the maximum rate allowed by law. Interest
                                            is payable in addition to the potential late charge provided for in Paragraph 13.4.

 

13.6 Breach by Lessor.

 

		(a)	Notice of Breach. Lessor shall not be deemed in breach of
                                            this lease unless Lessor fails within a reasonable time to perform an obligation required
                                            to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no
                                            event be less than 30 days after receipt by Lessor, and any Lender whose name and address
                                            shall have been furnished to Lessee in writing for such purpose, of written notice specifying
                                            wherein such obligation of Lessor has not been performed; provided, however, that if the
                                            nature of Lessor's obligation is such that more than 30 days are reasonably required for
                                            its performance, then Lessor shall not be in breach if performance is commenced within such
                                            30 day period and thereafter diligently pursued to completion.

 

		(b)	Performance by Lessee on Behalf of
                                            Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days
                                            after receipt of said notice, or if having commenced said cure they do not diligently pursue
                                            it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset
                                            from Rent the actual and reasonable cost to perform such cure, provided, however, that such
                                            offset shall not exceed an amount equal to the greater of one month's Base Rent or the Security
                                            Deposit, reserving Lessee's right to seek reimbursement from Lessor for any such expense
                                            in excess of such offset. Lessee shall document the cost of said cure and supply said documentation
                                            to Lessor.

 

		14.	Condemnation. If the Premises of any portion thereof are
                                            taken under the power of eminent domain or sold under the threat of the exercise of said
                                            power (collectively "Condemnation"), this Lease shall terminate as to the part
                                            taken as of the date the condemning authority takes title or possession, whichever first
                                            occurs. If more than 10% of the rentable floor area of the Premises, or more than 25% of
                                            Lessee's Reserved Parking Spaces, if any, are taken by Condemnation, Lessee may, at Lessee's
                                            option, to be exercised in writing within 10 days after Lessor shall have given Lessee written
                                            notice of such taking (or in the absence of such notice, within 10 days after the condemning
                                            Authority shall have taken possession) terminate this Lease as of the date the condemning
                                            authority takes such possession. If Lessee does not terminate this Lease in accordance with
                                            the foregoing, this Lease shall remain in full force and effect as to the portion of the
                                            Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction
                                            in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments
                                            shall be the property of Lessor, whether such award shall be made as compensation for diminution
                                            in value of the leasehold, the value of the part taken, or for severance damages, provided
                                            however, that Lessee shall be entitled to any compensation paid by the condemnor for Lessee's
                                            relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether
                                            or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations
                                            and Utility Installations made to the

                                            Premise by Lessee, for purposes of Condemnation only, shall be considered the property of
                                            the Lessee and Lessee shall be entitled to any and all compensation which payable therefor.
                                            In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall
                                            repair any damage to the Premises caused by such Condemnation.

 

		15.	Brokerage Fees.

 

15.1 Additional Commission. [Intentionally deleted.]

 

15.2 Assumption of Obligations. [Intentionally deleted.]

 

15.3 Representations and Indemnities
of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm,
broker, agent or finder (other than the Brokers and Agents, if any) in connection with this Lease, and that no one other than said named
Brokers and Agents is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses,
attorneys' fees reasonably incurred with respect thereto.

 

		16.	Estoppel Certificates.

 

		(a)	Each Party (as "Responding Party") shall within
                                            10 days after written notice from the other Party (the "Requesting Party")
                                            execute, acknowledge and deliver to the Requesting Party a statement in writing "Estoppel
                                            Certificate", plus such additional information, confirmation and/or statements as may
                                            be reasonably requested by the Requesting Party.

 

		(b)	If the Responding Party shall fail to execute or deliver the Estoppel
                                            Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate
                                            stating that: (i) the Lease is in full force and effect without modification except as may
                                            be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting
                                            Party's performance, and (iii) if Lessor is the requesting Party, not more than one month's
                                            rent has been paid in advance. Prospective purchasers and encumbrancers
may rely upon the requesting Party's Estoppel Certificate, and the Responding Party shall be stopped from denying the truth of the facts
contained in said Certificate. In addition, Lessee acknowledges that any failure on its part to provide such an Estoppel Certificate
will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely
difficult to a certain Accordingly, should the Lessee fail to execute and/or deliver a requested 

 

    
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	 	 	Estoppel Certificate in a timely fashion the monthly Base Rent shall be automatically increased, without any requirement for notice to
Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater for remainder of the Lease. The Parties
agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/costs that Lessor will incur
by reason of Lessee's failure to provide the Estoppel Certificate. Such increase in Base Rent shall in no event constitute a waiver of
Lessee's Default or Breach with respect to the failure to provide the Estoppel Certificate nor prevent the exercise of any of the other
rights and remedies granted hereunder.

 

		(c)	If Lessor desires to finance, refinance, or sell the Premises, or
                                            any part thereof, Lessee and all Guarantor shall within 10 days after written notice from
                                            Lessor deliver to any potential lender or purchaser designated by Lessor such financial statements
                                            as may be reasonably required by such lender or purchaser, including but not limited to Lessee's
                                            financial statements for the past 3 years. All such financial statements shall be received
                                            by Lessor and such lender or purchaser in confidence and shall be used only for the purposes
                                            herein set forth.

 

		17.	Definition of Lessor. The
                                            term "Lessor" as used herein shall mean the owner or others at the time
                                            in question of the fee title to the Premises, or, if this is a sublease, of the Lessee's
                                            interest in the prior lease. In the event of a transfer of Lessor's title or interest in
                                            the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or
                                            by credit) any unused Security Deposit held by Lessor. Upon such transfer or assignment and
                                            delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all
                                            liability with respect to the obligations and/or covenants under this Lease thereafter to
                                            be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in
                                            this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove
                                            defined.

 

		18.	Severability. The invalidity
                                            of any provision of this Lease, as determined by a count of competent jurisdiction, shall
                                            in no way affect the validity of any other provision hereof.

 

		19.	Days. Unless otherwise specifically indicated to the contrary,
                                            the word "days" as used in this Lease shall mean and refer to calendar days.

 

		20.	Limitation on Liability. The obligations of Lessor under
                                            this Lease shall not constitute personal obligations of Lessor, or its partners, members,
                                            directors, officers or shareholders, and Lessee shall look to the Project, and to no other
                                            assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease,
                                            and shall not seek recourse against Lessor's partners, members directors, officers or shareholders,
                                            or any of their personal assets for such satisfaction.

 

		21.	Time of Essence. Time is
                                            of the essence with respect to the performance of all obligations to be performed or observed
                                            by the Parties under this Lease.

 

		22.	No Prior or Other Agreements; Broker Disclaimer. This Lease
                                            contains all agreements between the Parties with respect to any matter mentioned herein,
                                            and no other prior or contemporaneous agreement or understanding shall be effective. Lessor
                                            and Lessee each represents and warrants to the Brokers that it has made, and is relying solely
                                            upon, its own investigation as to the nature, quality, character and financial responsibility
                                            of the other Party to this Lease and as to the use, nature, quality and character of the
                                            Premises Brokers have no responsibility with respect thereto or with respect to any default
                                            or breach hereof by either Party.

 

		23.	Notices.

 

23.1 Notice Requirements. All
notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier)
or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission,
or by email, and shall be deemed sufficiently given if served in a manner specified in this paragraph 23. The addresses noted adjacent
to a Party's signature on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice
to the other specify a different address for notice, except that upon Lessee's taking possession of the premises, the Premises shall
constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate in writing.

 

23.2 Data of Notice. Any notice
sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on

the receipt card, or no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 72 hours
after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight
courier that guarantees next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier.
Notices delivered by hand, or transmitted by facsimile transmission or by email shall be deemed delivered upon actual receipt. If notice
is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

 

23.3 Options. Notwithstanding
the foregoing, in order to exercise any Options (see paragraph 39), the Notice must be sent by Certified Mail (return receipt requested),
Express Mail (signature required), courier (signature required) or some other methodology that provides a receipt establishing the date
the notice was received by the Lessor.

 

		24.	Waivers.

 

		(c)	No waiver by Lessor of the Default
                                            or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of
                                            any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee
                                            of the same or of any other term, covenant or condition hereof. Lessor's consent to, or approval
                                            of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to,
                                            or approval of any subsequent or similar act by Lessee, or be construed as the basis of an
                                            estoppel to enforce the provision or provisions of this Lease requiring such consent.

 

		(d)	The acceptance of Rent by Lessor shall
                                            not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted
                                            by Lessor on account of monies or damages due Lessor, notwithstanding any qualifying statements
                                            or conditions made by Lessee in connection therewith, which such statements and/or conditions
                                            shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor
                                            at or before the time of deposit of such payment.

 

		(e)	THE PARTIES AGREE THAT THE TERMS OF
                                            THIS LEASE SHALL GOVERN WITH REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS
                                            OF ANY PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS INCONSISTENT WITH THIS
                                            LEASE.

 

    
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25. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

 

		(a)	When entering into a discussion with a real estate agent regarding
                                            a real estate transaction, a Lessor or Lessee should from the outset understand what type
                                            of agency relationship or representation it has with the agent or agents in the transaction.
                                            Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows:

 

		(i)	Lessor's Agent. A Lessor's agent under a listing agreement with the Lessor acts as the agent for the Lessor only.
                                                                A Lessor agent or subagent has the following affirmative obligations:                           To the Lessor: A fiduciary duty of utmost care,
                                                                integrity, honesty, and loyalty in dealings with the Lessor.                            To the Lessee and the Lessor: (a) Diligent exercise of
                                                                reasonable skills and care in performance of the agent's duties. (b) A duty of honest and fair dealing and good faith (c) A duty to
                                                                disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or
                                                                within the diligent attention and observation of the Parties. An agent is not obligated to reveal to either Party any confidential
                                                                information obtained from the other party which does not involve the affirmative duties set forth above.

 

		(ii)	Lessee's Agent. An agent can agree to act as agent for the Lessee only. In these
                                                                 situations, the agent is not the lessons agent, even if by agreement the agent may receive compensation for services rendered,
                                                                 either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations.
                                                                                           To
                                                                 the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessee.                            To the
                                                                 Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent's duties. (b) A duty
                                                                 of honest and fair dealing and good faith (c) A duty to disclose all facts known to the agent materially affecting the value or
                                                                 desirability of the property that are not known to, or within the diligent attention and observation of the Parties. An agent is not
                                                                 obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the
                                                                 affirmative duties set forth above.

 

		(iii)	Agent Representing Both Lessor and Lessee. A real
                                            estate agent, either acting directly or through one or more associate licenses, can legally
                                            be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge
                                            and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has
                                            the following affirmative obligations to both the Lessor and the Lessee: (a) A fiduciary
                                            duty of utmost care, integrity, honesty and loyalty in the dealings with either Lessor or
                                            the Lessee. (b) Other duties to the Lessor and the Lessee as stated above in subparagraphs
                                            (i) or (ii). In representing both Lessor and Lessee, the agent may not, without the express
                                            permission of the respective Party, disclose to the other party confidential information,
                                            including, but not limited to, facts relating to either Lessee's or Lessor's financial position,
                                            motivations, bargaining position, or other personal information that may impact rent, including
                                            Lessor's willingness to accept a rent less than the listing rent or Lessee's willingness
                                            to pay rent greater than the rent offered. The above duties of the agent in a real estate
                                            transaction do not relieve a Lessor or Lessee from the responsibility to protect their own
                                            interests. Lessor and Lessee should carefully read all agreements to assure that they adequately
                                            express their understanding of the transaction. A real estate agent is a person qualified
                                            to advise about real estate. If legal or tax advice is desired, consult a competent professional.
                                            Both Lessor and Lessee should strongly consider Obtaining tax advice from a competent professional
                                            because the federal and state tax consequences of a transaction can be complex and subject
                                            to change.

 

		(b)	Brokers have no responsibility with respect to any default or breach
                                            hereof by either Party. The Parties agree that no lawsuit or other legal proceeding involving
                                            any breach of duty, error or omission relating to this Lease may be brought against Broker
                                            more than one year after the Start Date and that the liability (including court costs and
                                            attorneys' fees), of any Broker with respect to any such lawsuit and/or legal proceeding
                                            shall not exceed the fee received by such Broker pursuant to this Lease; provided, however,
                                            that the foregoing limitation on each Broker's liability shall not be applicable to any gross
                                            negligence or willful misconduct of such Broker.

 

		(c)	Lessor and Lessee
                                            agree to identify to Brokers as "Confidential" any communication or information
                                            given Brokers that is considered by such Party to be confidential.

 

		26.	No Right To Holdover. Lessee has no right to retain possession
                                            of the Premises or any part thereof beyond the expiration or termination of this Lease. In
                                            the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base
                                            Rent applicable immediately preceding the expiration or termination. Holdover Base Rent shall
                                            be calculated on a monthly basis. Nothing contained herein shall be construed as consent
                                            by Lessor to any holding over by Lessee.

 

		27.	Cumulative Remedies. No remedy
                                            or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative
                                            with all other remedies at law or in equity.

 

		28.	Covenants and Conditions; Construction of Agreement. All
                                            provisions of this Lease to be observed or performed by Lessee are both covenants and conditions.
                                            In construing this Lease, all headings and titles are for the convenience of the Parties
                                            only and shall not be considered a part of this Lease. Whenever required by the context,
                                            the singular shall include the plural and vice versa. This Lease shall not be construed as
                                            if prepared by one of the Parties, but rather according to its fair meaning as a whole, as
                                            it both parties had prepared it.

 

		29.	Binding Effect choice of Law. This Lease shall be binding
                                            upon the Parties, their personal representatives, successors and assigns and be governed
                                            by the laws of the state in which the Premises are located. Any litigation between the Parties
                                            hereto concerning this lease shall be initiated in the county in which the Premises are located.
                                            Signature to this Lease accomplished by means of electronic signature shall be legal and
                                            binding.

 

30.  Subordination; Attornment; Non-Disturbance.

 

30.1 Subordination. This
Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or hereafter placed upon the Premises, to any and
all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the
holders of any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or
obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option
granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation
thereof.

 

30.2 Attornment. In the event
that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	16

     

    

 

a Security Device to which this Lease is subordinated
  (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into
  a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or,
  at the election of the new owner, this Lease will automatically become a new lease between Lessee and such new owner, and (ii) Lessor
  shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor's obligations, except
  that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior
  to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound
  by prepayment of more than one month's rent, or (d) be liable for the return of any security deposit paid to any prior lessor which
  was not paid or credited to such new owner.

 

	 	30.3 	Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination
  of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a "Non-Disturbance Agreement")
  from the Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options
  to extend the term hereof, will not be disturbed so long as Lessee not in Breach hereof and attorns to the record owner of the Premises.
  Further, within 60 days after the execution of this Lease, Lessor shall, if requested by Lessee use its commercially reasonable efforts
  to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the
  event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's option, directly
  contact lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.

 

	 	30.4 	Self-Executing. The agreements contained in this paragraph 30 shall be effective without the execution of any further documents;
  provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises,
  Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment
  and/or Non-Disturbance Agreement provided for herein.

 

		31.	Attorneys' Fees. If any
                                            Party or Broker brings an action or proceeding involving the Premises whether founded in
                                            tort, contract or equity, or to declare rights hereunder, the prevailing Party (as hereafter
                                            defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable
                                            attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit,
                                            whether or not such action or proceeding is pursued to decision or judgment. the term, "Prevailing
                                            Party" shall include, without limitation, a Party or Broker who substantially obtains
                                            or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment,
                                            or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees
                                            award shall not be computed in accordance with any court fee schedule, but shall be such
                                            as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall
                                            be entitled to attorneys' fees, costs and expenses incurred in the preparation and service
                                            of notices of Default and consultations in connection therewith, whether or not a legal action
                                            is subsequently commenced in connection with such Default or resulting Breach ($200 is a
                                            reasonable minimum per occurrence for such services and consultation).

 

		32.	Lessor's
                                            Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to
                                            enter the Premises at any time, in the case of an emergency, and otherwise at reasonable
                                            times after reasonable prior notice for the purpose of showing the same to prospective purchasers,
                                            lenders, or tenants, and making such alterations, repairs, improvements or additions to the
                                            Premises as Lessor may deem necessary or desirable and the erecting, using and maintaining
                                            of utilities, services, pipes and conduits through the Premises and/or other premises as
                                            long as there is no material adverse effect on Lessee's use of the Premises. All such activities
                                            shall be without abatement of rent or liability to Lessee.

 

		33.	Auctions.
                                            Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without
                                            Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of
                                            reasonableness in determining whether to permit an auction.

 

		34.	Signs. Lessor may place on the Premises ordinary "For
                                            Sale" signs at any time and ordinary "For Lease" signs during the last 6 months
                                            of the term hereof. Lessor may not place any sign on the exterior of the Building that covers
                                            any of the Windows of the Premises. Except for ordinary "For Sublease" signs which
                                            may be placed only on the Premises, Lessee shall not place any sign upon the Project without
                                            Lessor's prior written consent. All signs must comply with all Applicable Requirements.

 

		35.	Termination; Merger. Unless
                                            specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this
                                            Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by
                                            Lessor for Breach by Lessee shall automatically terminate any sublease or lesser estate in
                                            the Premises; provided, however, that Lessor may elect to continue any one or all existing
                                            subtenancies. Lessor's failure within 10 days following any such event to elect to the contrary
                                            by written notice to the holder of any such lesser interest shall constitute lessor's election
                                            to have such event constitute the termination of such interest.

 

		36.	Consents. All requests for
                                            consent shall be in writing. Except as otherwise provided herein, wherever in this Lease
                                            the consent of a Party is required to an act by or for the other Party, such consent shall
                                            not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including
                                            but not limited to architects', attorneys', engineers' and other consultants' fees incurred
                                            in the consideration of, or response to, a request by Lessee for any Lessor consent, including
                                            but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous
                                            Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation
                                            therefor. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment
                                            that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed
                                            a waiver of any then existing Default or Breach, except as may be otherwise specifically
                                            stated in writing by Lessor at the time of such consent. The failure to specify herein any
                                            particular condition to Lessor's consent shall not preclude the imposition by Lessor at the
                                            time of consent of such further or other conditions as are then reasonable with reference
                                            to the particular matter for which consent is being given. In the event that either Party
                                            disagrees with any determination made by the other hereunder and reasonably requests the
                                            reasons for such determination, the determining party shall furnish its reasons in writing
                                            and in reasonable detail within 10 business days following such request.

 

		37.	Guarantor.

 

	 	37.1 	Execution. The Guarantors, if any, shall each execute a guaranty in the form supplied by Lessor.

 

	 	37.2 	Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence
  of the execution of the guaranty,
including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a
certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c)
an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	17

     

    

 

	38. 	Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions
  on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises
  during the term hereof.

 

	39. 	Options. If Lessee is granted any option, as defined below, then the following provisions shall apply.

 

	 	39.1 	Definition. "Option" shall mean: (a) the right to extend or reduce the term of or renew this Lease or to
  extend or reduce the term of or renew any lease than Lessee has on other property of Lessor; (b) the right of first refusal or first
  offer to lease either the Premises or other property of Lessor; (c) the right to purchase, the right of first offer to purchase or
  the right of first refusal to purchase the Premises or other property of Lessor.

  

	 	39.2 	Options Personal To Original Lessee. Any Option granted to Lessee in this Lease is personal to the original Lessee, and
  cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession
  of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.

 

	 	39.3 	Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot
  be exercised unless the prior Options have been validly exercised.

 

	 	39.4 	Effect of Default on Options.

 

		(a)	Lessee shall have no right to exercise an Option: (i) during the
                                            period commencing with the giving of any notice of Default and continuing until said Default
                                            is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice
                                            thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv)
                                            in the event that Lessee has been given 3 or more notices of separate Default, whether or
                                            not the Defaults are cured, during the 12 month period immediately preceding the exercise
                                            of the Option.

 

		(b)	The period of time within which an
                                            Option may be exercised shall not be extended or enlarged by reason of Lessee's inability
                                            to exerciser on Option because of the provisions of Paragraph 39.4(a).

 

		(c)	An Option shall
                                            terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise
                                            of the Option, if, after such exercise and prior to the commencement of the extended term
                                            or completion of the purchase, (i) Lessee fails to pay Rent for a period of 30 days after
                                            such Rent becomes due (without any necessity of Lessor to give notice thereof), or (ii) if
                                            Lessee commits a Breach of this Lease.

 

	40. 	Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard
  service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility
  for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties. In the event,
  however, that Lessor should elect to provide security services; then the cost thereof shall be an Operating Expense.

 

	41. 	Reservations.

 

		(a)	Lessor reserves the right: (i)
                                            to grant, without the consent or joinder of Lessee, such easements, rights and dedications
                                            that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions,
                                            (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications,
                                            maps, restrictions, and utility raceways do not unreasonably interfere with the use of the
                                            Premises by Lessee. Lessor may also: change the name, address or title of the Building or
                                            Project upon at least 90 days prior written notice; provide and install, at Lessee's expense,
                                            Building standard graphics on the door of the Premises and such portions of the Common Areas
                                            as Lessor shall reasonably deem appropriate; grant to any lessee the exclusive right to conduct
                                            any business as long as such exclusive right does not conflict with any rights expressly
                                            given herein; and to place such signs, notices or displays as Lessor reasonably deems necessary
                                            or advisable upon the roof, exterior of the Building or the Project or on signs in the Common
                                            Areas. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such
                                            rights. The obstruction of Lessee's view, air, or light by any structure erected in the vicinity
                                            of the building, whether by Lessor or third parties, shall in no way affect this Lease or
                                            impose any liability upon Lessor.

 

		(b)	Lessor also reserves the right to move Lessee to other space of
                                            comparable size the Building or Project. Lessor must provide at least 45 days prior written
                                            notice of such move, and the new space must contain improvements of comparable quality to
                                            those contained within the Premises. Lessor shall pay the reasonable out of pocket costs
                                            that Lessee incurs with regard to such relocation, including the expenses of moving and necessary
                                            stationary revision costs. In no event, however, shall Lessor be required to pay an amount
                                            in excess of two months Base Rent. Lessee may not be relocated more than once during the
                                            term of this Lease.

 

		(c)	Lessee shall not: (i) use a
                                            representation (photographic or otherwise) of the Building or Project or their name(s) in
                                            connection with Lessee's business; or (ii) suffer or permit anyone, except in emergency,
                                            to go upon the roof of the Building.

 

	42. 	Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party
  to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to
  make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right
  on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on
  the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as
  it was not legally required to pay. A Party who does not initiate suit for the recovery of sums paid "under protest" within
  6 months shall be deemed to have waived its right to protest such payment.

 

	43. 	Authority; Multiple Parties; Execution.

 

		(a)	If either Party hereto is a corporation,
                                            trust, limited liability company, partnership, or similar entity, each individual executing
                                            this Lease on behalf of such entity represents and warrants that he or she is duly authorized
                                            to execute and deliver this Lease on its behalf. Each Party shall, within 30 days after request,
                                            deliver to the other Party satisfactory evidence of such authority.

 

		(b)	If this Lease is executed by more than one person or entity as "Lessee",
                                            each such person or entity shall be jointly and severally liable hereunder. It is agreed
                                            that any one of the names Lessees shall be empowered to execute any amendment to this Lease,
                                            or other document ancillary thereto and
bind all of the named Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document.

 

		(c)	This Lease may be executed by the Parties in counterparts, each
                                            of which shall be deemed an original and all of which together shall constitute one and the
                                            same instrument.

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	18

     

    

 

		44.	Conflict. Any conflict between the printed provisions of
                                            this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten
                                            or handwritten provisions.

 

		45.	Offer. Preparation of this
                                            Lease by either party or their agent and submission of same to the other Party shall not
                                            be deemed an offer to lease to the other Party. This Lease is not intended to be binding
                                            until executed and delivered by all Parties hereto.

 

		46.	Amendments. This Lease may
                                            be modified only in writing, signed by the Parties in interest at the time of the modification.
                                            As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to
                                            make such reasonable non-monetary modifications to this Lease as may be reasonably required
                                            by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

 

		47.	Waiver of Jury Trial. THE PARTIES
                                            HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING
                                            THE PROPERTY OR ARISYUG OUT OF THIS AGREEMENT.

 

		48.	Arbitration of Disputes. Any dispute, claim or controversy
                                            arising out of or relating to this Lease or the breach, enforcement, interpretation or validity
                                            hereof whether in contract, tort, equity or otherwise, and whether relating to the meaning,
                                            interpretation, effect, validity, performance or enforcement of this Lease, including the
                                            determination of the scope or applicability of this agreement to arbitrate (each, a “Dispute”),
                                            shall be determined by arbitration in Los Angeles, California, before one arbitrator. The
                                            arbitration shall be administered by Judicial Arbitration and Mediation Services (JAMS) pursuant
                                            to

                                            its Comprehensive Arbitration Rules and Procedures, in accordance with the Expedited Procedures
                                            in those Rules. The Federal Arbitration Act shall govern the interpretation and enforcement
                                            of such arbitration proceeding. The Parties agree that arbitration shall be the exclusive
                                            and binding method

                                            for resolving any Dispute and will be used instead of any court action, which is hereby expressly
                                            waived, except for any request by a party for temporary or preliminary injunctive relief
                                            pending arbitration in accordance with applicable law, or an administrative claim with an
                                            administrative agency. All fees and expenses of the arbitration relating to the arbitrator
                                            shall be paid equally by the parties and all other fees and expenses of the arbitration incurred
                                            by each Party (including attorneys’ fees and costs) will be paid by the Party incurring
                                            them. The costs of the arbitration proceeding, including any appeal proceeding and any proceeding
                                            in court to confirm or to vacate any arbitration award, and including each Party’s
                                            reasonable attorneys’ fees, expert witness fees and out-of-pocket costs incurred in
                                            connection with such proceedings, shall be borne by the unsuccessful party, or at the discretion
                                            of the arbitrator, may be prorated between the parties in such proportion as the arbitrator
                                            determines equitably reflects the proportion by which the Parties prevailed on their respective
                                            claims, and shall be awarded as part of the arbitrator’s final award. The Parties shall
                                            provide evidence of such fees and expenses to the arbitrator.

 

		49.	Accessibility; Americans with Disabilities Act.

 

		(a)	The Premises have not undergone an
                                            inspection by a Certified Access Specialist (CASp). Note: A Certified Access Specialist (CASp)
                                            can inspect the subject premises and determine whether the subject premises comply with all
                                            of the applicable construction-related accessibility standards under state law. Although
                                            state law does not require a CASp inspection of the subject premises, the commercial property
                                            owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of
                                            the subject premises for the occupancy or potential occupancy of the lessee or tenant, if
                                            requested by the lessee or tenant. The parties shall mutually agree on the arrangements for
                                            the time and manner of the CASp inspection, the payment of the fee for the CASp inspection,
                                            and the cost of making any repairs necessary to correct violations of construction-related
                                            accessibility standards within the premises.

 

In the event that the Premises have been issued an
inspection report by a CASp the Lessor shall provide a copy of the disability access inspection certificate to Lessee within 7 days of
the execution of this Lease.

 

		(b)	Since compliance with the Americans with Disabilities Act (ADA)
                                            and other state and local accessibility statutes are dependent upon Lessee's specific use
                                            of the Premises, Lessor makes no warranty or representation as to whether or not the Premises
                                            comply with ADA or any similar legislation. In the event that Lessee's use of the Premises
                                            requires modifications or additions to the Premises in order to be in compliance with ADA
                                            or other accessibility statutes, Lessee agrees to make any such necessary modifications and/or
                                            additions at Lessee's expense.

 

[Signature page to follow below]

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	19

     

    

  

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS
LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO.
THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED; THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE
THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

 

The parties hereto have executed this Lease at the place
and on the dates specified above their respective signatures.

 

	By LESSOR:

     

    AusLo Properties LLC 
	 	By LESSEE:

     

    Energy Vault Inc.

 

	By: 	/s/ Byron Merade	 	By: 	/s/ Robert Piconi

 

	Name Printed:  	Byron Merade	 	Name Printed:  	Robert Piconi

 

	Title: 	CEO	 	Title: 	Co-Founder and CEO

 

	Phone: 		 	Phone: 	

 

	Email: 		 	Email: 	

  

	BROKER:

     

    N/A 
	 	BROKER:

     

    N/A

 

	Attn: 	 	 	Attn:  	 

 

	Title: 	 	 	Title: 	 

 

	Address:	 	 	Address:	 
	 	 	 	 	 
		 	

 

	Phone: 	 	 	Phone: 	 

 

	Email: 	 	 	Email: 	 

 

  

	Federal ID No.: 	 	 	Federal ID No.: 	 

 

	Broker DRE License #: 	 	 	Broker DRE License #: 	 

 

	Agent DRE License #: 	 	 	Agent DRE License #: 	 

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	20

     

    

 

LEASE ADDENDUM

 

A.           Tenant
Improvements. Lessor agrees to pay the costs associated with opening the wall to provide access to the kitchen and patio area in
suite 210. Lessee agrees to pay the costs of any other improvements to the Premises and agrees to use Risvold Construction for any improvements
or get Lessor approval in writing prior to doing any improvements with a different contractor.

 

B.           Early
Lease Termination. Notwithstanding section 1.3, Lessee shall have the right to terminate the Lease early by Lessee notifying Lessor
in writing no sooner than the first day of the 25th full calendar month of the Lease Term following the Rent Commencement Date of its
intent to terminate the Lease early with such early termination shall become effective at the end of 6 full months following receipt
of the notice to terminate.

 

C.           Furniture.
Lessee shall have the right to use the existing furniture within Premises. Prior to the Commencement Date, Lessor and Lessee shall
agree in writing upon which furniture Lessee will retain in the Premises for use during the Lease. The unwanted furniture shall be removed
from the Premises by Lessor. Lessor shall retain ownership of the furniture during the Lease and after the expiration of the Lease.

 

D.           Office
Lease Termination. The Office Lease between the Parties, dated October 15, 2019 (the “2019 Lease”), for the premises
described as 4360 Park Terrace Drive, Suite 100, Westlake Village, CA, shall be terminated as of December 1, 2021, and the Parties shall
have no further obligations to each other under the 2019 Lease. Lessee's security deposit under the 2019 Lease in the amount of $57,080.10
shall be applied to its security deposit obligation hereunder. (See Section 1.7)

 

    
	 	Lessor Initials_____

	 	Lessee Initials_____	21ex_335022.htm

Exhibit 10.1

 

 

THIRD AMENDMENT TO CREDIT AGREEMENT

 

This THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) dated as of February 9, 2022 (the “Third Amendment Signing Date”), is among HIGHPEAK ENERGY, INC., a Delaware corporation (the “Borrower”), FIFTH THIRD BANK, NATIONAL ASSOCIATION, as administrative agent (in such capacity, together with its successors in such capacity, the “Administrative Agent”), the Guarantors, and each of the Lenders party hereto.

 

RECITALS

 

A.  The Borrower, the Administrative Agent, and the Lenders are party to that certain Credit Agreement dated as of December 17, 2020 (as may be amended, restated, or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Lenders have made certain credit available to and on behalf of the Borrower.

 

B.   The Borrower has requested amendments to certain provisions of the Credit Agreement and a redetermination of the Borrowing Base.

 

C.  The Borrower seeks to incur Specified Additional Debt in an aggregate principal amount of no less than $150,000,000 (the “High Yield Debt Issuance”).

 

D.  The Borrower, the Guarantors, the Administrative Agent, and the Lenders have agreed to amend certain provisions of the Credit Agreement as more fully set forth herein.

 

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

 

Section 1.    Defined Terms. Each capitalized term which is defined in the Credit Agreement, but which is not defined in this Amendment, shall have the meaning ascribed such term in the Credit Agreement after giving effect to this Amendment. Unless otherwise indicated, all references to sections in this Amendment refer to sections in the Credit Agreement.

 

Section 2.    Amendments to Credit Agreement. Subject to satisfaction of the conditions to effectiveness set forth in Section 4 hereof, the parties hereto agree that the Credit Agreement is, effective as of the Third Amendment Effective Date, hereby amended in its entirety to read as set forth in the attached Exhibit A. The Schedules and Exhibits to the Credit Agreement shall remain unmodified except to the extent amended, modified or added below.

 

Section 3.    Replacement of Exhibits B and C to Credit Agreement. Subject to satisfaction of the conditions to effectiveness set forth in Section 4 hereof, the parties hereto agree that Exhibits B and C to the Credit Agreement are hereby deleted and replaced in its entirety with Exhibits B and C attached to the Credit Agreement set forth in Exhibit A.

 

Section 4.    Conditions Precedent as of the Third Amendment Effective Date. This Amendment shall become effective on the date, when each of the following conditions is satisfied (or waived in accordance with Section 12.02 of the Credit Agreement):

 

4.1    The Administrative Agent shall have executed and received from the Lenders and the Borrower, counterparts (in such number as may be requested by the Administrative Agent) of this Amendment signed on behalf of each such Person.

 

Third Amendment to Credit Agreement – Page 1

 

 

4.2    The Administrative Agent and the Lenders shall have received all fees and other amounts due and payable on or prior to the date hereof, including any fees or other amounts set forth in any fee letter executed as of the Third Amendment Effective Date by the Borrower and Administrative Agent.

 

4.3    Immediately before and after giving effect to this Amendment, no Default shall have occurred and be continuing as of the Third Amendment Signing Date and the Third Amendment Effective Date.

 

4.4    The Administrative Agent shall have received a certificate, duly executed by a Responsible Officer of the Borrower and dated as of the Third Amendment Effective Date, certifying that the 2024 Senior Notes have closed and funded.

 

 The Administrative Agent is hereby authorized and directed to declare this Amendment to be effective when it has received documents confirming or certifying, to the satisfaction of the Administrative Agent, compliance with the conditions set forth in this Section 4 or the waiver of such conditions as permitted in Section 12.02 of the Credit Agreement. Such declaration shall be final, conclusive and binding upon all parties to the Credit Agreement for all purposes.

 

Section 5.    Automatic Borrowing Base Reduction. Section 2.07(f)(ii) of the Credit Agreement provides that, upon receipt by the Borrower of the net proceeds from the issuance of the 2024 Senior Notes from the 2024 Senior Notes Escrow Account, the Borrowing Base then in effect shall be automatically reduced by an amount equal to 25% of the aggregate stated principal amount of the 2024 Senior Notes (without regard to any original issue discount), and the Borrowing Base as so reduced shall become the new Borrowing Base immediately upon the date of such receipt. The Borrower intends to incur Specified Additional Debt pursuant to the issuance of the 2024 Senior Notes, which would be subject to the automatic Borrowing Base Reduction set forth in Section 2.07(f)(ii). As such, upon receipt by the Borrower of the net proceeds from the issuance of the 2024 Senior Notes from the 2024 Senior Notes Escrow Account, the Borrowing Base and, per Section 2.06(c)(iii) of the Credit Agreement, the Aggregate Elected Commitments, in each case, shall be automatically reduced by an amount equal to 25% of the aggregate stated principal amount of the 2024 Senior Notes. Such Borrowing Base and Aggregate Elected Commitments shall remain in effect until the next Scheduled Redetermination Date, the next Interim Redetermination Date or as otherwise adjusted in accordance with the Credit Agreement, after giving effect to this Amendment.

 

Section 6.    Miscellaneous.

 

6.1    Confirmation. The provisions of the Credit Agreement, as amended by this Amendment, shall remain in full force and effect following the effectiveness of this Amendment.

 

6.2    Representations and Warranties. The Borrower and each Guarantor hereby (a) acknowledges and consents to the terms of this Amendment and (b) ratifies and affirms its obligations under, and acknowledges its continued liability under, each Loan Document to which it is a party and agrees that each Loan Document to which it is a party remains in full force and effect as expressly amended, restated, supplemented or otherwise modified hereby or otherwise in connection with a delivery made herewith and (c) represents and warrants to the Administrative Agent and the Lenders that as of the date hereof, after giving effect to the terms of this Amendment: (i) all of the representations and warranties contained in each Loan Document to which it is a party are true and correct in all material respects, except that (A) to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties shall continue to be true and correct in all material respects as of such specified earlier date and (B) to the extent any such representation and warranty is qualified by materiality, such representation and warranty (as so qualified) is true and correct in all respects and (ii) no Default or Event of Default has occurred and is continuing.

 

Third Amendment to Credit Agreement – Page 2

 

 

 

6.3    Counterparts. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by telecopy, facsimile or other electronic means (e.g., .pdf) shall be effective as delivery of a manually executed counterpart hereof.

 

6.4    No Oral Agreement. This Amendment, the Credit Agreement and the other Loan Documents executed in connection herewith and therewith represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or unwritten oral agreements of the parties. There are no subsequent oral agreements between the parties.

 

6.5    GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

 

6.6    Payment of Expenses. The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable and documented out-of-pocket costs and expenses incurred in connection with this Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of one law firm acting as counsel to the Administrative Agent.

 

6.7    Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

6.8    Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

6.9    Miscellaneous. Section 12.09(b), (c) and (d) of the Credit Agreement shall apply to this Amendment, mutatis mutandis.

 

[SIGNATURES BEGIN NEXT PAGE]

 

Third Amendment to Credit Agreement – Page 3

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed effective as of the day and year first above written.

 

	 	
			BORROWER:

			 

			HIGHPEAK ENERGY, INC., a Delaware corporation

			

			

			By:         /s/ Jack Hightower                                     

			Jack Hightower

			Chief Executive Officer

			 

			GUARANTORS:

			 

			HIGHPEAK ENERGY ACQUISITION CORP., a

			Delaware corporation

			HIGHPEAK ENERGY EMPLOYEES, INC., a

			Delaware corporation

			LAZY JJ PROPERTIES, LLC, a Delaware limited

			liability company

			

			

			By:         /s/ Jack Hightower                                                       

			Jack Hightower         

			Chief Executive Officer

			 

			 

			HIGHPEAK ENERGY ASSETS, LLC, a Delaware

			limited liability company

			HIGHPEAK ENERGY HOLDINGS, LLC, a

			Delaware limited liability company

			 

			 

			By:         /s/ Jack Hightower                                                       

			Jack Hightower

			President

			

 

Signature Page to Third Amendment to Credit Agreement

HighPeak Energy, Inc.

 

 

	 	
			ADMINISTRATIVE AGENT:

			 

			FIFTH THIRD BANK, NATIONAL 

			ASSOCIATION,

			as Administrative Agent

			

			

			By:         /s/ Dan Condley                                                  

			Dan Condley

			Managing Director

			 

			

			LENDER:

			

			FIFTH THIRD BANK, NATIONAL

			ASSOCIATION,

			as a Lender and as an Issuing Bank

			

			

			By:         /s/ Dan Condley                                                  

			Dan Condley

			Managing Director

			

 

Signature Page to Third Amendment to Credit Agreement

HighPeak Energy, Inc.

 

 

	 	
			LENDER:

			 

			CITIZENS BANK N.A.,

			as a Lender

			

			

			By:              /s/ David Baron                      

			Name:         David Baron

			Title:           Vice President

			

 

Signature Page to Third Amendment to Credit Agreement

HighPeak Energy, Inc.

 

 

	 	
			LENDER:

			 

			BOKF, NA dba BANK OF TEXAS,

			as a Lender

			

			

			By:              /s/ Scott Miller                      

			Name:         Scott Miller

			Title:           Senior Vice President

			

 

Signature Page to Third Amendment to Credit Agreement

HighPeak Energy, Inc.

 

 

	 	
			LENDER:

			 

			BANK OF AMERICA, N.A.,

			as a Lender

			

			

			By:              /s/ Megan Baqui                      

			Name:         Megan Baqui

			Title:           Director

			

 

Signature Page to Third Amendment to Credit Agreement

HighPeak Energy, Inc.

 

 

	 	
			LENDER:

			 

			UMB BANK N.A.,

			as a Lender

			

			

			By:              /s/ Erica Spencer                      

			Name:         Erica Spencer

			Title:           Senior Vice President

			

 

Signature Page to Third Amendment to Credit Agreement

HighPeak Energy, Inc.

 

 

EXHIBIT A

 

 

AMENDED CREDIT AGREEMENT

 

 

 

 

 

 

Exhibit A to Third Amendment to Credit Agreement

HighPeak Energy, Inc.

 

 

 

Credit Agreement

 

dated as of December 17, 2020 

 

among 

 

HIGHPEAK ENERGY, INC.,

as Borrower,

 

FIFTH THIRD BANK, NATIONAL ASSOCIATION, 

as Administrative Agent,

 

and

 

The Lenders Party Hereto

 

______________________________

 

FIFTH THIRD BANK, NATIONAL ASSOCIATION 

Sole Lead Arranger and Sole Bookrunner

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

	
			ARTICLE I Definitions and Accounting Matters

				1
	
			Section 1.01

				
			Terms Defined Above

				
			1

			
	
			Section 1.02

				
			Certain Defined Terms

				
			1

			
	
			Section 1.03

				
			Types of Loans and Borrowings

				
			29

			
	
			Section 1.04

				
			Terms Generally; Rules of Construction

				
			29

			
	
			Section 1.05

				
			Accounting Terms and Determinations; GAAP

				
			29

			
	
			Section 1.06

				
			Divisions

				
			30

			
	 	 
	
			ARTICLE II The Credits

				30
	
			Section 2.01

				
			Commitments

				
			30

			
	
			Section 2.02

				
			Loans and Borrowings

				
			30

			
	
			Section 2.03

				
			Requests for Borrowings

				
			31

			
	
			Section 2.04

				
			Interest Elections

				
			32

			
	
			Section 2.05

				
			Funding of Borrowings

				
			33

			
	
			Section 2.06

				
			Termination and Reduction of Aggregate Maximum Credit Amounts

				
			34

			
	
			Section 2.07

				
			Borrowing Base

				
			37

			
	
			Section 2.08

				
			Letters of Credit

				
			40

			
	
			Section 2.09

				
			Defaulting Lenders

				
			46

			
	 	 
	
			ARTICLE III Payments of Principal and Interest; Prepayments; Fees

				49
	
			Section 3.01

				
			Repayment of Loans

				
			49

			
	
			Section 3.02

				
			Interest

				
			49

			
	
			Section 3.03

				
			Tranche Rate Provisions

				
			50

			
	
			Section 3.04

				
			Prepayments

				
			52

			
	
			Section 3.05

				
			Fees

				
			55

			
	 	 
	
			ARTICLE IV Payments; Pro Rata Treatment; Sharing of Set-off

				56
	
			Section 4.01

				
			Payments Generally; Pro Rata Treatment; Sharing of Set-offs

				
			56

			
	
			Section 4.02

				
			Presumption of Payment by the Borrower

				
			57

			
	
			Section 4.03

				
			Certain Deductions by the Administrative Agent

				
			57

			
	
			Section 4.04

				
			Disposition of Proceeds

				
			58

			
	 	 
	
			ARTICLE V Increased Costs; Break Funding Payments; Taxes; Illegality

				58
	
			Section 5.01

				
			Increased Costs

				
			58

			
	
			Section 5.02

				
			Tranche Rate Breakage Fee

				
			59

			
	
			Section 5.03

				
			Taxes

				
			59

			
	
			Section 5.04

				
			Mitigation Obligations; Replacement of Lenders

				
			62

			
	
			Section 5.05

				
			Illegality

				
			63

			
	 	 
	
			ARTICLE VI Conditions Precedent

				63
	
			Section 6.01

				
			Effective Date

				
			63

			
	
			Section 6.02

				
			Each Credit Event

				
			66

			
	 	 
	
			ARTICLE VII Representations and Warranties

				67
	
			Section 7.01

				
			Organization; Powers

				
			67

			

 

i

 

 

	
			Section 7.02

				
			Authority; Enforceability

				
			67

			
	
			Section 7.03

				
			Approvals; No Conflicts

				
			67

			
	
			Section 7.04

				
			Financial Condition; No Material Adverse Change

				
			68

			
	
			Section 7.05

				
			Litigation

				
			68

			
	
			Section 7.06

				
			Environmental Matters

				
			68

			
	
			Section 7.07

				
			Compliance with the Laws and Agreements; No Defaults or Borrowing Base Deficiency

				
			69

			
	
			Section 7.08

				
			Investment Company Act

				
			70

			
	
			Section 7.09

				
			Taxes

				
			70

			
	
			Section 7.10

				
			ERISA

				
			70

			
	
			Section 7.11

				
			Disclosure; No Material Misstatements

				
			70

			
	
			Section 7.12

				
			Insurance

				
			71

			
	
			Section 7.13

				
			Restriction on Liens

				
			71

			
	
			Section 7.14

				
			Subsidiaries

				
			71

			
	
			Section 7.15

				
			Location of Business and Offices

				
			72

			
	
			Section 7.16

				
			Properties; Titles, Etc

				
			72

			
	
			Section 7.17

				
			Maintenance of Properties

				
			73

			
	
			Section 7.18

				
			Gas Imbalances, Prepayments

				
			73

			
	
			Section 7.19

				
			Marketing of Production

				
			73

			
	
			Section 7.20

				
			Swap Agreements and Qualified ECP Guarantor

				
			74

			
	
			Section 7.21

				
			Use of Loans and Letters of Credit

				
			74

			
	
			Section 7.22

				
			Solvency

				
			74

			
	
			Section 7.23

				
			Anti-Corruption Laws and Sanctions

				
			74

			
	
			Section 7.24

				
			EEA Financial Institutions

				
			75

			
	
			Section 7.25

				
			Security Instruments

				
			75

			
	 	 
	
			ARTICLE VIII Affirmative Covenants

				75
	
			Section 8.01

				
			Financial Statements; Other Information

				
			75

			
	
			Section 8.02

				
			Notices of Material Events

				
			78

			
	
			Section 8.03

				
			Existence; Conduct of Business

				
			78

			
	
			Section 8.04

				
			Payment of Obligations

				
			79

			
	
			Section 8.05

				
			Performance of Obligations under Loan Documents

				
			79

			
	
			Section 8.06

				
			Operation and Maintenance of Properties; Subordination of Affiliated Operators' Liens

				
			79

			
	
			Section 8.07

				
			Insurance

				
			80

			
	
			Section 8.08

				
			Books and Records; Inspection Rights

				
			80

			
	
			Section 8.09

				
			Compliance with Laws

				
			80

			
	
			Section 8.10

				
			Environmental Matters

				
			80

			
	
			Section 8.11

				
			Further Assurances

				
			81

			
	
			Section 8.12

				
			Reserve Reports

				
			82

			
	
			Section 8.13

				
			Title Information

				
			83

			
	
			Section 8.14

				
			Additional Collateral and Additional Guarantors

				
			83

			
	
			Section 8.15

				
			ERISA Compliance

				
			84

			
	
			Section 8.16

				
			Unrestricted Subsidiaries

				
			85

			
	
			Section 8.17

				
			Deposit Accounts; Commodity Accounts and Securities Accounts

				
			85

			
	
			Section 8.18

				
			Commodity Exchange Act Keepwell Provisions

				
			85

			
	
			Section 8.19

				
			Affirmative Hedging Covenant

				
			86

			
	
			Section 8.20

				
			Excess Cash Information

				
			86

			
	
			Section 8.21

				
			Post-Closing Obligations

				
			86

			

 

ii

 

 

	
			ARTICLE IX Negative Covenants

				
			 

				87
	
			Section 9.01

				
			Financial Covenants

				
			87

			
	
			Section 9.02

				
			Debt

				
			87

			
	
			Section 9.03

				
			Liens

				
			88

			
	
			Section 9.04

				
			Dividends and Distributions

				
			89

			
	
			Section 9.05

				
			Investments, Loans and Advances

				
			89

			
	
			Section 9.06

				
			Designation and Conversion of Restricted and Unrestricted Subsidiaries; Debt of Unrestricted Subsidiaries

				
			90

			
	
			Section 9.07

				
			Nature of Business; No International Operations

				
			91

			
	
			Section 9.08

				
			Proceeds of Loans

				
			91

			
	
			Section 9.09

				
			ERISA Compliance

				
			91

			
	
			Section 9.10

				
			Sale or Discount of Receivables

				
			92

			
	
			Section 9.11

				
			Mergers, Etc

				
			92

			
	
			Section 9.12

				
			Sale of Properties and Termination of Swap Agreements

				
			92

			
	
			Section 9.13

				
			Environmental Matters

				
			93

			
	
			Section 9.14

				
			Transactions with Affiliates

				
			93

			
	
			Section 9.15

				
			Subsidiaries

				
			93

			
	
			Section 9.16

				
			Negative Pledge Agreements; Dividend Restrictions

				
			94

			
	
			Section 9.17

				
			Gas Imbalances, Take-or-Pay or Other Prepayments

				
			94

			
	
			Section 9.18

				
			Swap Agreements

				
			94

			
	
			Section 9.19 

				
			Marketing Activities

				
			96

			
	
			Section 9.20

				
			Changes in Fiscal Year and Amendments to Organizational Documents

				
			96

			
	
			Section 9.21

				
			Non-Qualified ECP Guarantors

				
			96

			
	
			Section 9.22

				
			Sales and Leasebacks

				
			96

			
	
			Section 9.23

				
			Limitations on Redemptions of 2024 Senior Notes

				
			96

			
	 	 
	
			ARTICLE X Events of Default; Remedies

				97
	
			Section 10.01

				
			Events of Default

				
			97

			
	
			Section 10.02

				
			Remedies

				
			98

			
	
			Section 10.03

				
			Right to Cure Financial Covenant Non-Compliance

				
			100

			
	 	 	 
	
			ARTICLE XI The Agents

				101
	
			Section 11.01

				
			Appointment; Powers

				
			101

			
	
			Section 11.02

				
			Duties and Obligations of Administrative Agent

				
			101

			
	
			Section 11.03

				
			Action by Administrative Agent

				
			102

			
	
			Section 11.04

				
			Reliance by Administrative Agent

				
			102

			
	
			Section 11.05

				
			Subagents

				
			103

			
	
			Section 11.06

				
			Resignation of Administrative Agent

				
			103

			
	
			Section 11.07

				
			Agents as Lenders

				
			103

			
	
			Section 11.08

				
			No Reliance

				
			103

			
	
			Section 11.09

				
			Administrative Agent May File Proofs of Claim

				
			104

			
	
			Section 11.10

				
			Authority of Administrative Agent to Release Collateral, Liens and Guarantors

				
			104

			
	
			Section 11.11

				
			The Arranger and other Agents

				
			104

			
	
			Section 11.12

				
			Acknowledgments Regarding Erroneous Payments

				
			105

			
	 	 
	
			ARTICLE XII Miscellaneous

				106
	
			Section 12.01

				
			Notices

				
			106

			
	
			Section 12.02

				
			Waivers; Amendments

				
			106

			
	
			Section 12.03

				
			Expenses, Indemnity; Damage Waiver

				
			107

			

 

iii

 

 

	
			Section 12.04

				
			Successors and Assigns

				
			109

			
	
			Section 12.05

				
			Survival; Revival; Reinstatement

				
			112

			
	
			Section 12.06

				
			Counterparts; Integration; Effectiveness

				
			112

			
	
			Section 12.07

				
			Severability

				
			113

			
	
			Section 12.08

				
			Right of Setoff

				
			113

			
	
			Section 12.09

				
			GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

				
			113

			
	
			Section 12.10

				
			Headings

				
			114

			
	
			Section 12.11

				
			Confidentiality

				
			115

			
	
			Section 12.12

				
			Interest Rate Limitation

				
			115

			
	
			Section 12.13

				
			EXCULPATION PROVISIONS

				
			116

			
	
			Section 12.14

				
			Collateral Matters; Swap Agreements

				
			116

			
	
			Section 12.15

				
			No Third Party Beneficiaries

				
			117

			
	
			Section 12.16

				
			USA Patriot Act Notice

				
			117

			
	
			Section 12.17

				
			No Advisory or Fiduciary Responsibility

				
			117

			
	
			Section 12.18

				
			Acknowledgement and Consent to Bail-In of Affected Financial Institutions

				
			117

			
	
			Section 12.19

				
			Certain ERISA Matters

				
			118

			
	
			Section 12.20

				
			Acknowledgment Regarding Any Supposed QFCs

				
			119

			

 

iv

 

 

ANNEXES, EXHIBITS AND SCHEDULES 

 

	
			Annex

				
			I List of Maximum Credit Amounts and Elected Commitments

			

 

	
			Exhibit

			Exhibit B

			Exhibit C

			Exhibit D

			Exhibit E

			Exhibit F

			Exhibit G

			Exhibit H

			Exhibit I-1

			Exhibit I-2

			Exhibit I-3

			Exhibit I-4

			Exhibit J

				
			A Form of Note

			Form of Borrowing Request

			Form of Interest Election Request

			Form of Compliance Certificate

			Security Instruments as of the Effective Date

			Form of Guaranty Agreement

			Form of Security Agreement

			Form of Assignment and Assumption

			Form of U.S. Tax Compliance Certificate (Foreign Lenders; not partnerships)

			Form of U.S. Tax Compliance Certificate (Foreign Participants; not partnerships)

			Form of U.S. Tax Compliance Certificate (Foreign Participants; partnerships)

			Form of U.S. Tax Compliance Certificate (Foreign Lenders; partnerships)

			Form of Lender Certificate

			

 

	
			Schedule 7.05

			Schedule 7.06

			Schedule 7.14

			Schedule 7.18

			Schedule 7.19

			Schedule 7.20

			Schedule 8.21(c)

			Schedule 9.02

			Schedule 9.05

				
			Litigation

			Environmental Matters

			Subsidiaries

			Gas Imbalances

			Marketing Contracts

			Swap Agreements

			Post-Closing Liens

			Existing Debt

			Investments

			

 

v

 

 

 

This Credit Agreement dated as of December 17, 2020, is among HIGHPEAK ENERGY, INC., a corporation duly formed and existing under the laws of the State of Delaware (the "Borrower"), each of the Lenders from time to time party hereto; and FIFTH THIRD BANK, NATIONAL ASSOCIATION (in its individual capacity, "Fifth Third"), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent").

 

R E C I T A L S

 

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

 

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

 

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

 

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

 

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

 

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

 

"2022 Indenture" means that certain Indenture, dated as of February 4, 2022, between the Borrower, as issuer, and 2024 Senior Notes Trustee.

 

"2024 Senior Notes" means the 10.000% senior unsecured notes due 2024 issued by the Borrower pursuant to the 2022 Indenture.

 

"2024 Senior Notes Escrow Account" means that certain escrow account with UMB Bank, National Association that will hold proceeds of the 2024 Senior Notes until the 2024 Senior Notes Escrow Release Date.

 

"2024 Senior Notes Escrow Release Date" means the date on which the release of the proceeds of the 2024 Senior Notes and all other escrowed property from the 2024 Senior Notes Escrow Account and the release of 2024 Senior Notes Trustee's Lien thereon and security interest therein occurs.

 

"2024 Senior Notes Scheduled Maturity Date" means February 4, 2024.

 

"2024 Senior Notes Trustee" means UMB Bank, National Association, as trustee.

 

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

 

"Account Control Agreement" means a control agreement, in form and substance reasonably satisfactory to the Administrative Agent, which grants the Administrative Agent "control" as defined in the Uniform Commercial Code in effect in the applicable jurisdiction over any Deposit Account, Securities Account or Commodity Account maintained by any Credit Party, in each case, among the Administrative Agent, the applicable Credit Party and the applicable financial institution at which such Deposit Account, Securities Account or Commodity Account is maintained.

 

CREDIT AGREEMENT – Page 1

 

 

"Additional Lenders" has the meaning ascribed such term in Section 2.06(c)(ii).

 

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

 

"Affected Financial Institution" means (a) any EEA Financial Institution or (b) any UK Financial Institution.

 

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

 

"Agents" means, collectively, the Administrative Agent and any other agent appointed under this Agreement from time to time.

 

"Aggregate Elected Commitments" "means (a) on the Second Amendment Effective Date, $195,000,000, and (b) at any time thereafter, an amount determined in accordance with Section 2.06(c).

 

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

 

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

 

"Alternate Base Rate" means, for any day, a variable per annum rate, as of any date of determination, equal to the Prime Rate. The Alternate Base Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Fifth Third may make commercial loans or other loans at rates of interest at, above or below the Alternate Base Rate. Any change in the Alternate Base Rate due to a change in the Prime Rate shall be effective from and including the effective date of such change in the Prime Rate, without notice to Borrower. For the avoidance of doubt, if the Alternate Base Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

"Anti-Corruption Laws" means all state or federal laws, rules, and regulations applicable to the Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption, including the FCPA.

 

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

 

	
			Borrowing Base Utilization Grid

			
	
			Borrowing Base Utilization Percentage

				
			<25%

				
			>25% <50%

				
			>50% <75%

				
			>75% <90%

				
			>90%

			
	
			Tranche Rate Loans

				
			3.25%

				
			3.50%

				
			3.75%

				
			4.00%

				
			4.25%

			
	
			ABR Loans

				
			2.25%

				
			2.50%

				
			2.75%

				
			3.00%

				
			3.25%

			
	
			Commitment Fee Rate

				
			0.50%

				
			0.50%

				
			0.50%

				
			0.50%

				
			0.50%

			

 

CREDIT AGREEMENT – Page 2

 

 

Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change; provided that if at any time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), then the "Applicable Margin" means the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level until such Reserve Report is delivered.

 

"Applicable Percentage" means, with respect to any Lender, at any time, the percentage of the Aggregate Maximum Credit Amounts represented by such Lender's Maximum Credit Amount, as such percentage is set forth on Annex I.

 

"Approved Counterparty" means (a) any Lender or any Affiliate of a Lender and (b) any other Person that has (or whose credit support provider in respect of its Swap Agreements has) a long term senior unsecured debt rating or issuer rating of A− or A3 by S&P or Moody's (or their equivalent) or higher.

 

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

 

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

 

"Arranger" means, (a) collectively, Fifth Third Bank, National Association, Citizens Bank N.A., BOKF, NA dba Bank of Texas, and Bank of America, N.A., in their respective capacities as joint lead arrangers hereunder, and (b) Fifth Third Bank, National Association, in its capacity as sole bookrunner hereunder.

 

"ASC" means the Financial Accounting Standards Board Accounting Standards Codification, as in effect from time to time.

 

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

 

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

 

"Bail-In Action" means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

 

"Bail-In Legislation" means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time that is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

 

CREDIT AGREEMENT – Page 3

 

 

"Bank Products" means any of the following bank services: (a) commercial credit cards, (b) stored value cards, and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

 

"Bank Products Provider" means any Lender or Affiliate of a Lender that provides Bank Products to the Borrower, any Restricted Subsidiary or any Guarantor.

 

"Beneficial Ownership Certification" means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation, which certification shall be substantially similar in form and substance to the form of Certification Regarding Beneficial Owners of Legal Entity Customers published jointly, in May 2018, by the Loan Syndications and Trading Association and Securities Industry and Financial Markets Association.

 

"Beneficial Ownership Regulation" means 31 C.F.R. § 1010.230.

 

"Benefit Plan" means any of (a) an "employee benefit plan" (as defined in ERISA) that is subject to Title I of ERISA, (b) a "plan" as defined in Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such "employee benefit plan" or "plan".

 

"BHC Act Affiliate" means, as to any Person, an "affiliate" (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

 

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

 

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

 

"Borrowing Base" means at any time an amount equal to the amount determined in accordance with Section 2.07, as the same may be adjusted from time to time pursuant to Section 2.07(e), Section 2.07(f), Section 8.13(c) or otherwise.

 

"Borrowing Base Asset Disposition" means (a) the sale, assignment, farm-out, conveyance or other transfer of Oil and Gas Properties to which Proved Reserves are attributed, and (b) the sale, assignment, or other transfer of Equity Interests in any Subsidiary that owns any Oil and Gas Properties to which Proved Reserves are attributed or any interest in Hydrocarbons produced or to be produced therefrom, including the designation of an Unrestricted Subsidiary owning such Oil and Gas Properties, provided that no such sale, assignment, farm-out, or other transfer between or among the Credit Parties shall constitute a Borrowing Base Asset Disposition.

 

"Borrowing Base Deficiency" means, any time at which the total Revolving Credit Exposures exceeds the Borrowing Base then in effect.

 

"Borrowing Base Properties" means the Properties and/or Oil and Gas Properties of the Credit Parties included in the Initial Reserve Report and thereafter in the most recently delivered Reserve Report delivered pursuant to Section 8.12.

 

CREDIT AGREEMENT – Page 4

 

 

"Borrowing Base Swap Liquidation" means the liquidation, monetization, unwinding, termination or transfer (by novation or otherwise) of any commodity Swap Agreement, or the amendment of any such Swap Agreement in any way that could reasonably be expected to reduce the Borrowing Base value thereof, including any sale, assignment, or other transfer of Equity Interests in any Subsidiary that is a party to any commodity Swap Agreement to a party that is not a Credit Party; provided that none of the following shall constitute a Borrowing Base Swap Liquidation: (a) any transfer (by novation or otherwise) of a Swap Agreement between or among the Credit Parties, (b) any novation of a Swap Agreement from the existing counterparty to an Approved Counterparty, with a Credit Party being the "remaining party" for purposes of such novation, (c) the termination of a Swap Agreement at the end of its stated term, and (d) any replacement, in a substantially contemporaneous transaction, of one or more Swap Agreements of any Credit Party with one or more Swap Agreements with any Credit Party covering Hydrocarbons of the type that were hedged pursuant to such replaced Swap Agreement(s) and with notional volumes, prices, tenors and economic effect during such tenors not less favorable to the applicable Credit Party as those set forth in such replaced Swap Agreement(s) and without cash payments to any Credit Party in connection therewith.

 

"Borrowing Base Utilization Percentage" means, as of any day, the fraction expressed as a percentage, the numerator of which is the sum of the Revolving Credit Exposures of the Lenders on such day, and the denominator of which is the Borrowing Base in effect on such day.

 

"Borrowing Base Value" means (a) with respect to the Oil and Gas Properties that are transferred in any Borrowing Base Asset Disposition, the portion of the total Borrowing Base that the Administrative Agent allocates to such Oil and Gas Properties (which amount, if it would result in a Borrowing Base reduction, is approved by the Required Lenders) and (b) with respect to the commodity Swap Agreement that is the subject of any Borrowing Base Swap Liquidation, the reduction in value to the Borrowing Base, as determined by the Administrative Agent, that is attributable to such Borrowing Base Swap Liquidation (which amount, if it would result in a Borrowing Base reduction, is approved by the Required Lenders).

 

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

 

"Business Day" means (a) with respect to all notices and determinations, including Interest Payment Dates, in connection with the Tranche Rate or Daily Simple SOFR, any day that commercial banks in New York, New York are required by law to be open for business and that is a U.S. Government Securities Business Day, which means any day other than a Saturday, Sunday, or day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities and (b) in all other cases, any day on which commercial banks in Cincinnati, Ohio are required by law to be open for business; provided that, notwithstanding anything to the contrary in this definition of "Business Day", at any time during which a Swap Agreement with any Secured Party is then in effect with respect to all or a portion of the Indebtedness, then the definitions of "Business Day" and "Banking Day", as applicable, pursuant to such Swap Agreement shall govern with respect to all applicable notices and determinations in connection with such portion of the Indebtedness arising under such Swap Agreement. Periods of days referred to in the Loan Documents will be counted in calendar days unless Business Days are expressly prescribed.

 

"Capital Leases" means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder. Any lease that was treated as an operating lease under GAAP at the time it was entered into that later becomes a capital lease as a result of a change in GAAP during the life of such lease, including any renewals, shall be treated as an operating lease for all purposes under this Agreement, and any lease that was treated as a capital lease under GAAP at the time it was entered into that later becomes an operating lease as a result of a change in GAAP during the life of such lease, including any renewals, shall be treated as a capital lease for all purposes under this Agreement.

 

CREDIT AGREEMENT – Page 5

 

 

"Cash Collateralize" means, to pledge and deposit with or deliver to the Administrative Agent (in a manner reasonably satisfactory to the Administrative Agent, which may require such deposit to be made into a controlled account), for the benefit of the Issuing Bank or the Lenders, as collateral for LC Exposure or obligations of the Lenders to fund participations in respect of LC Exposure, cash or deposit account balances or, if the Administrative Agent and the Issuing Bank shall agree, in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and the Issuing Bank. "Cash Collateral" shall have a meaning correlative to the foregoing and shall include the proceeds of such Cash Collateral and other credit support.

 

"Casualty Event" means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of the Borrower or any of its Restricted Subsidiaries having a fair market value in excess of $1,000,000.

 

"CERCLA" has the meaning set forth in the definition of "Environmental Laws".

 

"Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group, other than Permitted Holders, (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) of Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, unless such Person or group acquires newly issued Equity Interests (instead of Equity Interests of the Borrower existing on the Effective Date) in exchange for (1) the contribution of Oil and Gas Properties or (2) the receipt of cash proceeds, or (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated.

 

"Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 5.01(b), by any lending office of such Lender or by such Lender's or the Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided, however, for the purposes of this Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines or directives in connection therewith or promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision or the United States or foreign regulatory authorities, in each case, pursuant to Basel III, are deemed to have gone into effect and to have been adopted after the date of this Agreement.

 

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

 

"Collateral" means the Mortgaged Properties and all other Property of the Credit Parties, now owned or hereafter acquired, which is subject to a Lien under one or more Security Instruments.

 

"Commitment" means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.06, (ii) increased or reduced from time to time pursuant to Section 2.06(c) and (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b). The amount representing each Lender's Commitment shall at any time be the least of (i) such Lender's Maximum Credit Amount, (ii) such Lender's Applicable Percentage of the then effective Borrowing Base and (iii) such Lender's Applicable Percentage of the then effective Aggregate Elected Commitments.

 

CREDIT AGREEMENT – Page 6

 

 

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

 

"Commodity Account" shall have the meaning set forth in Article 9 of the UCC.

 

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

 

"Conforming Changes" means, with respect to the use, administration of, or any conventions associated with the Tranche Rate or any proposed Successor Rate, as applicable, any changes to the terms of this Agreement related to the timing, frequency, and methodology of determining rates and making payments of interest, including changes to the definition of Business Day, lookback periods or observation shift, prepayments, and borrowing, conversion, or continuation notices, and other technical, administrative, or operational matters, as may be appropriate, in the discretion of the Administrative Agent, to reflect the adoption and implementation of such applicable rate and to permit the administration thereof by the Administrative Agent in an operationally feasible manner and, to the extent feasible, consistent with market practice.

 

"Consolidated Cash Balance" means the aggregate amount of cash and cash equivalents, marketable securities, treasury bonds and bills, certificates of deposit, investments in money market funds and commercial paper, in each case, held or owned by (whether directly or indirectly), credited to the account of, or otherwise reflected as an asset on the balance sheet of, the Borrower and its Subsidiaries (other than (i) any cash set aside to pay in the ordinary course of business amounts of the Borrower and its Subsidiaries then due and owing to unaffiliated third parties (including, for the avoidance of doubt, to pay royalty obligations, working interest obligations, production payments, severance taxes, suspense payments, payroll, payroll taxes, other taxes, employee wage and benefit payments, trust and fiduciary obligations and reimbursements of LC Disbursements) and for which the Borrower or such Subsidiary, as applicable, has issued checks or has initiated wires or ACH transfers in order to pay (or will issue checks or initiate wires or ACH transfers in order to pay such amounts within thirty days), (ii) any cash set aside to pay royalty obligations in the ordinary course of business of the Borrower and its Subsidiaries then due and owing to unaffiliated third parties, (iii) any amounts held as Cash Collateral as required pursuant to Section 2.08(j), (iv) cash of the Borrower or any Restricted Subsidiary set aside to be used by the Borrower or any Subsidiary within five Business Days to pay the purchase price for any acquisition of any assets or property permitted hereunder by the Borrower or any Subsidiary pursuant to a binding and enforceable purchase and sale agreement with an unaffiliated third party containing customary provisions regarding the payment and refunding of such purchase price, (v) any proceeds from any issuance of Equity Interests by the Borrower not prohibited by this Agreement, provided that, in the case of this clause (v), such proceeds shall only be excluded from the Consolidated Cash Balance from the date of such issuance through and including the ninety days after such issuance, (vi) while and to the extent refundable, any cash or Cash Equivalents of the Borrower or any Subsidiaries constituting purchase price deposits held in escrow pursuant to a binding and enforceable purchase and sale agreement with an unaffiliated third party containing customary provisions regarding the payment and refunding of such deposits and (vii) any amounts held in those accounts described in clause (d) of the definition of Excluded Account).

 

"Consolidated Cash Balance Measurement Day" means the last Business Day of each calendar month.

 

CREDIT AGREEMENT – Page 7

 

 

"Consolidated Cash Balance Threshold" means $20,000,000.

 

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

 

"Consolidated Restricted Subsidiaries" means any Restricted Subsidiaries that are Consolidated Subsidiaries.

 

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

 

"Consolidated Unrestricted Subsidiaries" means any Unrestricted Subsidiaries that are Consolidated Subsidiaries.

 

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

 

"Covered Entity" means any of the following: (a) a "covered entity" as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (b) a "covered bank" as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (c) a "covered FSI" as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

 

"Covered Party" has the meaning assigned to such term in Section 12.20.

 

"Credit Parties" means, collectively, the Borrower and each Guarantor, and "Credit Party" means any one of the foregoing.

 

"Cure Period" has the meaning set forth in Section 10.03(a)(ii).

 

CREDIT AGREEMENT – Page 8

 

 

"Daily Simple SOFR" means, for any day, SOFR, with the conventions for this rate (which will include a five (5) U.S. Government Securities Business Days lookback) being established by the Administrative Agent in accordance with the conventions for this rate recommended by the relevant Governmental Authority for determining "Daily Simple SOFR" for syndicated credit facilities; provided, that if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion. For the avoidance of doubt, (a) in accordance with the terms of this Agreement, Daily Simple SOFR shall only be available to the extent the Borrower has a Swap Agreement in effect with respect to all or part of the Indebtedness or if the Successor Rate is based on Daily Simple SOFR and (b) provisions governing rounding of rates shall not apply to Daily Simple SOFR. For the avoidance of doubt, if the Daily Simple SOFR shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

"Debt" means, for any Person, the sum of the following (without duplication):

 

(a)         all obligations of such Person for borrowed money or evidenced by bonds, bankers' acceptances, debentures, notes or other similar instruments;

 

(b)         all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments;

 

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

 

(d)         all obligations under Capital Leases;

 

(e)         all obligations under Synthetic Leases;

 

(f)         all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person;

 

(g)         all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss;

 

(h)         all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others and, to the extent entered into as a means of providing credit support for the obligations of others and not primarily to enable such Person to acquire any such Property, all obligations or undertakings of such Person to purchase the Debt or Property of others;

 

(i)         obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments more than one (1) month in advance of delivery, other than gas balancing arrangements in the ordinary course of business;

 

CREDIT AGREEMENT – Page 9

 

 

(j)         obligations to pay for goods or services even if such goods or services are not actually received or utilized by such Person (other than firm transportation or storage, or drilling contracts in each case entered into in the ordinary course of business);

 

(k)         any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability;

 

(l)         Disqualified Capital Stock; and

 

(m)         the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment;

 

provided, however, that "Debt" does not include (i) obligations with respect to worker's compensation claims, appeal, surety, bid, performance or similar bonds, instruments entered into in the ordinary course of business in connection with the ownership or operation of Oil and Gas Properties or otherwise required pursuant to Governmental Requirements in connection with the oil and gas business of the Credit Parties, (ii) endorsements of negotiable instruments for deposit or collection, (iii) obligations under ASC 410 or (iv) for the avoidance of doubt, obligations under operating leases. The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

 

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

 

"Default Right" has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

 

"Defaulting Lender" means any Lender that (a) has failed, within two (2) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder; (b) has notified the Administrative Agent, the Borrower or any Credit Party in writing, or has made a public statement, to the effect that it does not intend or expect to comply with any of its funding obligations under this Agreement or generally under other agreements in which it commits to extend credit; (c) has failed, within three (3) Business Days after request by the Administrative Agent or a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund prospective Loans and participations in then outstanding Letters of Credit under this Agreement; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party's receipt of such certification in form and substance satisfactory to it and the Administrative Agent; or (d) has (or whose bank holding company has) been placed into receivership, conservatorship, bankruptcy or become the subject of a Bail-In Action; provided that a Lender shall not become a Defaulting Lender solely as a 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. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.09(b)) upon delivery of written notice of such determination to the Borrower, the Issuing Bank, and each Lender.

 

"Deposit Account" shall have the meaning set forth in Article 9 of the UCC.

 

CREDIT AGREEMENT – Page 10

 

 

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

 

"Division" means, with respect to any Person, a division of or by such Person into two or more Persons pursuant to the laws of the jurisdiction of any such Person's organization. "Divide" shall have the correlative meaning to Division.

 

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

 

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

 

"EBITDAX" means, for any period, the sum of Consolidated Net Income for such period plus (a) the following costs and expenses or charges to the extent deducted from Consolidated Net Income in such period: (i) interest, (ii) Taxes based on income, profits or capital gains, including franchise and similar Taxes, (iii) depletion, (iv) depreciation, (v) amortization, (vi) accretion of discount of asset retirement obligations, (vii) exploration and abandonment expenses, (viii) stock based compensation and other similar noncash charges, (ix) noncash mark to market losses on derivative financial instruments, (xi) losses from asset dispositions (other than Hydrocarbons produced in the ordinary course of business), and (x) transaction costs, expenses and charges with respect to the acquisition or disposition of Oil and Gas Properties, any issuance of debt permitted hereunder or with respect to the business combination and the Transactions in an aggregate amount not to exceed $10,000,000 in any fiscal year, minus (b) (i) all gains from asset dispositions (other than Hydrocarbons produced in the ordinary course of business), (ii) noncash mark to market gains on derivative financial instruments, and (iii) all noncash income, in each case to the extent added to Consolidated Net Income in such period. Notwithstanding anything herein to the contrary: EBITDAX for the Rolling Period ending on March 31, 2021 shall be calculated by multiplying EBITDAX for the fiscal quarter ending on such date by four (4); EBITDAX for the Rolling Period ending on June 30, 2021 shall be calculated by multiplying EBITDAX for the two consecutive fiscal quarters ending on such date by two (2); and EBITDAX for the Rolling Period ending on September 30, 2021 shall be calculated by multiplying EBITDAX for the three consecutive fiscal quarters ending on such date by four-thirds (4/3).

 

"EEA Financial Institution" means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

"EEA Member Country" means any of the member states of the European Union, Iceland, Liechtenstein and Norway.

 

"EEA Resolution Authority" means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

CREDIT AGREEMENT – Page 11

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

"ERISA Event" means (a) a "Reportable Event" described in section 4043 of ERISA, other than a Reportable Event as to which the provisions of thirty (30) days' notice to the PBGC is expressly waived under applicable regulations, with respect to a Plan subject to Title IV of ERISA, (b) the withdrawal of the Borrower, a Subsidiary or any ERISA Affiliate from a Plan subject to Title IV of ERISA during a plan year in which it was a "substantial employer" as defined in section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, (e) receipt by the Borrower, a Subsidiary or an ERISA Affiliate of a notice of withdrawal liability pursuant to section 4202 of ERISA or (f) any other event or condition which might constitute grounds under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan subject to Title IV of ERISA.

 

"EU Bail-In Legislation Schedule" means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

"Event of Default" has the meaning assigned to such term in Section 10.01.

 

CREDIT AGREEMENT – Page 12

 

 

"Excepted Liens" means: (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers' compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) statutory landlord's liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics', suppliers', workers', materialmen's, construction or other like Liens, in each case, arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of any material Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Restricted Subsidiary or materially impair the value of such Property subject thereto; (e) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by the Borrower or any of its Restricted Subsidiaries to provide collateral to the depository institution; (f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property of the Borrower or any Restricted Subsidiary for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure any monetary obligations and which in the aggregate do not materially impair the use of any material Property for the purposes of which such Property is held by the Borrower or any Restricted Subsidiary or materially impair the value of any material Property subject thereto; (g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business and (h) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced; provided, further that (i) Liens described in clauses (a) through (e) shall remain "Excepted Liens" only for so long as no action to enforce such Lien has been commenced and no intention to subordinate the first priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted Liens and (ii) the term "Excepted Liens" shall not include any Lien securing Debt for borrowed money other than the Indebtedness.

 

"Excess Cash" means the Consolidated Cash Balance in excess of the Consolidated Cash Balance Threshold at any time.

 

CREDIT AGREEMENT – Page 13

 

 

"Excluded Account" means (a) any deposit account, securities account or commodity account with an average daily balance of less than $100,000 individually and $500,000 in the aggregate with all other deposit accounts, securities accounts and commodity accounts that are designated as "Excluded Accounts" pursuant to this clause (a), (b) any deposit account that is used exclusively for trust, payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of any Credit Parties' employees, (c) any deposit account that is a zero balance account or a deposit account for which the balance of such deposit account is transferred at the end of each date to a Deposit Account that is not an Excluded Account, (d) any deposit account, securities account or commodity account that is pledged to a third party to the extent such Lien is permitted by the Loan Documents, and (e) any deposit account maintained with a depository bank other than a Lender that is used exclusively for automating royalty payments for the Credit Parties in the ordinary course of business, provided, however, only if no Lender can provide the same or similar automated service regarding royalty payments as such depository bank.

 

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

 

"Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower or any Guarantor hereunder or under any other Loan Document, (a) Taxes imposed on (or measured by) its net income, franchise Taxes, and branch profits Taxes, in each case, (i) imposed by the United States of America or such other jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, or (ii) that are Other Connection Taxes, (b) in the case of a Lender, any withholding Tax that is imposed on amounts payable to such Lender pursuant to a law in effect at the time such Lender becomes a party to this Agreement (other than an assignee pursuant to a request by the Borrower under Section 5.04(b)) or designates a new lending office, except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c), (c) Taxes attributable to such Lender's or the Administrative Agent's failure to comply with Section 5.03(f) or Section 5.03(g), and (d) any Taxes imposed by FATCA.

 

"FATCA" means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities entered into in connection with the implementation of the foregoing.

 

"FCPA" means the Foreign Corrupt Practices Act of 1977, as amended.

 

CREDIT AGREEMENT – Page 14

 

 

"Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it; provided that in no event shall the Federal Funds Effective Rate be less than 0%.

 

"Fee Letters" means (a) the Fee Letter, dated as of December 17, 2020 among the Borrower and the Administrative Agent and (b) any other fee letters that may hereafter be entered into between the Administrative Agent and the Borrower or any other Credit Party.

 

"Fifth Third" has the meaning set forth in the preamble.

 

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

 

"Flood Insurance Regulations" means (a) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (b) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statute thereto, (c) the National Flood Insurance Reform Act of 1994 (amending 42 USC § 4001, et seq.), as the same may be amended or recodified from time to time, (d) the Flood Insurance Reform Act of 2004, and (e) the Biggert-Waters Flood Reform Act of 2012, and any regulations promulgated thereunder.

 

"Floor" has the meaning given to such term in the definition of "Tranche Rate".

 

"Foreign Lender" means any Lender that is not a U.S. Person.

 

"Foreign Subsidiary" means any Restricted Subsidiary that is not a Domestic Subsidiary.

 

"Fronting Exposure" means, at any time there is a Defaulting Lender, with respect to the Issuing Bank, such Defaulting Lender's LC Exposure other than LC Exposure as to which such Defaulting Lender's participation obligation has been reallocated to other Lenders or cash collateralized in accordance with the terms hereof.

 

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

 

"Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

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

 

CREDIT AGREEMENT – Page 15

 

 

"Guarantors" means each Domestic Subsidiary that guarantees the Indebtedness pursuant to Section 8.14(b). 

 

"Guaranty Agreement" means an agreement executed by the Guarantors in substantially the form of Exhibit F unconditionally guarantying, on a joint and several basis, payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time.

 

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

 

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

 

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

 

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

 

"Increase Effective Date" has the meaning ascribed such term in Section 2.06(c)(ii).

 

"Increase Notice" has the meaning ascribed such term in Section 2.06(c)(ii).

 

"Indebtedness" means, without duplication, any and all amounts owing or to be owing by the Borrower or any Guarantor (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising): (a) to any Agent, the Issuing Bank or any Lender under any Loan Document, including, without limitation, all interest on any of the Loans (including any interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of any Credit Party (or could accrue but for the operation of applicable bankruptcy or insolvency laws), whether or not such interest is allowed or allowable as a claim in any such case, proceeding or other action); (b) to any Secured Swap Provider under any Swap Agreement including any Swap Agreement in existence prior to the date hereof, but excluding any additional transactions or confirmations entered into (i) after such Secured Swap Provider ceases to be a Lender or an Affiliate of a Lender or (ii) after assignment by a Secured Swap Provider to another Person that is not a Lender or an Affiliate of a Lender; (c) to any Bank Products Provider in respect of Bank Products; and (d) all renewals, extensions and/or rearrangements of any of the above; provided that solely with respect to any Credit Party that is not an "eligible contract participant" under the Commodity Exchange Act, Excluded Swap Obligations of such Credit Party shall in any event be excluded from "Indebtedness" owing by such Credit Party.

 

CREDIT AGREEMENT – Page 16

 

 

"Indemnified Taxes" means Taxes imposed on or with respect to any payment made by or on account of any obligation of the Borrower or any Guarantor under any Loan Document other than Excluded Taxes.

 

"Indemnitee" shall have the meaning assigned to such term in Section 12.03(b).

 

"Information" shall have the meaning assigned to such term in Section 12.11.

 

"Initial Financial Statements" means the pro forma consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Borrower and its Consolidated Subsidiaries as of the end of fiscal quarter ending September 30, 2020.

 

"Initial Reserve Report" means the Reserve Report prepared by Cawley, Gillespie & Associates, Inc., dated as of December 31, 2019, and subsequently updated by the Borrower, evaluating the Oil and Gas Properties of the Borrower and the other Credit Parties.

 

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

 

"Interest Payment Date" means (a) with respect to any ABR Loan or any Tranche Rate Loan bearing interest on Daily Simple SOFR, the last Business Day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, and (b) with respect to any Tranche Rate Loan bearing interest on the Tranche Rate, the last day of each Interest Period with respect to such Tranche Rate Loan and on the final maturity date of such Loan.

 

"Interest Period" means with respect to any Tranche Rate Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one or three months thereafter, as the Borrower may elect; provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period pertaining to a Tranche Rate Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (c) no Interest Period may have a term which would extend beyond the Maturity Date. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

 

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

 

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

 

"Investment" means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit with, or advance, loan or capital contribution to, assumption of Debt of, purchase or other acquisition of any other Debt or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of inventory, material, equipment, supplies or other assets sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property (other than Equity Interests) of another Person that constitutes a business unit; or (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, any Debt or other obligations of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person, in each case including any of the forgoing that are effected by a Division.

 

CREDIT AGREEMENT – Page 17

 

 

"IRS" means the United States Internal Revenue Service.

 

"ISDA Definitions" means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.

 

"Issuing Bank" means Fifth Third Bank, National Association, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.08(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

"LC Commitment" at any time means the greater of (i) five million dollars ($5,000,000), and (ii) five percent (5%) of the Borrowing Base then in effect.

 

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

 

"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time, adjusted to give effect to any reallocation under Section 2.09 of the LC Exposures of Defaulting Lenders in effect at such time.

 

"Lender Certificate" has the meaning ascribed such term in Section 2.06(c)(ii).

 

"Lenders" means the Persons listed on Annex I and any Person that shall have become a party hereto pursuant to Section 2.06(c)(ii) or pursuant to an Assignment and Assumption or other documentation contemplated hereby, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption or other documentation contemplated hereby.

 

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

 

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

 

"Lien" means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a deed of trust, mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Oil and Gas Properties. The term "Lien" shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations. For the purposes of this Agreement, the Borrower and its Restricted Subsidiaries shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.

 

CREDIT AGREEMENT – Page 18

 

 

"Loan Documents" means this Agreement, the Notes, the Letter of Credit Agreements, the Letters of Credit, each Account Control Agreement, and the Security Instruments and any other agreement entered into, now or in the future, in connection with this Agreement.

 

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

 

"Majority Lenders" means, (a) if there are fewer than three Lenders at such time, all Non-Defaulting Lenders, and (b) if there are three or more Lenders at such time, (i) at any time while no Loans or LC Exposure is outstanding, Non-Defaulting Lenders having at least fifty percent (50%) of the Aggregate Maximum Credit Amounts of all Non-Defaulting Lenders; and (ii) at any time while any Loans or LC Exposure is outstanding, Non-Defaulting Lenders holding at least fifty percent (50%) of the outstanding aggregate principal amount of the Loans and participation interests in Letters of Credit of all Non-Defaulting Lenders (without regard to any sale by a Non-Defaulting Lender of a participation in any Loan under Section 12.04(c)).

 

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

 

"Material Debt" means Debt (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, in each case of any one or more of the Borrower and its Restricted Subsidiaries in an aggregate principal amount exceeding the greater of (i) $3,000,000 and (ii) ten percent (10%) of the Aggregate Elected Commitments in effect at such time. For purposes of determining Material Debt, the "principal amount" of the obligations of the Borrower or any Restricted Subsidiary in respect of any Swap Agreement at any time shall be the Swap Termination Value of such Swap Agreement.

 

"Maturity Date" means the Scheduled Maturity Date; provided that if the Borrower has not (a) amended the terms of the 2024 Senior Notes to extend the scheduled repayment thereof to no earlier than October 1, 2024 or (b) Redeemed or refinanced the 2024 Senior Notes (in each case in compliance with Section 9.23) prior to October 1, 2023, the Maturity Date shall be October 1, 2023.

 

"Maximum Credit Amount" means, as to each Lender, the amount set forth opposite such Lender's name on Annex I under the caption "Maximum Credit Amounts", as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), (b) increased or reduced from time to time pursuant to Section 2.06(c)(ii)(C) or (c) modified from time to time pursuant to any assignment permitted by Section 12.04(b).

 

"Moody's" means Moody's Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency.

 

"Mortgaged Property" means any Property owned by the Borrower or any Guarantor which is subject to the Liens existing and to exist under the terms of the Security Instruments.

 

CREDIT AGREEMENT – Page 19

 

 

"Net Proceeds" means the aggregate cash proceeds received by a Credit Party in respect of any sale, lease, conveyance, disposition or other transfer of Property (including any cash subsequently received upon the sale or other disposition or collection of any non-cash consideration received in any sale), any incurrence of Debt, or Casualty Event, net of (a) the direct costs relating to such sale of Property, incurrence of Debt or any Casualty Event (including legal, accounting and investment banking fees, and sales commissions paid to unaffiliated third parties), (b) Taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (c) Debt (other than the Indebtedness) which is secured by a Lien upon any of the assets being sold and which must be repaid as a result of such sale.

 

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

 

"Non-Consenting Lender" means any Lender that does not approve any amendment, waiver or consent of or under any Loan Document that requires the approval of all Lenders or all affected Lenders in accordance with Section 12.02 (including any Proposed Borrowing Base that would increase the then‐current Borrowing Base) and has been approved by the Required Lenders.

 

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

 

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

 

"OFAC" means the Office of Foreign Assets Control of the United States Department of the Treasury.

 

"Oil and Gas Properties" means (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests; and (g) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. Unless otherwise expressly provided herein, all references in this Agreement to "Oil and Gas Properties" refer to Oil and Gas Properties owned by the Borrower and its Restricted Subsidiaries, as the context requires.

 

CREDIT AGREEMENT – Page 20

 

 

"Organizational Documents" means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to such corporation's jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

"Other Connection Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower or any Guarantor hereunder or under any other Loan Document, Taxes imposed as a result of a present or former connection between such recipient and the jurisdiction imposing such Tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

"Other Taxes" means any and all present or future stamp, court or documentary, intangible, recording, filing or other similar Taxes, charges or levies arising from any payment made hereunder or from the execution, delivery, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, this Agreement and any other Loan Document, except for any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 5.04(b)).

 

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

 

"Participant Register" has the meaning set forth in Section 12.04(c)(i).

 

"PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

"PDP Reserves" means "proved developed producing oil and gas reserves" as such term is defined by the SPE in its standards and guidelines.

 

"Permitted Holders" means (a) HighPeak Pure Acquisition, LLC, a Delaware limited liability company, (b) HighPeak Energy Partners, LP, a Delaware limited partnership, (c) HighPeak Energy Partners II, LP, a Delaware limited partnership, (d) HighPeak Energy III, LP, a Delaware limited partnership, (e) (i) Jack Hightower, (ii) any immediate family member of Jack Hightower and (iii) the estate or legal representative of the estate of Jack Hightower and/or any immediate family members of Jack Hightower (acting in the capacity of such legal representative), (f) (i) John Paul DeJoria, (ii) the John Paul DeJoria Family Trust, (ii) any immediate family member of John Paul DeJoria and (iii) the estate or legal representative of the estate of John Paul DeJoria and/or any immediate family members of John Paul DeJoria (acting in the capacity of such legal representative) and (g) any Affiliated funds, investments vehicles, holding companies, trusts, partnerships, limited liability companies, corporations or other entities directly or indirectly owned, managed or controlled by one or more Persons in clauses (a), (b), (c), (d), (e) and/or (f) of this definition.

 

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

 

CREDIT AGREEMENT – Page 21

 

 

"Plan" means any employee pension benefit plan, as defined in section 3(2) of ERISA (other than a multiemployer plan within the meaning of section 3(37) of ERISA), which is subject to Title IV of ERISA, section 302 of ERISA or section 412 of the Code and which (a) is currently or hereafter sponsored, maintained or contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time during the six calendar years preceding the date hereof, sponsored, maintained or contributed to by the Borrower or a Subsidiary or an ERISA Affiliate.

 

"Prime Rate" means the rate of interest per annum publicly announced from time to time by Fifth Third as its prime rate in effect at its principal office in Cincinnati, Ohio; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. Such rate is set by the Administrative Agent as a general reference rate of interest, taking into account such factors as the Administrative Agent may deem appropriate; it being understood that many of the Administrative Agent's commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Administrative Agent may make various commercial or other loans at rates of interest having no relationship to such rate.

 

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

 

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

 

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

 

"Proved Oil and Gas Properties" means Hydrocarbon Interests to which Proved Reserves are attributed.

 

"Proved Reserves" or "Proved" means collectively, "proved oil and gas reserves," "proved developed producing oil and gas reserves," "proved developed non-producing oil and gas reserves" (consisting of proved developed shut-in oil and gas reserves and proved developed behind pipe oil and gas reserves), and "proved undeveloped oil and gas reserves," as such terms are defined by the SPE in its standards and guidelines.

 

"PTE" means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

 

"QFC" has the meaning assigned to the term "qualified financial contract" in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

 

"QFC Credit Support" has the meaning assigned to such term in Section 12.20.

 

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

 

"Qualified Professional Asset Manager" as defined in Section 12.19(a)(iii)(A).

 

"RCRA" has the meaning set forth in the definition of "Environmental Laws".

 

CREDIT AGREEMENT – Page 22

 

 

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

 

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

 

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

 

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

 

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

 

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

 

"Remedial Work" has the meaning assigned such term in Section 8.10(a).

 

"Required Lenders" means, (a) if there are fewer than three Lenders at such time, all Non-Defaulting Lenders, and (b) if there are three or more Lenders at such time, (i) at any time while no Loans or LC Exposure is outstanding, Non-Defaulting Lenders having at least sixty-six and two-thirds percent (662⁄3%) of the Aggregate Maximum Credit Amounts of all Non-Defaulting Lenders; and (ii) at any time while any Loans or LC Exposure is outstanding, Non-Defaulting Lenders holding at least sixty‐six and two-thirds percent (662⁄3%) of the outstanding aggregate principal amount of the Loans and participation interests in Letters of Credit of all Non-Defaulting Lenders (without regard to any sale by a Non-Defaulting Lender of a participation in any Loan under Section 12.04(c)).

 

"Reserve Report" means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of the dates set forth in Section 8.12(a) (or such other date in the event of an Interim Redetermination), the Proved Reserves attributable to the Oil and Gas Properties of the Credit Parties that are Qualified ECP Guarantors, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the pricing assumptions consistent with the Administrative Agent's lending requirements at the time and reflecting Swap Agreements in place with respect to such production.

 

"Resolution Authority" means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

 

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

 

CREDIT AGREEMENT – Page 23

 

 

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

 

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

 

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

 

"Rolling Period" means for the fourth fiscal quarter following the Effective Date and each fiscal quarter ending thereafter, any period of four (4) consecutive fiscal quarters ending on the last day of such applicable fiscal quarter.

 

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

 

"Sanctioned Country" means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (as of the Effective Date, Crimea, Cuba, Iran, North Korea, Sudan and Syria).

 

"Sanctioned Person" means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, or by the United Nations Security Council, the European Union, any European Union member state, Her Majesty's Treasury of the United Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clause (a) or clause (b).

 

"Sanctions" means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state, Her Majesty's Treasury of the United Kingdom or other relevant sanctions authority.

 

"Scheduled Maturity Date" means June 17, 2024.

 

"Scheduled Redetermination" has the meaning assigned such term in Section 2.07(b).

 

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

 

"Scheduled Unavailability Date" has the meaning ascribed to it in Section 3.03(b)(i) of the Agreement.

 

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

 

"Second Amendment Effective Date" means October 1, 2021.

 

"Secured Parties" means, collectively, the Administrative Agent, the Lenders, the Issuing Bank, the Bank Products Providers and Secured Swap Providers, and "Secured Party" means any of them individually.

 

"Secured Swap Provider" means any (a) Person that is a party to a Swap Agreement with the Borrower or any of its Restricted Subsidiaries that entered into such Swap Agreement before or while such Person was a Lender or an Affiliate of a Lender, whether or not such Person at any time ceases to be a Lender or an Affiliate of a Lender, as the case may be, or (b) assignee of any Person described in clause (a) above so long as such assignee is a Lender or an Affiliate of a Lender.

 

CREDIT AGREEMENT – Page 24

 

 

"Securities Account" shall have the meaning set forth in Article 8 of the UCC.

 

"Security Agreement" means a Pledge and Security Agreement among the Borrower, the Guarantors and the Administrative Agent in substantially the form of Exhibit G (or otherwise in form and substance acceptable to the Administrative Agent) granting Liens and a security interest on the Credit Parties' personal property constituting Collateral (as defined therein) in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Indebtedness, as the same may be amended, modified, supplemented or restated from time to time.

 

"Security Instruments" means the Guaranty Agreement, the Security Agreement, mortgages, deeds of trust and other agreements, instruments or certificates described or referred to in Exhibit E, the Account Control Agreements and any and all other agreements, instruments, consents or certificates now or hereafter executed and delivered by the Borrower or any other Person (other than Swap Agreements with the Lenders or any Affiliate of a Lender or participation or similar agreements between any Lender and any other lender or creditor with respect to any Indebtedness pursuant to this Agreement) in connection with, or as security for the payment or performance of the Indebtedness, the Notes, this Agreement, or reimbursement obligations under the Letters of Credit, as such agreements may be amended, modified, supplemented or restated from time to time.

 

"SOFR" means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate published by the Federal Reserve Bank of New York (or a successor administrator) on the administrator's website (or any successor source for the secured overnight financing rate identified as such by the administrator) at approximately 2:30 p.m. (New York City time) on the immediately succeeding Business Day.

 

"SPE" means the Society of Petroleum Engineers.

 

"Specified Additional Debt" means any unsecured senior, senior subordinated or subordinated Debt of the Borrower incurred after the Effective Date under Section 9.02(g) and any refinancing of such Debt, including without limitation, the 2024 Senior Notes; provided that any such Debt may be refinanced only to the extent that the aggregate principal amount of such refinancing Debt does not result in an increase in the principal amount thereof plus amounts to fund any original issue discount or upfront fees relating thereto plus amounts to fund accrued interest, fees, expenses and premiums.

 

"Specified Equity Contribution" means any direct or indirect Investment in the Borrower pursuant to Section 10.03 in cash in the form of a capital contribution to the Borrower or the purchase of common or preferred Equity Interests issued by the Borrower; provided that the terms of any such preferred Equity Interests are reasonably acceptable to the Administrative Agent and such preferred Equity Interests are not Disqualified Capital Stock.

 

"Spread Adjustment" means a mathematical or other adjustment to an alternate benchmark rate selected pursuant to Section 3.03(b) of the Agreement and such adjustment may be positive, negative, or zero subject to the specific Spread Adjustments set forth in Section 3.03(b).

 

"subsidiary" means, with respect to any Person (the "parent") at any date, any other Person the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other Person (a) of which Equity Interests representing more than 50% of the equity or more than 50% of the ordinary voting power (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) or, in the case of a partnership, any general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

 

CREDIT AGREEMENT – Page 25

 

 

"Subsidiary" means any subsidiary of the Borrower.

 

"Successor Rate" shall mean any successor index rate determined pursuant to Section 3.03(b) from time to time.

 

"Supported QFC" has the meaning assigned to such term in Section 12.20.

 

"Swap Agreement" means any agreement with respect to any swap, forward, future, cap, floor, collar or derivative transaction or option or similar agreement, whether exchange traded, "over-the-counter" or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions (including any agreement, contract or transaction that constitutes a "swap" within the meaning of section 1a(47) of the Commodity Exchange Act); provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or its Subsidiaries shall be a Swap Agreement.

 

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

 

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

 

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

 

"Term SOFR" means, with respect to a Tranche Rate Loan bearing interest on the Tranche Rate for any Interest Period, the forward-looking SOFR rate administered by CME Group, Inc. (or other administrator selected by the Administrative Agent) and published on the applicable Bloomberg LP screen page (or such other commercially available source providing such quotations as may be selected by the Administrative Agent), fixed by the administrator thereof two Business Days prior to the commencement of the applicable Interest Period (provided, however, that if Term SOFR is not published for such Business Day, then Term SOFR shall be determined by reference to the immediately preceding Business Day on which such rate is published), rounded upwards, if necessary, to the next 1/100 of 1% and adjusted for reserves if Administrative Agent is required to maintain reserves with respect to the relevant Borrowings, all as determined by Administrative Agent in accordance with the Agreement and Administrative Agent's loan systems and procedures periodically in effect.

 

CREDIT AGREEMENT – Page 26

 

 

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

 

"Test Period" has the meaning set forth in Section 10.03(a)(ii).

 

"Total Debt" means, at any date, all Debt of the Borrower and the Consolidated Restricted Subsidiaries on a consolidated basis (provided that the amount of any such Debt for borrowed money shall be the face, principal amount of such Debt (even if such Debt is discounted on any financial statements of any Credit Party)), excluding (i) non-cash obligations under FAS 133 and (ii) accounts payable and other accrued liabilities (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business which are not greater than ninety (90) days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

 

"Tranche Rate" means, with respect to any Interest Period, the greater of (a) zero percent per annum (0.00%) (the "Floor") and (b) Term SOFR relating to quotations for 1 or 3 months, as selected by Borrower in its Borrowing Request, or as otherwise set pursuant to the terms of this Agreement, as applicable. Each determination by Administrative Agent of the Tranche Rate shall be conclusive and binding in the absence of manifest error.

 

"Tranche Rate Adjustment" means, (a) with respect to any Tranche Rate Loan bearing interest based on Daily Simple SOFR, a percentage per annum equal to 0.10%, and (b) with respect to the Tranche Rate, a percentage per annum equal to (i) 0.10%, if the Interest Period is one (1) month, or (ii) 0.25%, if the Interest Period is three (3) months.

 

"Tranche Rate Loan" means any Loan bearing interest at the rate specified in Section 3.02(b).

 

"Tranche Rate Replacement Date" has the meaning ascribed to it in Section 3.03(b)(i) of the Agreement.

 

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

 

"Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Alternate Base Rate, the Tranche Rate, or Daily Simple SOFR, as applicable.

 

"UCC" means the Uniform Commercial Code, as in effect from time to time, of the State of Texas or of any other state the laws of which are required as a result thereof to be applied in connection with the attachment, perfection or priority of, or remedies with respect to, Administrative Agent's or any Secured Party's Lien on any Mortgaged Properties.

 

CREDIT AGREEMENT – Page 27

 

 

"UK Financial Institution" means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

 

"UK Resolution Authority" means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

 

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

 

"USA Patriot Act" means the USA PATRIOT ACT (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

 

"U.S. Government Securities Business Day" means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.

 

"U.S. Person" shall mean any person that is a "United States person" as defined in Section 7701(a)(30) of the Code.

 

"U.S. Special Resolution Regimes" has the meaning assigned to such term in Section 12.20.

 

"U.S. Tax Compliance Certificate" has the meaning set forth in Section 5.03(f).

 

"Wholly-Owned Subsidiary" means any Restricted Subsidiary of which all of the outstanding Equity Interests (other than any directors' qualifying shares mandated by applicable law), on a fully-diluted basis, are owned by the Borrower or one or more of the Wholly-Owned Subsidiaries or are owned by the Borrower and one or more of the Wholly-Owned Subsidiaries.

 

"Withholding Agent" means any Credit Party or the Administrative Agent.

 

"Write-Down and Conversion Powers" means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

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

 

CREDIT AGREEMENT – Page 28

 

 

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

 

Section 1.05    Accounting Terms and Determinations; GAAP. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the financial statements first delivered pursuant to Section 8.01(a) except for changes in which Borrower's independent certified public accountants concur and which are disclosed to Administrative Agent on the next date on which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the Borrower and the Required Lenders shall otherwise agree in writing, no such change shall modify or affect the manner in which compliance with the covenants contained herein is computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods. Notwithstanding anything herein to the contrary, for the purposes of calculating any of the ratios tested under Section 9.01, and the components of each of such ratios, all Unrestricted Subsidiaries, and their subsidiaries (including their assets, liabilities, income, losses, cash flows, and the elements thereof) shall be excluded, except for any cash dividends or distributions actually paid by any Unrestricted Subsidiary or any of its subsidiaries to the Borrower or any Restricted Subsidiary, which shall be deemed to be income to the Borrower or such Restricted Subsidiary when actually received by it. Notwithstanding anything to the contrary contained in Section 1.05 or in the definition of "Capital Lease," any change in accounting for leases pursuant to GAAP resulting from the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases (Topic 842) ("FAS 842"), to the extent such adoption would require treating any lease (or similar arrangement conveying the right to use) as a capital lease where such lease (or similar arrangement) would not have been required to be so treated under GAAP as in effect on December 31, 2015, such lease shall not be considered a capital lease, and all calculations and deliverables under this Agreement or any other Loan Document shall be made or delivered, as applicable, in accordance therewith.

 

Section 1.06    Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction's laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.

 

CREDIT AGREEMENT – Page 29

 

 

ARTICLE II

THE CREDITS

 

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

 

Section 2.02    Loans and Borrowings.

 

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

 

(b)    Types of Loans. Subject to Section 3.03, each Borrowing shall be comprised entirely of ABR Loans or Tranche Rate Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Tranche Rate Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement and any such Affiliate shall comply with the obligations under Section 5.03(f) and (g).

 

(c)    Minimum Amounts; Limitation on Number of Borrowings. Each Borrowing of Tranche Rate Loans, such Borrowing shall be in an aggregate amount that is an integral multiple of $250,000 and not less than $500,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $200,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.08(e). Borrowings of more than one Type may be outstanding at the same time, provided that there shall not at any time be more than a total of seven Borrowings of Tranche Rate Loans outstanding. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

 

(d)    Notes. The Loans made by each Lender shall be evidenced by a single promissory note of the Borrower in substantially the form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the date of this Agreement, (ii) any Lender that becomes a party hereto in connection with an increase in the Aggregate Elected Commitments pursuant to Section 2.06(c), such Note shall be dated as of the effective date of such increase or (iii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, payable to such Lender in a principal amount equal to its Maximum Credit Amount as in effect on such date, and otherwise duly completed. In the event that any Lender's Maximum Credit Amount increases or decreases for any reason (whether pursuant to Section 2.06, Section 12.04(b) or otherwise), the Borrower shall deliver or cause to be delivered on the effective date of such increase or decrease, a new Note payable to such Lender in a principal amount equal to its Maximum Credit Amount after giving effect to such increase or decrease, and otherwise duly completed. The date, amount, Type, interest rate and, if applicable, Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note. Failure to make any such recordation shall not affect any Lender's or the Borrower's rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note.

 

CREDIT AGREEMENT – Page 30

 

 

Section 2.03    Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by submitting a Borrowing Request (a) in the case of a Borrowing of Tranche Rate Loans, not later than 12:00 p.m. noon, Cincinnati, Ohio time, three Business Days before the date of the proposed Borrowing (or with respect to the Borrowing on the Effective Date, such lesser period of time as is approved by the Administrative Agent) or (b) in the case of an ABR Borrowing, not later than 12:00 p.m. noon, Cincinnati, Ohio time, on the Business Day of the proposed Borrowing; provided that no such notice shall be required for any deemed request of an ABR Borrowing to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e). Each such Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, email or fax to the Administrative Agent of a written Borrowing Request in substantially the form of Exhibit B and signed by the Borrower. Each such Borrowing Request shall specify the following information in compliance with Section 2.02:

 

(i)    the aggregate amount of the requested Borrowing;

 

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

 

(iii)    whether such Borrowing is to be an ABR Borrowing or a Borrowing of Tranche Rate Loans;

 

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

 

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

 

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

 

(vii)    the Consolidated Cash Balance (without regard to the requested Borrowing) and the pro forma Consolidated Cash Balance (giving pro forma effect to the requested Borrowing and any use of proceeds thereof on or around the date of such requested Borrowing, but in any event not to exceed five Business Days after such date).

 

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Tranche Rate Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Each Borrowing Request shall constitute a representation by the Borrower (a) that the amount of the requested Borrowing shall not cause the total Revolving Credit Exposures to exceed the total Commitments (i.e., the least of (i) the Aggregate Maximum Credit Amounts, (ii) the then effective Borrowing Base and (iii) the then effective Aggregate Elected Commitments); and (b) that the Consolidated Cash Balance after giving pro forma effect to the requested Borrowing shall not exceed the Consolidated Cash Balance Threshold.

 

CREDIT AGREEMENT – Page 31

 

 

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

 

Section 2.04    Interest Elections.

 

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

 

(b)    Interest Election Requests. To make an election pursuant to this Section 2.04, the Borrower shall notify the Administrative Agent of such election by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery, email or fax to the Administrative Agent of a written Interest Election Request in substantially the form of Exhibit C and signed by the Borrower.

 

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

 

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

 

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

 

(iii)    whether the resulting Borrowing is to be an ABR Borrowing or a Borrowing of Tranche Rate Loans; and

 

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

 

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

 

CREDIT AGREEMENT – Page 32

 

 

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

 

(e)    Effect of Failure to Deliver Timely Interest Election Request and Events of Default and Borrowing Base Deficiencies on Interest Election. If the Borrower fails to deliver a timely Interest Election Request with respect to a Tranche Rate Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default or a Borrowing Base Deficiency has occurred and is continuing: (i) no outstanding Borrowing may be converted to or continued as a Tranche Rate Borrowing (and any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Tranche Rate Borrowing shall be ineffective) and (ii) unless repaid, each Borrowing of Tranche Rate Loans shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

 

Section 2.05    Funding of Borrowings.

 

(a)    Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m., Cincinnati, Ohio time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing Bank. Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or manner.

 

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

 

Section 2.06    Termination and Reduction of Aggregate Maximum Credit Amounts.

 

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

 

CREDIT AGREEMENT – Page 33

 

 

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

 

(i)    The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum Credit Amounts; provided that (A) each reduction of the Aggregate Maximum Credit Amounts shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000, (B) the Borrower shall not terminate or reduce the Aggregate Maximum Credit Amounts if, (1) after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Revolving Credit Exposures would exceed the total Commitments or (2) the Aggregate Maximum Credit Amount would be less than $50,000,000 (unless, with respect to this clause (2), the Aggregate Maximum Credit Amounts are reduced to $0) and (C) upon any reduction of the Aggregate Maximum Credit Amount that would otherwise result in the Aggregate Maximum Credit Amounts being less than the Aggregate Elected Commitments, the Aggregate Elected Commitments shall be automatically reduced (ratably among the Lenders in accordance with each Lender's Applicable Percentage) so that they equal the Aggregate Maximum Credit Amounts as so reduced.

 

(ii)    The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Aggregate Maximum Credit Amounts under Section 2.03(b)(i) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided that a notice of termination of the Aggregate Maximum Credit Amounts delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or the consummation of a transaction, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Aggregate Maximum Credit Amounts shall be permanent and may not be reinstated. Each reduction of the Aggregate Maximum Credit Amounts shall be made ratably among the Lenders in accordance with each Lender's Applicable Percentage.

 

(c)    Reduction/Termination of Aggregate Elected Commitments; Additional Lenders; Increase in Aggregate Elected Commitments.

 

(i)    The Borrower may from time to time by written notice to the Administrative Agent reduce or terminate the Aggregate Elected Commitments; provided that (A) each reduction of the Aggregate Elected Commitments shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000 (other than in connection with a Scheduled Redetermination or Interim Redetermination) and (B) such reduction or termination shall not become effective if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(c)(i), the total Revolving Credit Exposures would exceed the total Commitments. The Borrower shall notify the Administrative Agent of any election to reduce or terminate the Aggregate Elected Commitments under this Section 2.06(c)(i) at least three Business Days prior to the effective date of such reduction or termination, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof; provided that a notice of termination of the Aggregate Elected Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Each notice delivered by the Borrower pursuant to this Section 2.06(c)(i) shall be irrevocable. Each reduction of the Aggregate Elected Commitments shall occur on the effective date of such reduction specified in such written notice and shall be made ratably among the Lenders in accordance with each Lender's Applicable Percentage. Any termination or reduction of the Aggregate Elected Commitments shall be permanent and may not be reinstated, except pursuant to Section 2.06(c)(ii).

 

CREDIT AGREEMENT – Page 34

 

 

(ii)    (A) Subject to the conditions set forth in Section 2.06(c)(ii)(B), the Borrower may, at any time and from time to time request an increase to the Aggregate Elected Commitments up to an amount not to exceed the then effective Borrowing Base by providing written notice of such requested increase to the Administrative Agent (an "Increase Notice"). Each such Increase Notice shall specify (x) the proposed effective date of the increase (the "Increase Effective Date"), which date shall be no earlier than ten (10) Business Days after receipt by the Administrative Agent of such Increase Notice and (y) the amount of such requested increase to the Aggregate Elected Commitments.

 

(B)    Any increase in the Aggregate Elected Commitments shall be subject to the following additional conditions:

 

(1)    such increase shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $500,000 (or such lesser amount up to the Borrowing Base), unless in each case the Administrative Agent otherwise consents to a lesser amount;

 

(2)    both immediately before and immediately after giving effect to such increase and any Borrowing made on the date of such increase, no Default, Event of Default or Borrowing Base Deficiency exists or would exist;

 

(3)    the Borrower shall have paid to any Lender increasing its commitment pursuant to a Lender Certificate all fees and other amounts due and payable on or prior to the effective date of such increase (including in connection with such increase);

 

(4)    immediately after giving effect to such increase, the Aggregate Elected Commitments do not exceed the Borrowing Base then in effect;

 

(5)    no Lender shall be obligated to provide any portion of such increase in the Aggregate Elected Commitments (it being understood that any Lender's decision to agree to participate in such increase shall be made in its sole and absolute discretion and only with such Lender's prior written consent);

 

(6)    the Borrower may seek commitments in respect of such increase, in its sole discretion, from either existing Lenders (each of which shall be entitled to agree or decline to participate in its sole discretion) or from one or more additional banks or financial institutions with the prior written consent of each of the Administrative Agent and the Issuing Banks (each such consent not to be unreasonably withheld, conditioned or delayed) ("Additional Lenders"); provided, however, in no case shall an Additional Lender be the Borrower or any of the Borrower's Subsidiaries or Affiliates, any Defaulting Lender or any of its Subsidiaries, a natural person, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described herein;

 

CREDIT AGREEMENT – Page 35

 

 

(7)    each existing Lender or Additional Lender that agrees to provide any portion of such increase shall evidence its agreement by executing and delivering to the Borrower and the Administrative Agent a certificate substantially in the form of Exhibit J hereto (a "Lender Certificate"); and

 

(8)    the Administrative Agent shall have received Lender Certificates with commitments in an aggregate amount equal to the requested increase to the Aggregate Elected Commitments as specified in the Increase Notice (or such lesser amount as the Borrower may elect in its sole discretion).

 

(C)    Subject to the satisfaction of the conditions specified in Section 2.06(c)(ii)(B), the requested increase to the Aggregate Elected Commitments shall become effective on the Increase Effective Date, and upon such effectiveness: (1) the Aggregate Elected Commitments automatically without further action by the Borrower, the Administrative Agent, any Issuing Bank or any Lender shall be increased by an amount equal to the aggregate amount indicated in the executed Lender Certificates; and (2) the Aggregate Maximum Credit Amounts of the Lenders will be reallocated so that after giving effect to the increase to the Aggregate Elected Commitments, each Lender will hold a Maximum Credit Amount equal to such Lender's portion of the Aggregate Elected Commitments. The Administrative Agent, the Lenders and the Borrower hereby consent and agree to such reallocation. On the Increase Effective Date, the Administrative Agent shall distribute to the Borrower and the Lenders (including each Additional Lender) a revised Annex I to this Agreement, which shall set forth the Maximum Credit Amount and the Commitment of each Lender after giving effect to such reallocation, and such revised Annex I shall amend and restate and supersede and replace Annex I to this Agreement as in effect immediately prior to the Increase Effective Date. With respect to such reallocation, each Lender shall be deemed to have acquired the Maximum Credit Amount and Commitment allocated to it from each of the other Lenders pursuant to the terms of the Assignment and Assumption, as if the Lenders had executed an Assignment Agreement with respect to such allocation. On the Increase Effective Date, the Administrative Agent shall take the actions specified in Section 12.04(b)(v), including recording the assignments described herein in the Register, and such assignments shall be effective for purposes of this Agreement. Notwithstanding Section 12.04(b)(ii)(C), no Person shall be required to pay a processing and recordation fee of $4,000 to the Administrative Agent in connection with such assignments. If, on the Increase Effective Date, any Tranche Rate Loans have been funded, then the Borrower shall be obligated to pay any breakage fees or costs that are payable pursuant to Section 5.02 in connection with the reallocation of such outstanding Tranche Rate Loans to effectuate the provisions of this paragraph.

 

CREDIT AGREEMENT – Page 36

 

 

(iii)    Upon any redetermination or other adjustment in the Borrowing Base pursuant to this Agreement that would otherwise result in the Borrowing Base becoming less than the Aggregate Elected Commitments, the Aggregate Elected Commitments shall be automatically reduced (ratably among the Lenders in accordance with each Lender's Applicable Percentage) so that they equal such redetermined Borrowing Base.

 

(iv)    Notwithstanding anything herein to the contrary, contemporaneously with any increase in the Borrowing Base pursuant to this Agreement, if (A) the Borrower elects to increase the Aggregate Elected Commitments ratably among the Lenders and (B) each Lender has consented to such increase in the Aggregate Elected Commitments, then the Aggregate Elected Commitments shall be increased (ratably among the Lenders in accordance with each Lender's Applicable Percentage) by the amount requested by the Borrower (subject to the conditions set forth in Section 2.06(c)(ii)(B)) without the requirement that any Lender deliver a Lender Certificate.

 

Section 2.07    Borrowing Base.

 

(a)    Initial Borrowing Base. For the period from and including the Effective Date to but excluding the first Redetermination Date, the amount of the Borrowing Base shall be $40,000,000. Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments prior to the first Redetermination Date from time to time pursuant to Section 2.07(e), Section 2.07(f) or Section 8.13(c).

 

(b)    Scheduled and Interim Redeterminations. The Borrowing Base shall be redetermined semi-annually in accordance with this Section 2.07 (a "Scheduled Redetermination"), and, subject to Section 2.07(d), such redetermined Borrowing Base shall become effective and applicable to the Borrower, the Agents, the Issuing Bank and the Lenders on April 1st and October 1st of each year, commencing on April 1, 2021 (or, in each case, such date promptly thereafter as reasonably practicable). In addition, the Borrower may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at the direction of the Required Lenders, by notifying the Borrower thereof, one time between Scheduled Redeterminations, each elect to cause the Borrowing Base to be redetermined between Scheduled Redeterminations (an "Interim Redetermination") in accordance with this Section 2.07.

 

(c)    Scheduled and Interim Redetermination Procedure.

 

(i)    Each Scheduled Redetermination and each Interim Redetermination shall be effectuated as follows: upon receipt by the Administrative Agent of (A) the Reserve Report and the certificate required to be delivered by the Borrower to the Administrative Agent, in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an Interim Redetermination, pursuant to Section 8.12(b) and (c), and (A) such other reports, data and supplemental information, including, without limitation, the information provided pursuant to Section 8.12(c), as may, from time to time, be reasonably requested by the Administrative Agent (the Reserve Report, such certificate and such other reports, data and supplemental information being the "Engineering Reports"), the Administrative Agent shall evaluate the information contained in the Engineering Reports and shall, in its sole discretion, propose a new Borrowing Base (the "Proposed Borrowing Base") based upon such information and such other information (including, without limitation, the status of title information with respect to the Proved Oil and Gas Properties as described in the Engineering Reports and the existence of any other Debt, the Credit Parties' other assets, liabilities, fixed charges, cash flow, business, properties, prospects, management and ownership, hedged and unhedged exposure of the Credit Parties to price, price and production scenarios, interest rate and operating cost changes) as the Administrative Agent deems appropriate in its sole discretion and consistent with its normal oil and gas lending criteria as it exists at the particular time. In no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amounts;

 

CREDIT AGREEMENT – Page 37

 

 

(ii)    The Administrative Agent shall notify the Borrower and the Lenders of the Proposed Borrowing Base (the "Proposed Borrowing Base Notice") after the Administrative Agent has received complete Engineering Reports from the Borrower and has had a reasonable opportunity to determine the Proposed Borrowing Base in accordance with Section 2.07(c)(i); and

 

(iii)    Any Proposed Borrowing Base that would increase the Borrowing Base then in effect must be approved by all of the Lenders as provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect must be approved or be deemed to have been approved by the Required Lenders as provided in this Section 2.07(c)(iii). Upon receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days to agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base by proposing an alternate Borrowing Base. If, in the case of any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, at the end of such fifteen (15) days, any Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be an approval of the Proposed Borrowing Base. If, in the case of any Proposed Borrowing Base that would increase the Borrowing Base then in effect, at the end of such fifteen (15) days, any Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be a disapproval of the Proposed Borrowing Base. If, at or prior to the end of such 15-day period, all of the Lenders, in the case of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, or the Required Lenders, in the case of a Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect, have approved or, in the case of a decrease or reaffirmation, deemed to have approved, as aforesaid, then the Proposed Borrowing Base shall become the new Borrowing Base, effective on the date specified in Section 2.07(d). If, however, at the end of such 15-day period, all of the Lenders or the Required Lenders, as applicable, have not approved or, in the case of a decrease or reaffirmation, deemed to have approved, as aforesaid, then the Administrative Agent shall poll the Lenders to ascertain the highest Borrowing Base then acceptable to (A) in the case of a decrease or reaffirmation, a number of Lenders sufficient to constitute the Required Lenders and (B) in the case of an increase, all of the Lenders, and such amount shall become the new Borrowing Base, effective on the date specified in Section 2.07(d).

 

(d)    Effectiveness of a Redetermined Borrowing Base. After a redetermined Borrowing Base is approved or is deemed to have been approved by all of the Lenders or the Required Lenders, as applicable, pursuant to Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower and the Lenders of the amount of the redetermined Borrowing Base (the "New Borrowing Base Notice"), and such amount shall become the new Borrowing Base, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders:

 

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

 

CREDIT AGREEMENT – Page 38

 

 

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

 

Such amount shall then become the Borrowing Base until the next Scheduled Redetermination Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section 2.07(e), Section 2.07(f) or Section 8.13(c), whichever occurs first. Notwithstanding the foregoing, no Scheduled Redetermination or Interim Redetermination shall become effective until the New Borrowing Base Notice related thereto is received by the Borrower.

 

(e)    Automatic Reduction of the Borrowing Base on Borrowing Base Asset Dispositions and Borrowing Base Swap Liquidations. To the extent that, during any period between two successive Scheduled Redetermination Dates, Borrowing Base Asset Dispositions and/or Borrowing Base Swap Liquidations occurs with an aggregate Borrowing Base Value in excess of five percent (5%) of the Borrowing Base, as established on the most recent of such Scheduled Redetermination Dates, then, unless the Required Lenders make an election to the contrary, the Borrowing Base will be reduced, effective immediately upon such Borrowing Base Asset Disposition and/or Borrowing Base Swap Liquidation by the aggregate Borrowing Base Value of the Oil and Gas Properties and/or Swap Agreements subject of such Borrowing Base Asset Dispositions and/or Borrowing Base Swap Liquidations for such period and the Borrower shall make any mandatory prepayments required under Section 3.04(c)(iii) as a result of such reduction. Upon any such reduction in the Borrowing Base, the Administrative Agent shall promptly deliver notice thereof to the Borrower and the Lenders.

 

(f)    Automatic Reduction of Borrowing Base upon Issuance of Specified Additional Debt.

 

(i)    In addition to the other Scheduled Redeterminations and Interim Redeterminations of and adjustments to the Borrowing Base provided for herein, and notwithstanding anything to the contrary set forth herein, upon the issuance or incurrence of any Specified Additional Debt (other than the 2024 Senior Notes), the Borrowing Base shall be automatically reduced by an amount equal to 25% of the aggregate stated principal amount of such Specified Additional Debt (without regard to any original issue discount issued at such time). Such decrease in the Borrowing Base shall occur automatically upon the incurrence of such Specified Additional Debt (other than the 2024 Senior Notes) on the date of incurrence, without any vote of the Lenders or action by the Administrative Agent; provided, however, that for the avoidance of doubt, if such Specified Additional Debt is being incurred in order to refinance outstanding Specified Additional Debt (including, for the avoidance of doubt, the 2024 Senior Notes), then the foregoing automatic reduction shall only apply to the portion of the newly issued or incurred Specified Additional Debt that is in excess of the sum of (i) the principal amount of the Specified Additional Debt so refinanced and (ii) amounts to fund accrued, but unpaid interest and customary out-of-pocket fees and expenses thereon.

 

CREDIT AGREEMENT – Page 39

 

 

(ii)    In addition to the other Scheduled Redeterminations and Interim Redeterminations of and adjustments to the Borrowing Base provided for herein, and notwithstanding anything to the contrary set forth herein, upon receipt by the Borrower of the net proceeds from the issuance of the 2024 Senior Notes from the 2024 Senior Notes Escrow Account, the Borrowing Base shall be automatically reduced by an amount equal to 25% of the aggregate stated principal amount of the 2024 Senior Notes (without regard to any original issue discount issued at such time). Such decrease in the Borrowing Base shall occur automatically upon the receipt of the net proceeds of the 2024 Senior Notes from the 2024 Senior Notes Escrow Account by the Borrower, without any vote of the Lenders or action by the Administrative Agent. Notwithstanding anything to the contrary contained herein and for the avoidance of doubt, if the Borrower is required to use the proceeds of the 2024 Senior Notes to redeem the 2024 Senior Notes pursuant to a Special Mandatory Redemption (as defined in the 2022 Indenture), the Borrowing Base shall not be reduced in connection with the issuance of the 2024 Senior Notes.

 

(iii)    The Borrowing Base so reduced shall become the new Borrowing Base immediately upon the date of such issuance or incurrence, effective and applicable to the Borrower, the Administrative Agent, the Issuing Bank and the Lenders on such date until the next redetermination or other adjustment of the Borrowing Base pursuant to this Agreement. Upon any such reduction in the Borrowing Base, the Administrative Agent shall promptly deliver a New Borrowing Base Notice to the Borrower and the Lenders, and the Borrower shall make any mandatory prepayments required under Section 3.04(c)(iii) as a result of such reduction. Any redetermination of the Borrowing Base pursuant to this Section 2.07(f) shall not be considered an Interim Redetermination within the meaning of Section 2.07(b).

 

Section 2.08    Letters of Credit.

 

(a)    General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of dollar denominated Letters of Credit for its own account or for the account of any of its Restricted Subsidiaries (and not for any Affiliate that is not a Restricted Subsidiary), in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Availability Period in an aggregate amount not to exceed the LC Commitment; provided that the Borrower may not request the issuance, amendment, renewal or extension of Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time or would exist as a result thereof. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. Notwithstanding anything herein to the contrary, the Issuing Bank shall have no obligation hereunder to issue, and shall not issue, any Letter of Credit (i) the proceeds of which would be made available to any Person (A) to fund any activity or business of or with any Sanctioned Person, or in any country or territory that, at the time of such funding, is the subject of any Sanctions, in a manner that would violate Sanctions or (B) in any manner that would result in a violation of any Sanctions by any party to this Agreement, (ii) if any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Governmental Requirement relating to the Issuing Bank or any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which the Issuing Bank in good faith deems material to it or (iii) if the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank applicable to letters of credit generally under similar circumstances for similarly situated borrowers; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed not to be in effect on the Effective Date for purposes of clause (ii) above, regardless of the date enacted, adopted, issued or implemented.

 

CREDIT AGREEMENT – Page 40

 

 

(b)    Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or fax (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (not less than five (5) Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice:

 

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

 

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

 

(iii)    specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.08(c));

 

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

 

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

 

(vi)    specifying the amount of the then effective Borrowing Base and the then effective Aggregate Elected Commitments and whether a Borrowing Base Deficiency exists at such time, the current total Revolving Credit Exposures (without regard to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma total Revolving Credit Exposures (giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit).

 

Each notice shall constitute a representation and warranty by the Borrower that after giving effect to the requested issuance, amendment, renewal or extension, as applicable, (A) the LC Exposure shall not exceed the LC Commitment and (B) the total Revolving Credit Exposures shall not exceed the total Commitments (i.e., the least of (i) the Aggregate Maximum Credit Amounts, (ii) the then effective Borrowing Base and (iii) the then effective Aggregate Elected Commitments). No letter of credit issued by the Issuing Bank (if the Issuing Bank is not the Administrative Agent) shall be deemed to be a "Letter of Credit" issued under this Agreement unless the Issuing Bank has requested and received written confirmation from the Administrative Agent that the representations by Borrower contained in the foregoing clauses (A) and (B) are true and correct.

 

CREDIT AGREEMENT – Page 41

 

 

If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit; provided that, in the event of any conflict between such application or any Letter of Credit Agreement and the terms of this Agreement, the terms of this Agreement shall control.

 

(c)    Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) unless otherwise consented to by the Issuing Bank, the date that is eighteen months after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date. 

 

(d)    Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage (which, for this purpose, if any Defaulting Lender then exists, shall be calculated as such Lender's percentage of the aggregate LC Exposure after giving effect to Section 2.09(a)(iv)) of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.08(e), or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.08(d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default, the existence of a Borrowing Base Deficiency or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

 

(e)    Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 2:00 p.m., Cincinnati, Ohio time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., Cincinnati, Ohio time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, Cincinnati, Ohio time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 11:00 a.m., Cincinnati, Ohio time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, unless the Borrower has notified the Administrative Agent that it intends to reimburse, and does reimburse by the date and time required above, all or part of such LC Disbursement without using Loan proceeds, the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have requested, and the Borrower does hereby request under such circumstances, that such payment be financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender's Applicable Percentage (which, for this purpose, if any Defaulting Lender then exists, shall be calculated as such Lender's percentage of the aggregate LC Exposure after giving effect to Section 2.09(a)(iv)) thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage (which, for this purpose, if any Defaulting Lender then exists, shall be calculated as such Lender's percentage of the aggregate LC Exposure after giving effect to Section 2.09(a)(iv)) of the payment then due from the Borrower, in the same manner as provided in Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

 

CREDIT AGREEMENT – Page 42

 

 

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

 

CREDIT AGREEMENT – Page 43

 

 

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

 

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

 

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

 

CREDIT AGREEMENT – Page 44

 

 

(j)    Cash Collateralization. If (i) any Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this Section 2.08(j) or (ii) the Borrower is required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 103% of, (A) in the case of an Event of Default, the LC Exposure and (B) in the case of a payment required by Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower or any Restricted Subsidiary described in Section 10.01(h) or Section 10.01(i). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor. The Borrower's obligation to deposit amounts pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower or any of its Subsidiaries may now or hereafter have against any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such deposit shall be held as collateral securing the payment and performance of the Borrower's and the Guarantor's obligations under this Agreement and the other Loan Documents. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower and the Guarantors under this Agreement or the other Loan Documents. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, and the Borrower is not otherwise required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

 

(k)    Defaulting Lenders. If, at any time, a Defaulting Lender exists hereunder, then, within one (1) Business Day following the written request of the Issuing Bank, the Borrower shall cash collateralize the Fronting Exposure of the Issuing Bank with respect to such Defaulting Lender (determined after giving effect to Section 2.09(a)(iv) and any cash collateral provided by such Defaulting Lender) with respect to the Defaulting Lender in an amount equal to the lesser of (x) the amount of such Fronting Exposure and (y) an amount otherwise agreeable to the Issuing Bank and the Administrative Agent in their sole discretion.

 

(i)    Grant of Security Interest. The Borrower and, to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative Agent, for the benefit of the Issuing Bank, and agrees to maintain, a first priority security interest in all such cash collateral as security for (A) in the case of the Defaulting Lender, the Defaulting Lender's obligation to fund participations in respect of LC Exposure, to be applied pursuant to clause (ii) below and (B) in the case of the Borrower, its obligations hereunder to reimburse the LC Exposure for which such Defaulting Lender is obligated as a participant. Borrower or such Defaulting Lender, as applicable, shall execute any documents and agreements, including the Administrative Agent's standard form assignment of deposit accounts, that the Administrative Agent reasonably requests in connection therewith to establish such cash collateral account and to grant the Administrative Agent, for the benefit of the Issuing Bank, a first priority security interest in such account and the funds therein. If at any time the Administrative Agent determines that cash collateral is subject to any right or claim of any Person other than the Administrative Agent and the Issuing Bank as herein provided, or that the total amount of such cash collateral is less than the amount required above, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional cash collateral in an amount sufficient to eliminate such deficiency (after giving effect to any cash collateral provided by the Defaulting Lender).

 

CREDIT AGREEMENT – Page 45

 

 

(ii)    Application. Notwithstanding anything to the contrary contained in this Agreement, cash collateral provided by a Defaulting Lender under this Section 2.08(k) or Section 2.09 in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lender's obligation to fund participations in respect of LC Exposure (including, as to cash collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the cash collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

 

(iii)    Termination of Requirement. Cash collateral (or the appropriate portion thereof) provided to reduce the Issuing Bank's Fronting Exposure shall no longer be required to be held as cash collateral pursuant to this Section 2.08(k) following (A) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender), or (B) the determination by the Administrative Agent and the Issuing Bank that there exists excess cash collateral; provided that, subject to Section 2.09, (x) the Issuing Bank may determine in its sole discretion that cash collateral provided by a Defaulting Lender shall be held to support future anticipated Fronting Exposure or other obligations of such Defaulting Lender and (y) the Borrower and the Issuing Bank may agree that cash collateral provided by the Borrower shall be held to support future anticipated Fronting Exposure or other obligations; and provided further that to the extent that such cash collateral was provided by the Borrower, such cash collateral shall remain subject to any other security interest granted pursuant to the Loan Documents.

 

(l)    LC Exposure Determination. For all purposes of this Agreement, the amount of a Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at the time of determination.

 

Section 2.09    Defaulting Lenders.

 

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

 

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

 

CREDIT AGREEMENT – Page 46

 

 

(ii)    Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article X or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 12.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Bank hereunder; third, to cash collateralize the Issuing Bank's Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.08(k); fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender's potential future funding obligations with respect to Loans under this Agreement and (y) cash collateralize the Issuing Bank's future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.08(k); sixth, to the payment of any amounts owing to the Lenders or the Issuing Bank as a result of any judgment of a court of competent jurisdiction obtained by any Lender or the Issuing Bank against such Defaulting Lender as a result of such Defaulting Lender's breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender's breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or LC Exposure in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 6.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and LC Exposure owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or LC Exposure owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in LC Exposure are held by the Lenders pro rata in accordance with the Commitments without giving effect to Section 2.09(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section 2.09(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)    Certain Fees.

 

(A)    No Defaulting Lender shall be entitled to receive any commitment fee pursuant to Section 3.05(a) for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

(B)    Each Defaulting Lender shall be entitled to receive fees pursuant to Section 3.05(b) for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Applicable Percentage of the stated amount of Letters of Credit for which it has provided cash collateral pursuant to Section 2.08(k).

 

(C)    With respect to any fee pursuant to Section 3.05(b) not required to be paid to any Defaulting Lender pursuant to sub-clause (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender's participation in Letter of Credit obligations that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the Issuing Bank the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the Issuing Bank's Fronting Exposure to such Defaulting Lender and (z) not be required to pay the remaining amount of any such fee.

 

CREDIT AGREEMENT – Page 47

 

 

(iv)    Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lender's participation in LC Exposure shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lender's Maximum Credit Amount) but only to the extent that such reallocation does not cause the Revolving Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender's Commitment then in effect. Subject to Section 12.18, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender's increased exposure following such reallocation.

 

(v)    Cash Collateral. If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, cash collateralize the Issuing Bank's Fronting Exposure in accordance with the procedures set forth in Section 2.08(k).

 

(b)    Defaulting Lender Cure. If the Borrower, the Administrative Agent and the Issuing Bank agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit to be held pro rata by the Lenders in accordance with the Commitments (without giving effect to Section 2.09(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender's having been a Defaulting Lender.

 

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

 

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

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

 

Section 3.02    Interest.

 

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

 

CREDIT AGREEMENT – Page 48

 

 

(b)    Tranche Rate Loans. The Loans comprising each Borrowing of Tranche Rate or Daily Simple SOFR shall bear interest at the Tranche Rate for the Interest Period or Daily Simple SOFR, as applicable, in effect for such Borrowing plus the Applicable Margin plus the Tranche Rate Adjustment, but in no event to exceed the Highest Lawful Rate.

 

(c)    Post-Default and Post-Borrowing Base Deficiency Rate. Notwithstanding the foregoing, (i) if any Event of Default of the type described in Section 10.01(a), Section 10.01(b), Section 10.01(h), Section 10.01(i) or Section 10.01(j) occurs and is continuing, then all outstanding principal, fees and other obligations under any Loan Document shall automatically bear interest, after as well as before judgment, at a rate per annum of two percent (2%) plus the rate applicable to ABR Loans as provided in Section 3.02(a) (including the Applicable Margin), but in no event to exceed the Highest Lawful Rate, and shall be payable on demand by the Administrative Agent and (ii) if any Borrowing Base Deficiency or Event of Default (other than an Event of Default described in Section 10.01(a), Section 10.01(b), Section 10.01(h), Section 10.01(i) or Section 10.01(j)) occurs and is continuing, then at the election of the Required Lenders (or the Administrative Agent at the direction of Required Lenders), all outstanding principal, fees and other obligations under any Loan Document shall bear interest, after as well as before judgment, at a rate per annum of two percent (2%) plus the rate then applicable to the Loans outstanding at such time (including the Applicable Margin), but in no event to exceed the Highest Lawful Rate, and shall be payable on demand by the Administrative Agent.

 

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

 

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

 

Section 3.03    Tranche Rate Provisions .

 

(a)    Temporary Replacement of the Tranche Rate and Tenor Replacement. In the event, prior to commencement of any Interest Period relating to a Tranche Rate Loan, Administrative Agent shall determine or be notified by Majority Lenders that no Successor Rate has been determined in accordance with Section 3.03(b) and either: (i) the Tranche Rate is unavailable, unrepresentative, or unreliable, (ii) the Tranche Rate as determined by Administrative Agent will not adequately and fairly reflect the cost to Lenders of funding their Tranche Rate Loans for such Interest Period, or (iii) the making or funding of Tranche Rate Loans has become impracticable; then, in any such case, Administrative Agent shall promptly provide notice of such determination to Borrower and Lenders (which shall be conclusive and binding on all parties hereto absent manifest error), and (A) any request for a Tranche Rate Loan or for a conversion to or continuation of a Tranche Rate Loan shall be automatically withdrawn and shall be deemed a request for an ABR Loan, (B) each Tranche Rate Loan will automatically, on the last day of the then current Interest Period relating thereto, become an ABR Loan, and (C) the obligations of Lenders to make Tranche Rate Loans shall be suspended until Administrative Agent or Majority Lenders determine that the circumstances giving rise to such suspension no longer exist, in which event Administrative Agent shall so notify Borrower and Lenders. If a Successor Rate has been determined in accordance with Section 3.03(b) and Administrative Agent determines, or Majority Lenders provide notice, that any of the circumstances described in clauses (i)-(iii) of this paragraph has occurred, then clauses (A)-(C) of this paragraph shall apply as if each reference to Tranche Rate therein were a reference to the Successor Rate.

 

CREDIT AGREEMENT – Page 49

 

 

At any time (including in connection with the implementation of a Successor Rate), the Administrative Agent may remove any tenor of a Tranche Rate that is unavailable, non-representative, or not in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, in the Administrative Agent's sole discretion, for Tranche Rate settings; provided however that the Administrative Agent may reinstate such previously removed tenor for Tranche Rate settings, if the Administrative Agent determines in its sole discretion that such tenor has become available and representative again.

 

(b)    Tranche Rate Replacement.

 

(i)    Notwithstanding anything to the contrary herein or in any other Loan Document (and any Swap Agreement shall be deemed not to be a "Loan Document" for purposes of this Section 3.03(b)), but without limiting Section 3.03(a) above, if the Administrative Agent determines (which determination shall be conclusive and binding on all parties hereto absent manifest error) that any of the circumstances described in Section 3.03(a)(i)-(iii) has occurred and is unlikely to be temporary or the administrator of the Tranche Rate or a Governmental Authority having or purporting to have jurisdiction over the Administrative Agent or such administrator has made a public statement identifying a specific date (the "Scheduled Unavailability Date") after which the Tranche Rate will no longer be representative or made available or used for determining the interest rate of loans or otherwise cease or will no longer be in compliance or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Benchmarks, and there is no successor administrator satisfactory to the Administrative Agent, then on a date and time determined by the Administrative Agent (the "Tranche Rate Replacement Date"), but no later than the Scheduled Unavailability Date, the Tranche Rate will be replaced hereunder and under any other Loan Document with Daily Simple SOFR.

 

(ii)    If the Successor Rate is based on Daily Simple SOFR, interest shall be due and payable on a quarterly basis (on the last day of each March, June, September and December).

 

(iii)    Notwithstanding anything to the contrary herein, if the Administrative Agent determines that Daily Simple SOFR is not available and administratively feasible prior to the Tranche Rate Replacement Date, or if any of the circumstances described in the initial paragraph of this Section 3.03(b) with regard to the Tranche Rate has occurred with respect to a Successor Rate then in effect, the Administrative Agent and Borrower may amend this Agreement solely for the purpose of replacing the Tranche Rate or any then current Successor Rate in accordance with this Section 3.03(b) with another alternative benchmark rate and a Spread Adjustment, giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated syndicated credit facilities and any recommendations of a relevant Governmental Authority, and which Spread Adjustment or method for calculating such Spread Adjustment shall be published on an information service as selected by the Administrative Agent from time to time in its reasonable discretion. Any such alternative benchmark rate and Spread Adjustment shall constitute a Successor Rate hereunder. Any such amendment shall become effective on the date set forth in a written notice provided by the Administrative Agent to the Borrower and Lenders (such date to be five or more Business Days after the date of such notice) unless the Majority Lenders have provided written notice of their objection to such amendment on or before the fifth Business Day after the Administrative Agent provides such notice.

 

CREDIT AGREEMENT – Page 50

 

 

(iv)    The Administrative Agent will promptly (in one or more notices) notify the Borrower and Lenders of the implementation of any Successor Rate. Any Successor Rate shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for the Administrative Agent, such Successor Rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.

 

(v)    In connection with the implementation and administration of a Successor Rate (including, without limitation, pursuant to Section 3.03(b)(viii) below), the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement; provided that the Administrative Agent shall provide notice of such Conforming Changes to the Borrower and Lenders reasonably promptly after such amendment becomes effective.

 

(vi)    Notwithstanding anything to the contrary herein, if the Successor Rate would be less than the Floor, the Successor Rate will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents. Further, if the interest rate to be replaced is rounded upwards to the next 1/100 of 1% under the terms of this Agreement or any Loan Document, the Successor Rate shall also be rounded up to the next 1/100 of 1%; provided further that this provision governing rounding shall not apply if the Successor Rate is Daily Simple SOFR.

 

(vii)    The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission, or any other matter related to the Tranche Rate or any Successor Rate, including the selection of such rate, any related Spread Adjustment, or any Conforming Changes, or whether the composition or characteristics of any Successor Rate and Spread Adjustment or Conforming Changes will be similar to, or produce the same value or economic equivalence of, the initial Tranche Rate.

 

(c)    Tranche Rate Conforming Changes. In connection with the use or administration of the Tranche Rate, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of the Tranche Rate.

 

CREDIT AGREEMENT – Page 51

 

 

Section 3.04    Prepayments.

 

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

 

(b)    Notice and Terms of Optional Prepayment. The Borrower shall notify the Administrative Agent by telephone (confirmed by fax or email) of any prepayment hereunder (i) in the case of prepayment of a Borrowing of Tranche Rate Loans, not later than 12:00 noon, Cincinnati, Ohio time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, Cincinnati, Ohio time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date (which shall be a Business Day) and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.06(b), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06(b). Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02.

 

(c)    Mandatory Prepayments.

 

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

 

(ii)    Upon any Scheduled Redetermination or Interim Redetermination or upon any adjustment to the Borrowing Base pursuant to Section 8.13(c), if the total Revolving Credit Exposures exceed the redetermined or adjusted Borrowing Base, then, after receiving notice from the Administrative Agent by means of (x) a New Borrowing Base Notice or (y) written notice of adjustment pursuant to Section 8.13(c), in each case, of such Borrowing Base Deficiency (such date of receipt of notice, the "Deficiency Notification Date"), the Borrower shall, within ten (10) Business Days of the Deficiency Notification Date, deliver an irrevocable written notice to the Administrative Agent indicating the Borrower's election to take one of the following actions:

 

(A)    within thirty (30) days of the date such election is made, prepaying the Borrowings, and if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, Cash Collateralizing such excess as provided in Section 2.08(j);

 

(B)    within thirty (30) days of the date such election is made (or such longer period as may be acceptable to the Administrative Agent), mortgaging additional Proved Oil and Gas Properties not evaluated in the most recently delivered Reserve Report with value and quality satisfactory to the Administrative Agent and the Required Lenders in their sole discretion;

 

CREDIT AGREEMENT – Page 52

 

 

(C)    within thirty (30) days of the date such election is made, electing to make (and thereafter paying in accordance with such election) six equal monthly payments that collectively prepay the Borrowings until such excess is reduced to zero (and if any excess remains after prepaying all of the Borrowings as a result of any LC Exposure, Cash Collateralize such excess as provided in Section 2.08(j)), with the first such payment being due and payable within such thirty days and each subsequent payment being due and payable on the same day in each of the subsequent calendar months; provided that all payments required to be made pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination Date; or

 

(D)    (1) combine the options provided in clauses (A), (B) and (C) above and specify (in the written notice delivered to the Administrative Agent electing such option) the amount to be prepaid pursuant to clauses (A) and/or (C) and the amount to be provided as additional Mortgaged Property pursuant to clause (B), and (2) make such payments, and deliver such additional Mortgaged Property, within the time periods required under clauses (A), (B) and (C) above, as applicable,

 

provided that, notwithstanding the options set forth above, in all cases, the Borrowing Base Deficiency must be eliminated on or prior to the Termination Date. If, because of LC Exposure, a Borrowing Base Deficiency remains after prepaying all of the Loans, the Borrower shall Cash Collateralize such remaining Borrowing Base Deficiency as provided in Section 2.08(j). In the event the Borrower fails to provide written notice to the Administrative Agent of its election under this Section 3.04(c)(ii) within the ten (10) day period referred to above, the Borrower shall be deemed to have elected the option set forth in clause (A) above. The failure of the Borrower to comply with any of the options elected (including any deemed election) pursuant to the provisions of Section 3.04(c)(ii) and specified in such notice (or relating to such deemed election) shall constitute an Event of Default.

 

(iii)    Upon any other adjustment to the Borrowing Base (other than with respect to a Scheduled Redetermination or Interim Redetermination or upon any adjustment to the Borrowing Base pursuant to Section 8.13(c)), including without limitation, an adjustment pursuant to Section 2.07(e) or Section 2.07(f), if the total Revolving Credit Exposures exceed the Borrowing Base as adjusted, then the Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal to such excess and, (B) if any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, Cash Collateralize such excess as provided in Section 2.08(j). The Borrower shall be obligated to make such prepayment and/or deposit of Cash Collateral on or prior to the next Business Day after such reduction in the Borrowing Base; provided that all payments required to be made pursuant to this Section 3.04(c)(iii) must be made on or prior to the Termination Date.

 

(iv)    Promptly following the incurrence of any Debt by any Credit Party (other than Debt permitted under Section 9.02), the Borrower shall prepay the Loans in an aggregate amount equal to one hundred percent (100%) of the Net Proceeds received in respect of such Debt. Nothing in this paragraph is intended to permit any Credit Party to incur Debt other than as permitted under Section 9.02, and any such incurrence of Debt shall be a violation of Section 9.02 and a breach of this Agreement.

 

CREDIT AGREEMENT – Page 53

 

 

(v)    Promptly following the receipt of Net Proceeds by any Credit Party in respect of any Casualty Event, the Borrower shall prepay the Loans in an aggregate amount equal to one hundred percent (100%) of such Net Proceeds; provided, that if no Default or Borrowing Base Deficiency then exists, the Credit Parties may apply the Net Proceeds from such Casualty Event, within 180 days after receipt of such Net Proceeds, to purchase assets useful in the business of the Credit Parties and no prepayment shall be required pursuant to this paragraph (v) in respect of such Net Proceeds; provided, further, that to the extent any such Net Proceeds have not been so applied by the end of such 180-day period, a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied.

 

(vi)    If, on any Consolidated Cash Balance Measurement Day, (A) there are outstanding Borrowings or LC Exposure and (B) the Credit Parties have any Excess Cash, then the Borrower shall, on or before the end of the next Business Day, prepay the Borrowings in an aggregate principal amount equal to such Excess Cash, and if any Excess Cash remains after prepaying all of the Borrowings as a result of any LC Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such Excess Cash to be held as Cash Collateral as provided in Section 2.08(j).

 

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

 

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

 

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

 

Section 3.05    Fees.

 

(a)    Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the applicable Commitment Fee Rate on the average daily amount of the unused amount of the Commitment of such Lender during the period from and including the date of this Agreement to but excluding the Termination Date (it being understood that LC Exposure shall constitute usage of the Commitments for purposes of this Section 3.05(a)). Accrued commitment fees shall be payable in arrears on the last Business Day of March, June, September and December of each year and on the Termination Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case commitment fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

CREDIT AGREEMENT – Page 54

 

 

(b)    Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to Tranche Rate Loans on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date on which such Lender's Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, and (iii) to the Issuing Bank, for its own account, its standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last Business Day of March, June, September and December of each year shall be payable on the last Business Day of such month, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be payable on demand. During the continuation of an Event of Default under Section 10.01(a), Section 10.01(b), Section 10.01(h), Section 10.01(i), or Section 10.01(j), or, at the request of the Required Lenders (or the Administrative Agent at the direction of Required Lenders), any other Event of Default, the fees payable pursuant to this Section 3.05(b) shall increase by 2.00% per annum over the then-applicable rate. Any other fees payable to the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case participation and fronting fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

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

 

(d)    Borrowing Base Increase Fees. The Borrower agrees to pay to the Administrative Agent, for the account of each Lender then party to this Agreement, a Borrowing Base increase fee in an amount to be set forth in a separate written agreement on the amount of any increase of the Borrowing Base, payable on the effective date of any such increase to the Borrowing Base.

 

ARTICLE IV

PRO RATA TREATMENT; SHARING OF SET-OFFS

 

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

 

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

 

CREDIT AGREEMENT – Page 55

 

 

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

 

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

 

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

 

CREDIT AGREEMENT – Page 56

 

 

Section 4.03    Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(a), Section 2.08(d), Section 2.08(e) or Section 4.02, or otherwise hereunder, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. If at any time prior to the acceleration or maturity of the Loans, the Administrative Agent shall receive any payment in respect of principal of a Loan or a reimbursement of an LC Disbursement while one or more Defaulting Lenders shall be party to this Agreement, the Administrative Agent shall apply such payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its pro rata share until such time as such Borrowing(s) are paid in full or each Lender (including each Defaulting Lender) is owed its Applicable Percentage of all Loans then outstanding. After acceleration or maturity of the Loans, all principal will be paid ratably as provided in Section 10.02(c).

 

Section 4.04    Disposition of Proceeds. The Security Instruments contain an assignment by the Borrower and/or the Guarantors unto and in favor of the Administrative Agent for the benefit of the Secured Parties of all of the Borrower's or each Guarantor's interest in and to production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property. The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Indebtedness and other obligations described therein and secured thereby. Notwithstanding the assignment contained in such Security Instruments, unless an Event of Default has occurred and is continuing, (a) the Administrative Agent and the Lenders agree that they will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds to be remitted to the Administrative Agent or the Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrower and its Restricted Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to take such actions as may be necessary to cause such proceeds to be paid to the Borrower and/or such Restricted Subsidiaries.

 

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

 

Section 5.01    Increased Costs.

 

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

 

(i)    impose, modify or deem applicable any reserve (including any reserve imposed by the Board of Governors of the Federal Reserve System, or any successor thereto, but excluding any reserve included in the determination of the Tranche Rate pursuant to the provisions of this Agreement), special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by any Lender, or

 

(ii)    impose on any Lender any other condition affecting its Tranche Rate Loans, any of its notes issued pursuant hereto (if any) or its obligation to make Tranche Rate Loans;

 

CREDIT AGREEMENT – Page 57

 

 

and the result of anything described in these clauses (i) and (ii) is to increase the cost to (or to impose a cost on) such Lender of making or maintaining any Tranche Rate Loan, or to reduce the amount of any sum received or receivable by such Lender under this Agreement or under any of its notes issued pursuant hereto (if any) with respect thereto, then upon demand by such Lender, Borrower shall promptly pay directly to such Lender such additional amount as will compensate such Lender for such increased cost or such reduction.

 

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

 

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

 

(d)    Effect of Failure or Delay in Requesting Compensation. Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section 5.01 for any increased costs or reductions incurred more than 365 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided, further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 365-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

Section 5.02    Tranche Rate Breakage Fee. Upon (i) any default by Borrower in making any borrowing of, conversion into or conversion of any Tranche Rate Loan following Borrower's delivery to Administrative Agent of any Borrowing Request or Interest Election Request, as applicable, or (ii) any payment of a Tranche Rate Loan on any day that is not the last day of the Interest Period applicable thereto (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise), Borrower shall promptly pay each Lender an amount equal to the amount of any losses, expenses and liabilities (including any loss (including interest paid) in connection with the re-employment of such funds) that such Lender sustains as a result of such default or such payment. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.02 and reasonably detailed calculations therefor, upon request of the Borrower, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

 

CREDIT AGREEMENT – Page 58

 

 

Section 5.03    Taxes.

 

(a)    Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower or any Guarantor under any Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes, except as required by applicable law; provided that if any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making such deduction or withholding (including deductions or withholdings of Indemnified Taxes payable under this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deduction or withholding been made, (ii) the applicable Withholding Agent shall make such deduction or withholding and (iii) the applicable Withholding Agent shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law.

 

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

 

(c)    Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes payable or paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 5.03) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate of the Administrative Agent, a Lender or the Issuing Bank as to the amount of such payment or liability under this Section 5.03 shall be delivered to the Borrower and shall be conclusive absent manifest error.

 

(d)    Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender's failure to comply with the provisions of Section 12.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).

 

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

 

CREDIT AGREEMENT – Page 59

 

 

(f)    Status of Lenders.  Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 5.03(f)(ii)(A), Section 5.03(f)(ii)(B) and Section 5.03(g) below) shall not be required if in the Lender's reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

(ii)    Without limiting the generality of the foregoing,

 

(A)    any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from United States federal backup withholding tax;

 

(B)    any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

 

(1)    in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN (or IRS Form W-8BEN-E, as applicable) establishing an exemption from, or reduction of, United States federal withholding Tax pursuant to the "interest" article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN (or IRS Form W-8BEN-E, as applicable) establishing an exemption from, or reduction of, United States federal withholding Tax pursuant to the "business profits" or "other income" article of such tax treaty;

 

(2)    executed originals of IRS Form W-8ECI;

 

(3)    in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit I-1 to the effect that such Foreign Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, a "10 percent shareholder" of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a "controlled foreign corporation" described in Section 881(c)(3)(C) of the Code (a "U.S. Tax Compliance Certificate") and (y) executed originals of IRS Form W-8BEN (or IRS Form W-8BEN-E, as applicable); or

 

CREDIT AGREEMENT – Page 60

 

 

(4)    to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN (or IRS Form W-8BEN-E, as applicable), a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-2 or Exhibit I-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-4 on behalf of each such direct and indirect partner; and

 

(C)    any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made.

 

(iii)    On or before the date on which Fifth Third Bank, National Association (and any successor or replacement Administrative Agent) becomes the Administrative Agent hereunder, it shall deliver to the Borrower an executed original of IRS Form W-9 certifying that such Administrative Agent is exempt from United States federal backup withholding tax.

 

Each Lender and the Administrative Agent agrees that if any form or certification it previously delivered under this Section 5.03(f) or Section 5.03(g) expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

 

(g)    FATCA. If a payment made to a Lender under any Loan Document would be subject to United States federal withholding Tax imposed by FATCA if such Lender fails to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with its obligations under FATCA, to determine that such Lender has complied with such Lender's obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 5.03(g), "FATCA" shall include any amendments made to FATCA after the date of this Agreement.

 

CREDIT AGREEMENT – Page 61

 

 

Section 5.04    Mitigation Obligations; Replacement of Lenders.

 

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

 

(b)    Replacement of Lenders. If any Lender requests compensation under Section 5.01, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, or if any Lender becomes a Defaulting Lender or Non-Consenting Lender hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.04(b)), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), (iii) in the case of any such assignment resulting from a claim for compensation under Section 5.01 or payments required to be made pursuant to Section 5.03, such assignment will result in a reduction in such compensation or payments, and (iv) in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent or Proposed Borrowing Base. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. Notwithstanding the foregoing, a Lender shall not be required to make any such assignment and delegation if such Lender is a Secured Swap Provider with any outstanding Swap Agreements with any Credit Party (to the extent obligations under such Swap Agreements constitute Indebtedness), unless on or prior thereto, all such Swap Agreements have been terminated or novated to another Person and such Lender (or its Affiliate) shall have received payment of all amounts, if any, payable to it in connection with such termination or novation.

 

Section 5.05    Illegality. Notwithstanding any other provisions hereof, if any law shall make it unlawful for any Lender to make, fund or maintain Tranche Rate Loans, such Lender shall promptly give notice of such circumstances to Administrative Agent, Borrower and the other Lenders. In such an event, (i) the commitment of such Lender to make Tranche Rate Loans, continue Tranche Rate Loans as Tranche Rate Loans or convert ABR Loans to Tranche Rate Loans shall be immediately suspended and (ii) such Lender's outstanding Tranche Rate Loans shall be converted automatically to ABR Loans on the last day of the Interest Period thereof or at such earlier time as may be required by Law.

 

CREDIT AGREEMENT – Page 62

 

 

ARTICLE VI

CONDITIONS PRECEDENT

 

Section 6.01    Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02):

 

(a)    The Administrative Agent, the Arranger and the Lenders shall have received all commitment, facility and agency fees and all other fees and amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder (including, without limitation, the fees and expenses of Winstead PC, counsel to the Administrative Agent).

 

(b)    The Administrative Agent shall have received a certificate of the Secretary or an Assistant Secretary of the Borrower and each Guarantor setting forth (i) resolutions of its board of directors (or comparable governing body) with respect to the authorization of the Borrower or such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of the Borrower or such Guarantor (A) who are authorized to sign the Loan Documents to which the Borrower or such Guarantor is a party and (B) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of such authorized officers, and (iv) the articles or certificate of incorporation and bylaws (or comparable organizational documents for any Credit Parties that are not corporations) of the Borrower and such Guarantor, certified as being true and complete. The Administrative Agent and the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Borrower to the contrary.

 

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

 

(d)    The Administrative Agent shall have received a closing certificate of a Responsible Officer of the Borrower, dated as of the Effective Date, certifying that (i) the representations and warranties of the Borrower and the Guarantors in this Agreement and the other Loan Documents are true and correct in all material respects, except to the extent any such representations and warranties are already qualified by materiality, Material Adverse Effect or a similar qualification, in which case, such representations and warranties are true and correct in all respects, (ii) no Default or Event of Default then exists, (iii) the Borrower has received all consents and approvals required by Section 7.03, (iv) after giving effect to the consummation of all of the Transactions on the Effective Date (including any initial Borrowings hereunder) the sum of the undrawn Commitments available to the Borrower plus the unrestricted cash of the Borrower are not less than 20% of the Borrowing Base, and (v) all conditions set forth in this Section 6.01 have been satisfied.

 

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

 

(f)    The Administrative Agent shall have received duly executed Notes payable to each Lender in a principal amount equal to its Maximum Credit Amount dated as of the date hereof.

 

CREDIT AGREEMENT – Page 63

 

 

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

 

(i)    be reasonably satisfied that the Security Instruments create first priority, perfected Liens on at least 90% of the total value of the Proved Oil and Gas Properties evaluated in the Initial Reserve Report and on all other Property purported to be pledged as collateral pursuant to the Security Instruments; and

 

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

 

(h)    The Administrative Agent shall have received an opinion of Vinson & Elkins L.L.P., special counsel to the Borrower, in form and substance acceptable to the Administrative Agent and its counsel.

 

(i)    The Administrative Agent shall have received a certificate of insurance coverage of the Credit Parties evidencing that the Credit Parties are carrying insurance in accordance with Section 7.12.

 

(j)    The Administrative Agent shall have received title information as the Administrative Agent may reasonably require satisfactory to the Administrative Agent setting forth the status of title to at least 90% of the total value of the Proved Oil and Gas Properties evaluated in the Initial Reserve Report.

 

(k)    The Administrative Agent shall be reasonably satisfied with the environmental condition of the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries.

 

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

 

(m)    The Administrative Agent shall have received appropriate UCC search certificates and county-level real property record search results reflecting no prior Liens encumbering the Properties of the Borrower and its Restricted Subsidiaries for each jurisdiction requested by the Administrative Agent; other than those being assigned or released on or prior to the Effective Date or Liens permitted by Section 9.03.

 

(n)    The Administrative Agent shall have received, and satisfactorily completed its review of, all due diligence information regarding the Credit Parties as it shall have requested including, without limitation, information regarding litigation, tax matters, accounting matters, insurance matters, labor matters, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership, contingent liabilities and other legal matters of the Borrower and its Subsidiaries.

 

(o)    The capitalization structure and equity ownership of each Credit Party after giving effect to the Transactions shall be reasonably satisfactory to the Administrative Agent in all respects.

 

CREDIT AGREEMENT – Page 64

 

 

(p)    At least three days prior to the Effective Date, the Administrative Agent shall have received from the Credit Parties, to the extent requested by the Lenders or the Administrative Agent, all documentation and other information required by regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including the USA Patriot Act.

 

(q)    The Administrative Agent shall have received the Initial Financial Statements, including, if requested, a pro forma balance sheet of the Borrower after giving effect to the Transactions to occur on the Effective Date, including the payment of fees and expenses and any Borrowings occurring on the Effective Date.

 

(r)    The Administrative Agent shall have received evidence satisfactory to it, including without limitations, any lease operating statement, production report, or similar documentation, evidencing that the aggregate volumes being produced from the Borrowing Base Properties (other than the O'Daniel 46-30 B Unit A7H and the O'Daniel 46-30 B Unit L7H wells) are equal to or greater than the aggregate volumes produced therefrom prior to shutting in such Oil and Gas Properties.

 

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

 

Without limiting the generality of the provisions of Section 11.04, for purposes of determining compliance with the conditions specified in this Section 6.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required under this Section 6.01 to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the Effective Date specifying its objection thereto. All documents executed or submitted pursuant to this Section 6.01 by and on behalf of the Borrower or any of its Subsidiaries shall be in form and substance satisfactory to the Administrative Agent and its counsel. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

 

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

 

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

 

(b)    At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no event, development or circumstance has occurred or shall then exist that has resulted in, or could reasonably be expected to have, a Material Adverse Effect.

 

(c)    The representations and warranties of the Borrower and the Guarantors set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent any such representations and warranties (i) are expressly limited to an earlier date, in which case, on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, such representations and warranties shall continue to be true and correct in all material respects as of such specified earlier date or (ii) are already qualified by materiality, Material Adverse Effect or a similar qualification, in which case, such representations and warranties shall be true and correct in all respects.

 

CREDIT AGREEMENT – Page 65

 

 

(d)    At the time of and immediately after giving effect to such Borrowing and any application of the proceeds thereof on or around the date of such requested Borrowing, but in any event not to exceed two Business Days after such date, the Credit Parties shall not have any Excess Cash.

 

(e)    The making of such Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, would not conflict with, or cause any Lender or the Issuing Bank to violate or exceed, any applicable Governmental Requirement, and no litigation shall be pending or threatened, which does or, with respect to any threatened litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of any Loan, the issuance, amendment, renewal, extension or repayment of any Letter of Credit or any participations therein or the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

(f)    The receipt by the Administrative Agent of a Borrowing Request in accordance with Section 2.03 or a request for a Letter of Credit (or an amendment, extension or renewal of a Letter of Credit) in accordance with Section 2.08(b), as applicable.

 

(g)    Solely with respect to the initial Borrowing hereunder, the satisfaction of the post-closing obligation of the Borrower set forth in Section 8.21(c).

 

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

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Lenders that:

 

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

 

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

 

CREDIT AGREEMENT – Page 66

 

 

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

 

Section 7.04    Financial Condition; No Material Adverse Change.

 

(a)    The Borrower has heretofore furnished to the Lenders the Initial Financial Statements. The Initial Financial Statements do not, taken as a whole, contain any untrue statement of material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading.

 

(b)    Since the Effective Date, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.

 

(c)    Neither the Borrower nor any Restricted Subsidiary has on the date hereof any material Debt (including Disqualified Capital Stock) or any contingent liabilities, off-balance sheet liabilities or partnerships, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are, in the aggregate, material to the balance sheet and statements of income, stockholders equity and cash flows of the Borrower and the Restricted Subsidiaries on a consolidated basis and that are not reflected on such balance sheets, statements of income, stockholders equity and cash flows.

 

Section 7.05    Litigation.

 

(a)    Except as set forth on Schedule 7.05, there are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Restricted Subsidiary (i) not fully covered by insurance (except for normal deductibles) as to which there is a reasonable possibility of an adverse determination that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, or (ii) that involve the validity or enforceability of any Loan Document or the Transactions.

 

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

 

Section 7.06    Environmental Matters.

 

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

 

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

 

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

 

(iii)    there are no claims, demands, suits, orders, inquiries, or proceedings concerning any violation of, or any liability (including as a potentially responsible party) under, any applicable Environmental Laws that is pending or, to Borrower's knowledge, threatened against the Borrower or any Subsidiary or any of their respective Properties or as a result of any operations at such Properties.

 

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

 

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

 

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

 

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(vii)    there has been no exposure of any Person or Property to any Hazardous Materials as a result of or in connection with the operations and businesses of any of the Borrower's or its Subsidiaries' Properties that could reasonably be expected to form the basis for a claim for damages or compensation.

 

(b)    As of the Effective Date, the Borrower and its Subsidiaries have made available to the Lenders complete and correct copies of all environmental site assessment reports, investigations and studies, on environmental matters (including matters relating to any alleged non-compliance with or liability under Environmental Laws) that are in any of the Borrower's or the Subsidiaries' possession or control and relating to their respective Properties or operations thereon.

 

Section 7.07    Compliance with the Laws and Agreements; No Defaults or Borrowing Base Deficiency.

 

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

 

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

 

(c)    No Default or Borrowing Base Deficiency has occurred and is continuing.

 

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

 

Section 7.09    Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all material Tax returns and reports required to have been filed and has paid or caused to be paid all material Taxes required to have been paid by it, except Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP.

 

Section 7.10    ERISA. Except for matters that could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect:

 

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

 

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

 

CREDIT AGREEMENT – Page 69

 

 

(c)    Full payment when due has been made of all amounts which the Borrower, its Subsidiaries or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan as of the date hereof;

 

(d)    Neither the Borrower, its Subsidiaries nor any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material liability; and

 

(e)    No ERISA Event has occurred as of the date hereof.

 

Section 7.11    Disclosure; No Material Misstatements.

 

(a)    The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Restricted Subsidiaries is subject, and all other facts and circumstances known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. The written reports, financial statements, certificates or other written information, taken as a whole, furnished by or on behalf of the Borrower or any Restricted Subsidiary to the Administrative Agent or any Lender or any of their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) do not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading as of the date such information is dated or certified; provided that (a) to the extent any such certificate, statement, report, or information was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such certificate, statement, report, or information (it being recognized by the Lenders, however, that projections as to future events are not to be viewed as facts and that results during the period(s) covered by such projections may differ from the projected results and that such differences may be material and that the Borrower makes no representation that such projections will be realized) and (b) as to statements, information and reports supplied by third parties, the Borrower represents only that it is not aware of any material misstatement or omission therein. There is no fact peculiar to the Borrower or any Restricted Subsidiary which could reasonably be expected to have a Material Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which has not been set forth in this Agreement or the Loan Documents or the other documents, certificates and statements furnished to the Administrative Agent or the Lenders by or on behalf of the Borrower or any Restricted Subsidiary prior to, or on, the date hereof in connection with the transactions contemplated hereby. There are no statements or conclusions in any Reserve Report which are based upon or include material misleading information or fail to take into account known material information regarding the matters reported therein, it being understood that projections concerning volumes attributable to the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries and production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and that the Borrower and its Restricted Subsidiaries do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

 

(b)    As of the Effective Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

 

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

 

Section 7.13    Restriction on Liens. Neither the Borrower nor any of its Restricted Subsidiaries is a party to any material agreement or arrangement (other than Capital Leases creating Liens permitted by Section 9.03(c), but then only on the Property subject of such Capital Lease), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Administrative Agent for the benefit of the Secured Parties on or in respect of their Properties to secure the Indebtedness and the Loan Documents.

 

Section 7.14    Subsidiaries. Except as set forth on Schedule 7.14 or as disclosed in writing to the Administrative Agent (which shall promptly furnish a copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower has no Subsidiaries and the Borrower has no Foreign Subsidiaries. Schedule 7.14 identifies each Subsidiary as of the Effective Date as either "Restricted" or "Unrestricted", and each Restricted Subsidiary on such schedule is a Wholly-Owned Subsidiary.

 

Section 7.15    Location of Business and Offices. As of the Effective Date, the Borrower's jurisdiction of organization is Delaware; the name of the Borrower as listed in the public records of its jurisdiction of organization is HighPeak Energy, Inc.; and the organizational identification number of the Borrower in its jurisdiction of organization is 7677183 (or, in each case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(m) in accordance with Section 12.01). As of the Effective Date, the Borrower's principal place of business and chief executive offices are located at the address specified in Section 12.01 (or as set forth in a notice delivered pursuant to Section 8.01(m) and Section 12.01(c)). As of the Effective Date, each Restricted Subsidiary's jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business and chief executive office is stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to Section 8.01(m)).

 

Section 7.16    Properties; Titles, Etc.

 

(a)    Each of the Borrower and the Restricted Subsidiaries has good and defensible title to substantially all of their the Proved Oil and Gas Properties evaluated in the most recently delivered Reserve Report and good title to all its material personal Properties, in each case, other than Properties sold in compliance with Section 9.12 and free and clear of all Liens except Liens permitted by Section 9.03. After giving full effect to the Excepted Liens, the Borrower or the Restricted Subsidiary specified as the owner owns the net interests in production attributable to the Hydrocarbon Interests as reflected in the most recently delivered Reserve Report, other than reductions in such interests resulting from any actions permitted under Section 9.10 or from the election of the Borrower to not participate in any operation in respect of an Oil and Gas Property, and the ownership of such Properties shall not in any material respect obligate the Borrower or such Restricted Subsidiary to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount in excess of the working interest of each Property set forth in the most recently delivered Reserve Report that is not offset by a corresponding proportionate increase in the Borrower's or such Restricted Subsidiary's net revenue interest in such Property other than excesses (i) relating to customary provisions of operating agreements requiring parties thereto to pay to the operator the share of costs of a defaulting party or (ii) resulting from the acquisition of the interest of any non-participating parties pursuant to customary provisions of the joint operating agreements.

 

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

 

(c)    The rights and Properties presently owned, leased or licensed by the Borrower and its Restricted Subsidiaries including, without limitation, all easements and rights of way, include all rights and Properties necessary to permit the Borrower and its Restricted Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the date hereof.

 

(d)    All of the Properties of the Borrower and its Restricted Subsidiaries which are reasonably necessary for the operation of their businesses are in good working condition and are maintained in accordance with prudent business standards.

 

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

 

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

 

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

 

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

 

Section 7.20    Swap Agreements and Qualified ECP Guarantor. Schedule 7.20, as of the date hereof, and after the date hereof, each report required to be delivered by the Borrower pursuant to Section 8.01(e), sets forth, a true and complete list of all Swap Agreements of the Borrower and each Restricted Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement. The Borrower is a Qualified ECP Guarantor.

 

Section 7.21    Use of Loans and Letters of Credit. The proceeds of the Loans and the Letters of Credit shall be used to provide working capital for exploration and production operations, for acquisitions of Oil and Gas Properties permitted hereunder, and for general corporate purposes. The Borrower and its Subsidiaries are not engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board). No part of the proceeds of any Loan or Letter of Credit will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.

 

Section 7.22    Solvency. After giving effect to the transactions contemplated hereby (including at the time of each Borrowing hereunder and each issuance or extension of any Letter of Credit), (a) the aggregate assets (after giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a consolidated basis, as the Debt becomes absolute and matures, (b)  the Borrower and the Guarantors, taken as a whole, will not have incurred or intended to incur, and will not believe that they will incur, Debt beyond their ability to pay such Debt (after taking into account the timing and amounts of cash to be received by each of the Borrower and the Guarantors and the amounts to be payable on or in respect of its liabilities, and giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute and matures, and (c) the Borrower and the Guarantors, taken as a whole, will not have (and will have no reason to believe that they will have thereafter) unreasonably small capital for the conduct of their business.

 

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Section 7.23    Anti-Corruption Laws and Sanctions.

 

(a)    The Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with applicable Anti-Corruption Laws and applicable Sanctions.

 

(b)    The Borrower, its Subsidiaries, their respective officers and employees and, to the knowledge of the Borrower, its directors and agents are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in any Credit Party being designated as a Sanctioned Person.

 

(c)    None of (x) the Borrower or any Subsidiary, or (y) to the knowledge of the Borrower or any Subsidiary, any of their respective officers, employees or directors or any agent of the Borrower that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. The Borrower will not directly or, to its knowledge, indirectly use the proceeds from the Loans or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, for the purpose of financing the activities of any Person currently subject to any applicable Sanctions in violation of Sanctions.

 

Section 7.24    EEA Financial Institutions. No Credit Party is an EEA Financial Institution.

 

Section 7.25    Security Instruments. The Security Instruments are effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Mortgaged Properties and proceeds thereof, subject, in the case of enforceability, to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and to general principles of equity and principles of good faith and fair dealing. The Indebtedness is and shall be at all times secured by legal, valid and enforceable, perfected first priority Liens in favor of the Administrative Agent, covering and encumbering the Mortgaged Properties, to the extent perfection has occurred or will occur, by the recording of a mortgage, the filing of a UCC financing statement or, with respect to Equity Interests represented by certificates, by possession (in each case, to the extent available in the applicable jurisdiction); provided that, Liens permitted by Section 9.03 may exist.

 

ARTICLE VIII

AFFIRMATIVE COVENANTS

 

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

 

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

 

(a)    Annual Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than ninety (90) days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2021, the audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Borrower and its Consolidated Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year for the combined financial statements of the Company and its predecessors, all reported on by an independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit (other than a "going concern" or other qualification that results solely from the Maturity Date being scheduled to occur within one (1) year from the time such audit opinion is delivered or from a potential inability to satisfy a financial covenant in future period)) to the effect that such consolidated financial statements present fairly in all material respects the combined financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied.

 

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(b)    Quarterly Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, commencing with the fiscal quarter ending March 31, 2021, the consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Borrower and its Consolidated Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year for the combined financial statements of the Company and its predecessors, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.

 

(c)    Certificate of Financial Officer — Compliance. Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer in substantially the form of Exhibit D hereto (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 9.01 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 7.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate (the "Compliance Certificate").

 

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

 

(e)    Certificate of Financial Officer — Swap Agreements and Projected Production Reports. Concurrently with any delivery of financial statements under Section 8.01(a) and Section 8.01(b) and the delivery of each Reserve Report hereunder, (i) a certificate of a Financial Officer, in form and substance satisfactory to the Administrative Agent, setting forth as of a recent date, a true and complete list of all Swap Agreements of the Borrower and each Restricted Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark-to-market value therefor, any new credit support agreements relating thereto not listed on Schedule 7.20, any margin required or supplied under any credit support document, the counterparty to each such agreement, and a certification that the Credit Parties are in compliance with Section 8.19 and Section 9.18 in all respects, and (ii) a report, in form and substance satisfactory to the Administrative Agent, setting forth, for each calendar month for the 24-month period following such date, the projected and anticipated volume of production of crude oil for each such calendar month from all of the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries (such report, a "Projected Production Report").

 

CREDIT AGREEMENT – Page 75

 

 

(f)    Certificate of Insurer — Insurance Coverage. Concurrently with any delivery of financial statements under Section 8.01(a), a certificate of insurance coverage from each insurer with respect to the insurance required by Section 8.07, in form and substance satisfactory to the Administrative Agent, and, if requested by the Administrative Agent or any Lender, all copies of the applicable policies.

 

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

 

(h)    SEC and Other Filings; Reports to Shareholders. Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC, or with any national securities exchange, or distributed by the Borrower to its equityholders generally, as the case may be.

 

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

 

(j)    Lists of Purchasers. Promptly following the written request of the Administrative Agent, a list of all Persons purchasing Hydrocarbons from the Borrower or any Restricted Subsidiary.

 

(k)    Notice of Sales of Oil and Gas Properties and Terminations of Commodity Swap Agreements. In the event the Borrower or any Restricted Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil and Gas Properties or any Equity Interests in any Subsidiary, or terminate or otherwise monetize any commodity Swap Agreement (with a Borrowing Base value in excess of $1,000,000), in each case in accordance with Section 9.12(d), or to designate a Restricted Subsidiary owning Oil and Gas Properties as an Unrestricted Subsidiary in accordance with Section 8.16, reasonable prior written notice (and in any event not less than five Business Days' prior notice) of such disposition, the price thereof and the anticipated date of closing and any other details thereof requested by the Administrative Agent or any Lender.

 

(l)    Notice of Casualty Events. Prompt written notice, and in any event within three Business Days of the Borrower obtaining knowledge, of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event, in each case with respect to Property of any Credit Party having an aggregate fair market value in excess of $1,000,000.

 

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(m)    Information Regarding Borrower and Guarantors. Prompt written notice (and in any event within ten (10) Business Days prior thereto or such later date as may be acceptable to the Administrative Agent) of any change (i) in the Borrower or any Guarantor's corporate name or in any trade name used to identify such Person in the conduct of its business or in the ownership of its Properties, (ii) in the Borrower or any Guarantor's identity or corporate structure or in the jurisdiction in which such Person is incorporated or formed, (iii) in the Borrower or any Guarantor's organizational identification number in such jurisdiction of organization; (y) concurrent written notice of any change in the Borrower or any Guarantor's federal taxpayer identification number and (z) prompt written notice (and in any event within fifteen days thereafter, or such later date as may be acceptable to the Administrative Agent) of any change in the location of the Borrower or any Guarantor's chief executive office or principal place of business.

 

(n)    Production Report and Lease Operating Statements. Within sixty (60) days after the end of each fiscal quarter, a report setting forth, for each calendar month during the then current fiscal year to date, the volume of production and sales attributable to production (and the prices at which such sales were made and the revenues derived from such sales) for each such calendar month from the Oil and Gas Properties, and setting forth the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month, and setting forth the operator of record for the Oil and Gas Properties.

 

(o)    Notices of Certain Changes. Promptly, but in any event within five (5) Business Days (or such later date as is acceptable to Administrative Agent) after the execution thereof, copies of any amendment, modification or supplement to the Organizational Documents of the Borrower or any Restricted Subsidiary.

 

(p)    Deposit Accounts, Commodity Accounts and Securities Accounts. Not less than ten (10) days' prior written notice (or such shorter period of time as is acceptable to Administrative Agent) of the opening of any new Deposit Account, Commodity Account or Securities Account.

 

(q)    Reserve Report Certificate. With the delivery of each Reserve Report, the certificate required to be delivered pursuant to Section 8.12(c).

 

(r)    Annual Business Plan and Forecast. Within sixty (60) days after the end of each fiscal year, the twelve month business plan, operating budget, cash flow and capital expenditure forecast approved by the executive committee of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent.

 

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

 

Section 8.02    Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt (and in any event within three Business Days after a Responsible Officer of the Borrower obtains knowledge of such event) written notice of the following:

 

(a)    the occurrence of any Default;

 

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

 

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

 

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

 

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

 

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

 

Section 8.05    Performance of Obligations under Loan Documents. The Borrower will pay the Loans according to the reading, tenor and effect thereof, and the Borrower will, and will cause each Restricted Subsidiary to, do and perform every act and discharge all of the obligations to be performed and discharged by them under the Loan Documents, including, without limitation, this Agreement, at the time or times and in the manner specified.

 

Section 8.06    Operation and Maintenance of Properties; Subordination of Affiliated Operators' Liens. The Borrower, at its own expense, will, and will cause each Restricted Subsidiary to:

 

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

 

(b)    maintain and keep in good repair, working order and efficiency (ordinary wear and tear excepted) all of its Proved Oil and Gas Properties and other Properties material to the conduct of its business, including, without limitation, all equipment, machinery and facilities, except, in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

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

 

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

 

(e)    cause each Affiliate of the Borrower which operates any of the Borrower's or its Restricted Subsidiaries' Proved Oil and Gas Properties to subordinate, pursuant to agreements in form and substance reasonably satisfactory to the Administrative Agent, any operators' Liens or other Liens in favor of such Affiliate in respect of such Oil and Gas Properties to the Liens in favor of the Administrative Agent for the benefit of the Secured Parties.

 

(f)    to the extent the Borrower is not the operator of any Property, the Borrower shall use commercially reasonable efforts to cause the operator to comply with this Section 8.06, but failure of the operator to so comply will not constitute a Default or Event of Default.

 

Section 8.07    Insurance. The Borrower will, and will cause each Restricted Subsidiary to, maintain, with financially sound and reputable insurance companies, insurance (a) in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations and (b) in accordance with all Governmental Requirements. The loss payable clauses or provisions in said insurance policy or policies insuring any of the collateral for the Loans shall be endorsed in favor of and made payable to the Administrative Agent as its interests may appear and such policies shall name the Administrative Agent as an "additional insured" and/or "lender loss payee", as applicable, and provide that the insurer will endeavor to give at least thirty (30) days prior notice of any cancellation to the Administrative Agent or ten (10) days prior notice in the case of cancellation for non-payment.

 

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

 

Section 8.09    Compliance with Laws. The Borrower will, and will cause each Restricted Subsidiary to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and each of their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

 

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Section 8.10    Environmental Matters.

 

(a)    The Borrower shall at its sole expense: (i) comply, and shall cause its Properties and operations and each Subsidiary and each Subsidiary's Properties and operations to comply, with all applicable Environmental Laws, the breach of which could be reasonably expected to have a Material Adverse Effect; (ii) not Release or threaten to Release, and shall cause each Subsidiary not to Release or threaten to Release, any Hazardous Material on, under, about or from any of the Borrower's or its Subsidiaries' Properties or any other property offsite the Property to the extent caused by the Borrower's or any of its Subsidiaries' operations except in compliance with applicable Environmental Laws, the Release or threatened Release of which could reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or file, and shall cause each Subsidiary to timely obtain or file, all Environmental Permits, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower's or its Subsidiaries' Properties, which failure to obtain or file could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion, and shall cause each Subsidiary to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the "Remedial Work") in the event any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future Release or threatened Release of any Hazardous Material on, under, about or from any of the Borrower's or its Subsidiaries' Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material Adverse Effect; (v) conduct, and cause its Subsidiaries to conduct, their respective operations and businesses in a manner that will not expose any Property or Person to Hazardous Materials in violation of Environmental Law if such exposure could reasonably be expected to have a Material Adverse Effect; and (vi) establish and implement, and shall cause each Subsidiary to establish and implement, such procedures as may be necessary to continuously determine and assure that the Borrower's and its Subsidiaries' obligations under this Section 8.10(a) are timely and fully satisfied, which failure to establish and implement could reasonably be expected to have a Material Adverse Effect.

 

(b)    The Borrower will promptly, but in no event later than five days after the Borrower obtains knowledge thereof, notify the Administrative Agent and the Lenders in writing of any threatened action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit by any Person against the Borrower or its Subsidiaries or their Properties of which the Borrower has knowledge in connection with any Environmental Laws (excluding routing testing and corrective action) if the Borrower could reasonably anticipate that such action will result in liability (whether individually or in the aggregate) in excess of the greater of (i) $3,000,000 and (ii) ten percent (10%) of the Aggregate Elected Commitments in effect at such time, not fully covered by insurance, subject to normal deductibles.

 

(c)    If an Event of Default has occurred and is continuing, the Administrative Agent may (but shall not be obligated to), at the expense of the Borrower and to the extent that the Borrower has the right to do so, conduct such Remedial Work as it deems appropriate to determine the nature and extent of any noncompliance with applicable Environmental Laws, the nature and extent of the presence of any Hazardous Material and the nature and extent of any other environmental conditions that may exist at or affect any of the Mortgaged Properties, and the Borrower and its Subsidiaries shall cooperate with the Administrative Agent in conducting such Remedial Work. Such Remedial Work may include a detailed visual inspection of the Mortgaged Properties, including all storage areas, storage tanks, drains and dry wells and other structures and locations, as well as the taking of soil samples, surface water samples, and ground water samples and such other investigations or analyses as the Administrative Agent deems appropriate. The Administrative Agent and its officers, employees, agents and contractors shall have and are hereby granted the right to enter upon the Mortgaged Properties for the foregoing purposes.

 

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Section 8.11    Further Assurances.

 

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

 

(b)    The Borrower hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Mortgaged Property without the signature of the Borrower or any other Guarantor where permitted by law. A carbon, photographic or other reproduction of the Security Instruments or any financing statement covering the Mortgaged Property or any part thereof shall be sufficient as a financing statement where permitted by law. The Borrower acknowledges and agrees that any such financing statement may describe the collateral as "all assets" of the applicable Credit Party or words of similar effect as may be required by the Administrative Agent.

 

Section 8.12    Reserve Reports.

 

(a)    On or before March 1st and September 1st of each year, commencing March 1, 2021, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report evaluating the Proved Oil and Gas Properties of the Credit Parties that are Qualified ECP Guarantors as of the immediately preceding January 1st and July 1st. The Reserve Report as of January 1 of each year shall be prepared or audited by one or more Approved Petroleum Engineers that have completed an independent engineering evaluation of the reserves attributable to the Credit Parties' Proved Oil and Gas Properties, and the July 1 Reserve Report of each year shall be prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding January 1 Reserve Report.

 

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

 

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(c)    With the delivery of each Reserve Report, the Borrower shall provide to the Administrative Agent and the Lenders a certificate from a Responsible Officer certifying that in all material respects: (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct in all material respects, (ii) the Borrower or its Restricted Subsidiaries owns good and defensible title to substantially all of the Proved Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.18 with respect to its Proved Oil and Gas Properties evaluated in such Reserve Report which would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons either generally or produced from such Proved Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of their Proved Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its Proved Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered into subsequent to the later of the date hereof or the most recently delivered Reserve Report which the Borrower could reasonably be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof, and (vi) attached thereto is a schedule of the Proved Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged Properties.

 

Section 8.13    Title Information.

 

(a)    On or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Section 8.12(a), the Borrower will deliver title information in form and substance reasonably acceptable to the Administrative Agent covering enough of the Proved Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received together with title information previously delivered to the Administrative Agent, reasonably satisfactory title information on at least 90% of the total value of the Proved Oil and Gas Properties evaluated by such Reserve Report.

 

(b)    If the Borrower has provided title information for additional Proved Oil and Gas Properties under Section 8.13(a), the Borrower shall, within 60 days after notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Proved Oil and Gas Properties, either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions except for Excepted Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such definition) having an equivalent value, or (iii) deliver title information in form and substance reasonably acceptable to the Administrative Agent so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent, reasonably satisfactory title information on at least 90% of the value of the Proved Oil and Gas Properties evaluated by such Reserve Report.

 

(c)    If the Borrower is unable to cure any title defect requested by the Administrative Agent or the Lenders to be cured within the 60-day period or the Borrower does not comply with the requirements to provide reasonably acceptable title information covering 90% of the value of the Proved Oil and Gas Properties evaluated in the most recent Reserve Report, such default shall not be a Default, but instead the Administrative Agent and/or the Required Lenders shall have the right to exercise the following remedy in their sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent or the Lenders. To the extent that the Administrative Agent or the Required Lenders are not satisfied with title to any Mortgaged Property after the 60-day period has elapsed, such unacceptable Mortgaged Property shall not count towards the 90% requirement, and the Administrative Agent may send a notice to the Borrower and the Lenders that the then outstanding Borrowing Base shall be reduced by an amount as determined by the Required Lenders to cause the Borrower to be in compliance with the requirement to provide reasonably acceptable title information on 90% of the value of the Proved Oil and Gas Properties including in the Borrowing Base. This new Borrowing Base shall become effective immediately after receipt of such notice.

 

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Section 8.14    Additional Collateral and Additional Guarantors.

 

(a)    In connection with each redetermination of the Borrowing Base, the Borrower shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties represent at least 90% of the total value of the Proved Oil and Gas Properties evaluated in the most recently completed Reserve Report after giving effect to exploration and production activities, acquisitions, dispositions and production. In the event that the Mortgaged Properties do not represent at least 90% of such total value, then the Borrower shall, and shall cause its Restricted Subsidiaries to, grant, within thirty (30) days (or such longer period acceptable to the Administrative Agent) of delivery of the certificate required under Section 8.12(c), to the Administrative Agent as security for the Indebtedness a first-priority Lien interest (provided that Excepted Liens of the type described in clauses (a) to (d) and (f) of the definition thereof may exist, but subject to the provisos at the end of such definition) on additional Proved Oil and Gas Properties of the Credit Parties that are Qualified ECP Guarantors and which such Proved Oil and Gas Properties are not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 90% of such total value. All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, mortgages, security agreements and financing statements or other Security Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes. In order to comply with the foregoing, if any Restricted Subsidiary places a Lien on its Proved Oil and Gas Properties and such Restricted Subsidiary is not a Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).

 

(b)    In the event that (i) any Unrestricted Subsidiary becomes a Restricted Subsidiary (including by way of a Division), or (ii) any Domestic Subsidiary is a Restricted Subsidiary, the Borrower shall promptly cause such Restricted Subsidiary to guarantee the Indebtedness pursuant to the Guaranty Agreement. In connection with any such guaranty, the Borrower shall, or shall cause such Restricted Subsidiary to, (A) execute and deliver a Guaranty Agreement or supplement to the Guaranty Agreement and a Security Agreement or supplement to the Security Agreement executed by such Subsidiary, (B) pledge all of the Equity Interests of such Subsidiary (including, without limitation, delivery of original stock certificates (if applicable) evidencing the Equity Interests of such Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof), and (C) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent.

 

(c)    The Borrower will at all times cause the other material tangible and intangible assets of the Borrower and each Restricted Subsidiary (including, without limitation, all Swap Agreements) to be subject to a Lien of the Security Instruments.

 

(d)    Upon the request of the Required Lenders, the Borrower and each of its Restricted Subsidiaries shall take any additional actions reasonably required, if any, to cause all of its right, title and interest in each Swap Agreement to which it is a party to be collaterally assigned to the Administrative Agent, for the benefit of the Secured Parties.

 

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(e)    Notwithstanding any provision in any of the Loan Documents to the contrary, in no event is any Building (as defined in the applicable Flood Insurance Regulations) or Manufactured (Mobile) Home (as defined in the applicable Flood Insurance Regulations) owned by any Credit Party included in the Mortgaged Property and no Building or Manufactured (Mobile) Home shall be encumbered by any Security Instrument; provided, that (i) the applicable Credit Party's interests in all lands and Hydrocarbons situated under any such Building or Manufactured (Mobile) Home shall be included in the Mortgaged Property and shall be encumbered by the Security Instruments and (ii) the Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, permit to exist any Lien on any Building or Manufactured (Mobile) Home except Excepted Liens.

 

Section 8.15    ERISA Compliance. The Borrower will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent (a) promptly upon request of the Administrative Agent, copies of each annual and other report with respect to each Plan or any trust created thereunder that has been filed with the United States Secretary of Labor or the Internal Revenue Service, and (b) promptly upon becoming aware of the occurrence of any "prohibited transaction," as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by a Responsible Officer of the Borrower, the Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service or the Department of Labor with respect thereto.

 

Section 8.16    Unrestricted Subsidiaries. The Borrower:

 

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

 

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

 

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

 

Section 8.17    Deposit Accounts; Commodity Accounts and Securities Accounts.

 

(a)    Within one hundred and twenty (120) days (or such later date as agreed to in writing by the Administrative Agent) after the Effective Date, the Borrower and each Guarantor will maintain one or more of the Lenders or Affiliates of Lenders as it principal depository bank(s), and will not have or maintain any Deposit Accounts (other than Excluded Accounts) with any banks that are not Lenders or Affiliates of Lenders; provided that if any Lender or Affiliate of a Lender is such a depository bank for the Borrower or any Guarantor and such Lender for any reason ceases to be a Lender party to this Agreement, the Borrower or such Guarantor (as applicable) shall be deemed to have satisfied the foregoing requirement so long as the Borrower or such Guarantor transitions its Deposit Accounts to another Lender or Affiliate of a Lender within ninety (90) days (or such longer period of time as may be acceptable to the Administrative Agent) following such cessation; provided further that Borrower may maintain up to one corporate Deposit Account with a depository bank that is not a Lender or an Affiliate of a Lender so long as such Deposit Account is subject to an Account Control Agreement pursuant to Section 8.17(b).

 

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(b)    Within ninety (90) days after the Effective Date or after any account is established (or such later date as agreed to in writing by the Administrative Agent), as applicable, the Borrower and each Guarantor will cause each of their respective Deposit Accounts, Commodity Accounts or Securities Accounts (in each case, other than Excluded Accounts) to at all times be subject to an Account Control Agreement.

 

Section 8.18    Commodity Exchange Act Keepwell Provisions. The Borrower hereby guarantees the payment and performance of all Indebtedness of each Credit Party (other than the Borrower) and absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Credit Party (other than the Borrower) in order for such Credit Party to honor its obligations under its respective Guaranty Agreement including obligations with respect to Swap Agreements (provided, however, that the Borrower shall only be liable under this Section 8.18 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 8.18, or otherwise under this Agreement or any Loan Document, as it relates to such other Credit Parties, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of the Borrower under this Section 8.18 shall remain in full force and effect until all Indebtedness is paid in full to the Lenders, the Administrative Agent and all other Secured Parties, and all of the Lenders' Commitments are terminated. The Borrower intends that this Section 8.18 constitute, and this Section 8.18 shall be deemed to constitute, a "keepwell, support, or other agreement" for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Section 8.19    Affirmative Hedging Covenant. (a) Within sixty (60) days after the Second Amendment Effective Date (or such later date as acceptable to Administrative Agent in its sole discretion), and (b) thereafter, as of the last day of each fiscal quarter (or, in each case, such later date acceptable to the Administrative Agent in its reasonable discretion), the Borrower shall deliver to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that the Borrower has entered into, or shall have caused another Credit Party to enter into: (i) Swap Agreements with one or more Approved Counterparties to hedge notional volumes covering, for the first twelve-month period following such measurement date, not less than sixty percent (60%) of the aggregate projected production of crude oil for such twelve-month period from the Borrower and its Restricted Subsidiaries' Oil and Gas Properties owned as of such date constituting PDP Reserves as set forth in the most recently delivered Reserve Report, and (ii) Swap Agreements with one or more Approved Counterparties (including, to the extent applicable, any Swap Agreements entered into by any Credit Party for the requirement set forth under clause (i) above) to hedge notional volumes covering, for the 24-month period following such measurement date, not less than sixty percent (60%) of the aggregate projected production of crude oil for such 24-month period from the Borrower and its Restricted Subsidiaries' Oil and Gas Properties owned as of such date constituting PDP Reserves as set forth in the most recently delivered Reserve Report.

 

Section 8.20    Excess Cash Information. (a) Upon the request of the Administrative Agent, within two Business Days of any such request, and (b) on any Consolidated Cash Balance Measurement Day on which the Borrower has any Excess Cash, the Borrower shall provide to the Administrative Agent, (i) a certificate of a Responsible Officer in form and substance satisfactory to the Administrative Agent, certifying as to the amount of the Consolidated Cash Balance and the amount of such Excess Cash, if any, as of such date, and (ii) attaching thereto, summary and balance statements, in a form reasonably acceptable to the Administrative Agent, for each Deposit Account, Securities Account or other account in which any of the Consolidated Cash Balance is held, credited or carried; provided, however, notwithstanding the foregoing, Borrower shall not be obligated to deliver any certificate or report required under this Section 8.20 if, at any time of request or determination, there is no Revolving Credit Exposure existing at such time.

 

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Section 8.21    Post-Closing Obligations.

 

(a)    Deposit Account Control Agreements. Within the timeframe set forth in Section 8.17(b), Borrower will cause each of their respective Deposit Accounts, Commodity Accounts or Securities Accounts (in each case, other than Excluded Accounts) to be subject to an Account Control Agreement.

 

(b)    Minimum Hedging. Within the timeframe set forth in Section 8.19(a), Borrower shall comply with the hedging requirements specified therein.

 

(c)    Lien Releases. Within ten (10) days after the Effective Date (or such later date as agreed to by Administrative Agent in its sole discretion), Borrower shall deliver evidence satisfactory to Administrative Agent that (i) Borrower has received executed and recordable Lien releases for each of the recorded documents set forth in Schedule 8.21(c), and (ii) any and all Liens in favor of the secured party named in the recorded documents set forth in Schedule 8.21(c) encumbering the Mortgaged Properties have been terminated and released (subject to filing of any applicable Lien releases).

 

ARTICLE IX

NEGATIVE COVENANTS

 

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder and all other amounts payable under the Loan Documents have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

 

Section 9.01    Financial Covenants.

 

(a)    Ratio of Total Debt to EBITDAX. The Borrower will not, as of the last day of any fiscal quarter, commencing March 31, 2021, permit its ratio of Total Debt as of such date to EBITDAX for the Rolling Period ending on such date to be greater than 3.00 to 1.00 for each quarter ended thereafter.

 

(b)    Current Ratio. The Borrower will not permit, as of the last day of any fiscal quarter, commencing June 30, 2021, its ratio of (i) consolidated current assets of the Borrower and its Consolidated Restricted Subsidiaries (including the unused amount of the total Commitments (but only to the extent that the Borrower is permitted to borrow such amount under the terms of this Agreement, including, without limitation, Section 6.02 hereof), but excluding non-cash assets under ASC 815) to (ii) consolidated current liabilities of the Borrower and its Consolidated Restricted Subsidiaries (excluding non-cash obligations under ASC 815 and current maturities under this Agreement) (such ratio, the "Current Ratio") to be less than 1.0 to 1.0.

 

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

 

(a)    the Notes, the Loans or other Indebtedness arising under the Loan Documents or any Swap Agreement with a Secured Swap Provider or any other Approved Counterparty or any guaranty of or suretyship arrangement for the Notes, the Loans or other Indebtedness arising under the Loan Documents or any Swap Agreement with a Secured Swap Provider.

 

CREDIT AGREEMENT – Page 86

 

 

(b)    Debt of the Borrower and its Restricted Subsidiaries existing on the date hereof that is reflected on Schedule 9.02.

 

(c)    [Reserved].

 

(d)    Debt under Capital Leases and purchase money Debt not to exceed the greater of (i) $1,000,000 and (ii) five percent (5%) of the Borrowing Base in effect at such time, in each case, in the aggregate at any one time outstanding.

 

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

 

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

 

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

 

(h)    Debt incurred in connection with the financing of insurance premiums in the ordinary course of business.

 

(i)    Specified Additional Debt; provided that (i) after giving effect to the incurrence of such Debt, no Event of Default shall have occurred and be continuing, (ii) such Debt does not have any scheduled principal payments, mandatory redemption (except as a result of a change of control or asset sale so long as any rights of the holders of such Debt upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Indebtedness that are accrued and payable and termination of all Commitments and, except in the case of the 2024 Senior Notes, the Special Mandatory Redemption (as defined in the 2022 Indenture)) or maturity date until the date that is one hundred and eighty (180) days following the Maturity Date, (iii) on the same day as the incurrence of such Debt, the Borrowing Base shall be adjusted to the extent required by Section 2.07(f) and prepayment is made to the extent required by Section 3.04(c)(iii) and no Borrowing Base Deficiency would then exist after giving effect to such adjustment and prepayment, (iv) after giving pro forma effect to the incurrence of such Specified Additional Debt (and any concurrent repayment, redemption or satisfaction and discharge of Debt with the proceeds of such incurrence), the Borrower is in pro forma compliance with Section 9.01), (v) such Debt shall have no financial covenants which are not also contained in this Agreement (including after giving effect to an amendment of this Agreement to add such financial covenants) and any such financial covenants shall be no more restrictive than those contained in this Agreement, (vi) the non-financial covenants applicable to such Debt are no more restrictive, taken as a whole, than the non-financial covenants contained in this Agreement (as determined by the Borrower in good faith), and (vii) no Subsidiary of the Borrower (other than a Guarantor) is an obligor under such Debt;

 

CREDIT AGREEMENT – Page 87

 

 

(j)    other Debt not to exceed, in the case of this clause (j), the greater of (i) $1,000,000 and (ii) five percent (5%) of the Borrowing Base in effect at such time, in each case, in the aggregate principal amount at any one time outstanding.

 

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

 

(a)    Liens arising under the Loan Documents securing the payment of any Indebtedness.

 

(b)    Excepted Liens.

 

(c)    Liens securing Capital Leases or purchase money Debt permitted by Section 9.02(d) but only on the Property under such Capital Leases or personal property subject to such purchase money Debt.

 

(d)    Liens on unearned insurance premiums securing Debt permitted under Section 9.02(h).

 

(e)    Liens on Property not constituting collateral for the Indebtedness and not otherwise permitted by the foregoing clauses of this Section 9.03; provided that the aggregate principal or face amount of all Debt secured under this Section 9.03(e) shall not exceed, at any time, the greater of (i) $1,000,000 and (ii) five percent (5%) of the Borrowing Base in effect at such time.

 

(f)    at all times prior to the 2024 Senior Notes Escrow Release Date, Liens on the proceeds of the sale of the 2024 Senior Notes held in the 2024 Senior Notes Escrow Account

 

Notwithstanding the foregoing, none of the Liens permitted pursuant to this Section 9.03 (other than Liens securing the Indebtedness and Excepted Liens) may at any time attach to any Oil and Gas Properties of the Credit Parties or any Equity Interests in any Subsidiary.

 

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

 

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

 

(b)    any Restricted Subsidiary may declare and pay dividends to the Borrower or another Credit Party ratably with respect to their Equity Interests; and

 

(c)    other Restricted Payments with respect to its Equity Interests, so long as both immediately before and immediately after giving effect thereto, (i) no Default or Event of Default exists or would result therefrom, (ii) the ratio (calculated on a pro forma basis after giving effect to such Restricted Payment and any Borrowing on the date thereof) of Total Debt as of such date to EBITDAX for the Rolling Period most recently ended, does not exceed 2.25 to 1.00, and (iii) unused availability is not less than 30% of the Borrowing Base in effect at such time.

 

CREDIT AGREEMENT – Page 88

 

 

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

 

(a)    Investments as of the Effective Date which are disclosed to the Lenders in Schedule 9.05.

 

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

 

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

 

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

 

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

 

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

 

(g)    Investments (i) made by the Borrower in or to the Guarantors, and (ii) made by any Restricted Subsidiary in or to the Borrower or any Guarantor.

 

(h)    subject to the limits in Section 9.07, Investments of the type described in clause (c) of the definition thereof in direct ownership interests in additional Oil and Gas Properties and gas gathering systems related thereto or related to farm-out, farm-in, joint operating, joint venture or area of mutual interest agreements, gathering systems, pipelines or other similar arrangements which are usual and customary in the oil and gas exploration and production business located within the geographic boundaries of the United States of America.

 

(i)    loans or advances to employees, officers or directors in the ordinary course of business of the Borrower or any Restricted Subsidiary; provided that the amount of Investments under this clause (i) do not exceed the greater of (i) $500,000 and (ii) two and one-half percent (2.5%) of the Borrowing Base in effect at such time, in the aggregate during any fiscal year.

 

(j)    Investments received in settlement of debts arising from Investments permitted under this Section 9.05 owing to the Borrower or any Restricted Subsidiary as a result of the bankruptcy or other insolvency proceeding of the obligor in respect of such debts or upon the enforcement of any Lien in favor of the Borrower or any Restricted Subsidiary.

 

(k)    Investments in Unrestricted Subsidiaries in an aggregate amount not to exceed $500,000 at any one time outstanding.

 

CREDIT AGREEMENT – Page 89

 

 

(l)    other Investments not to exceed the greater of (i) $1,000,000 and (ii) five percent (5%) of the Borrowing Base in effect at such time, in the aggregate at any one time outstanding.

 

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

 

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

 

(b)    The Borrower may designate by written notification thereof to the Administrative Agent, any Restricted Subsidiary, including a newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after giving effect, to such designation, neither a Default nor a Borrowing Base Deficiency would exist and (ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount equal to the fair market value as of the date of such designation of the Borrower's direct and indirect ownership interest in such Subsidiary and such Investment would be permitted to be made at the time of such designation under Section 9.05. Such designation will be deemed to be a disposition of any Oil and Gas Properties owned by such Subsidiary. Except as provided in this Section 9.06(b), no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.

 

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

 

Section 9.07    Nature of Business; No International Operations. The Borrower will not, and will not permit any Restricted Subsidiary to, allow any material change to be made in the character of its business as an independent oil and gas exploration and production company. From and after the date hereof, the Borrower and its Domestic Subsidiaries will not acquire or make any other expenditure (whether such expenditure is capital, operating or otherwise) in or related to, any Oil and Gas Properties not located within the geographical boundaries of the United States. The Borrower shall at all times remain organized under the laws of the United States of America or any State thereof.

 

Section 9.08    Proceeds of Loans.

 

(a)    The Borrower will not permit the proceeds of the Loans to be used for any purpose other than those permitted by Section 7.21. Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. If requested by the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

 

CREDIT AGREEMENT – Page 90

 

 

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

 

Section 9.09    ERISA Compliance. Except for matters that could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, the Borrower will not, and will not permit any Subsidiary to, at any time:

 

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

 

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

 

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

 

Section 9.11    Mergers, Etc. The Borrower will not, and will not permit any Restricted Subsidiary to, merge into or with or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or Divide, or sell, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions and including by Division of such Person) all or substantially all of its Property to any other Person (including by Division of such Person) (whether now owned or hereafter acquired) (any such transaction, a "consolidation"), or liquidate or dissolve; provided that (a) any Restricted Subsidiary may participate in a consolidation with the Borrower (provided that the Borrower shall be the continuing or surviving entity), (b) any Restricted Subsidiary may participate in a consolidation with another Subsidiary so long as, if a Guarantor is participating in such consolidation, a Guarantor shall be the continuing or surviving entity and (c) any Restricted Subsidiary may Divide if the Persons resulting from such Division comply with Section 8.14 and, if such Restricted Subsidiary owns any Property that is Collateral, the Persons resulting from such Division shall execute and deliver to the Administrative Agent a reaffirmation of, or amendment and restatement of, the predecessor's Security Instruments, in form an substance acceptable to the Administrative Agent, to ensure that such Property remains Mortgaged Property.

 

Section 9.12    Sale of Properties and Termination of Swap Agreements. The Borrower will not, and will not permit any Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise transfer any Property (including any transfer pursuant to a Division; provided that, a Division of a Credit Party in accordance with Section 9.05 and Section 9.11 shall not be restricted by this Section 9.12) (excluding Casualty Events) or to terminate or otherwise monetize any Swap Agreement in respect of commodities except for:

 

(a)    the sale of Hydrocarbons in the ordinary course of business;

 

CREDIT AGREEMENT – Page 91

 

 

(b)    farmouts of undeveloped acreage and assignments in connection with such farmouts;

 

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

 

(d)    the sale or other disposition of any Oil and Gas Property or any interest therein or any Restricted Subsidiary owning Oil and Gas Properties and the termination or monetization of any Swap Agreement in respect of commodities; provided that:

 

(i)    no Default or Borrowing Base Deficiency exists or results from such sale or disposition of Property or the termination or monetization of any Swap Agreement in respect of commodities;

 

(ii)    100% of the consideration received in respect of such sale or other disposition or termination (A) shall be cash or (B) other Oil and Gas Properties or (C) a combination of cash and other Oil and Gas Properties;

 

(iii)    the consideration received in respect of such sale or other disposition or termination or monetization of any Swap Agreement in respect of commodities shall be equal to or greater than the fair market value of the Oil and Gas Property, interest therein or Restricted Subsidiary subject of such sale or other disposition, or Swap Agreement subject of such termination or monetization (as reasonably determined by the board of directors (or comparable governing body) of the Borrower and, if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible Officer of the Borrower certifying to that effect);

 

(iv)    if the Borrowing Base Value of such Oil and Gas Properties sold or disposed of and Swap Agreements terminated pursuant to this clause (d) in any period between two successive Scheduled Redetermination Dates exceeds five percent (5%) of the Borrowing Base then in effect, then the Borrowing Base shall be reduced in accordance with Section 2.07(e), and the Borrower shall make any required corresponding prepayment under Section 3.04(c)(iii); and

 

(v)    if any such sale or other disposition is of a Restricted Subsidiary owning Oil and Gas Properties, such sale or other disposition shall include all the Equity Interests of such Restricted Subsidiary;

 

(e)    so long as no Default or Event of Default has occurred and is continuing, sales or other dispositions of (i) any Oil and Gas Property not constituting Proved Reserves or (ii) the Equity Interests of any Unrestricted Subsidiary to the extent not constituting a Borrowing Base Asset Disposition; and

 

(f)    transfers of Properties from any Credit Party to the Borrower or any other Credit Party.

 

CREDIT AGREEMENT – Page 92

 

 

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

 

Section 9.14    Transactions with Affiliates. The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate (other than the Guarantors) unless such transactions are otherwise permitted under this Agreement and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not an Affiliate.

 

Section 9.15    Subsidiaries. The Borrower will not, and will not permit any Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless the Borrower gives written notice to the Administrative Agent of such creation or acquisition and complies with Section 8.14(b). The Borrower shall not, and shall not permit any Restricted Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any Restricted Subsidiary except in compliance with Section 9.12. Neither the Borrower nor any Restricted Subsidiary shall have any Foreign Subsidiaries. The Borrower will not permit any Person other than the Borrower or another Credit Party to own any Equity Interests in any Guarantor.

 

Section 9.16    Negative Pledge Agreements; Dividend Restrictions. The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any contract, agreement or understanding (other than (i) this Agreement, the Security Instruments or Debt creating Liens permitted by Section 9.03(c) so long as such restrictions or conditions apply only to the property or assets securing such Debt, (ii) any leases or licenses or similar contracts as they affect any Property or Lien subject to a lease or license (in each case in this clause (ii) other than Oil and Gas Properties), or (iii) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all of the equity or Property of such Restricted Subsidiary (or the property that is subject to such restriction) pending the closing of such sale or disposition, provided that such restrictions and conditions apply only to the asset or another Credit Party that is to be sold and such sale or disposition is permitted hereunder) which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Administrative Agent and the Secured Parties or restricts any Restricted Subsidiary from paying dividends or making distributions to the Borrower or any Guarantor, or which requires the consent of or notice to other Persons in connection therewith.

 

Section 9.17    Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will not, and will not permit any Restricted Subsidiary to, allow gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower or any Restricted Subsidiary that would require the Borrower or such Restricted Subsidiary to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefor to exceed one half bcf of gas (on an mcf equivalent basis) in the aggregate.

 

CREDIT AGREEMENT – Page 93

 

 

Section 9.18    Swap Agreements.

 

(a)    The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any Swap Agreements with any Person other than:

 

(i)    Swap Agreements with an Approved Counterparty in respect of commodities entered into not for speculative purposes the notional volumes for which (when aggregated with other commodity Swap Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements) do not exceed, as of the date such Swap Agreement is entered into:

 

(A)    85% for the 1st through 24th month following the date such Swap Agreement is entered into, in the aggregate for such period;

 

(B)    85% for the 25th through 36th month following the date such Swap Agreement is entered into (and for each month during the period during which such Swap Agreement is in effect); and

 

(C)    75% for the 37th through 60th month following the date such Swap Agreement is entered into (and for each month during the period during which such Swap Agreement is in effect),

 

in each case of the reasonably anticipated production of (1) crude oil, (2) natural gas and (3) natural gas liquids and condensate, calculated separately with respect to each such clause (1) through (3), as such production is projected from the Borrower's and its Restricted Subsidiaries' Oil and Gas Properties classified as Proved Reserves as set forth on the most recent Projected Production Report delivered pursuant to the terms of this Agreement; provided, however, that such Swap Agreements shall not, in any case, have a tenor of longer than five (5) years. It is understood that Swap Agreements in respect of commodities which may, from time to time, "hedge" the same volumes, but different elements of commodity risk thereof, shall not be aggregated together when calculating the foregoing limitations on notional volumes.

 

(ii)    Swap Agreements in respect of interest rates with an Approved Counterparty, as follows:

 

(A)    Swap Agreements effectively converting interest rates from fixed to floating, the notional amounts of which (when aggregated with all other Swap Agreements of the Borrower and its Restricted Subsidiaries then in effect effectively converting interest rates from fixed to floating) do not exceed 50% of the then outstanding principal amount of the Credit Parties' Debt for borrowed money which bears interest at a fixed rate, and which Swap Agreements shall not, in any case, have a tenor beyond the maturity date of such Debt, and

 

(B)    Swap Agreements effectively converting interest rates from floating to fixed, the notional amounts of which (when aggregated with all other Swap Agreements of the Borrower and its Restricted Subsidiaries then in effect effectively converting interest rates from floating to fixed) do not exceed 75% of the then outstanding principal amount of the Credit Parties' Debt for borrowed money which bears interest at a floating rate, and which Swap Agreements shall not, in any case, have a tenor beyond the maturity date of such Debt.

 

CREDIT AGREEMENT – Page 94

 

 

(b)    [Reserved].

 

(c)    In no event shall any Swap Agreement contain any requirement, agreement or covenant for the Borrower or any Restricted Subsidiary to post collateral, credit support (including in the form of letters of credit) or margin (other than, in each case, pursuant to the Security Instruments) to secure their obligations under such Swap Agreement or to cover market exposures.

 

(d)    For purposes of entering into or maintaining Swap Agreement trades or transactions under Section 9.18(a)(i) and Section 9.18(b), respectively, forecasts of reasonably anticipated production from the Borrower's and its Restricted Subsidiaries' Oil and Gas Properties classified as Proved Reserves as set forth on the most recent Reserve Report delivered pursuant to the terms of this Agreement shall be deemed to be updated to account for any increase or decrease therein anticipated because of information obtained by the Borrower or any of its Restricted Subsidiaries and delivered to the Administrative Agent subsequent to the publication of such Reserve Report including, without limitation, (i) the Borrower's or any of its Restricted Subsidiaries' internal forecasts of production decline rates for existing wells, (ii) additions to or deletions from anticipated future production from new wells, (iii) completed dispositions, and (iv) completed acquisitions coming on stream or failing to come on stream; provided that (A) any such supplemental information shall be reasonably satisfactory to the Administrative Agent and (B) if any such supplemental information is delivered, such information shall be presented on a net basis (i.e., it shall take into account both increases and decreases in anticipated production subsequent to publication of the most recent Reserve Report).

 

Section 9.19    Marketing Activities. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, engage in marketing activities for any Hydrocarbons or enter into any contracts related thereto other than (i) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from their Proved Oil and Gas Properties during the period of such contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be produced from Proved Oil and Gas Properties of third parties during the period of such contract associated with the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries that the Borrower or one of its Restricted Subsidiaries has the right to market pursuant to joint operating agreements, unitization agreements or other similar contracts that are usual and customary in the oil and gas business, and (iii) other contracts for the purchase and/or sale of Hydrocarbons of third parties (A) which have generally offsetting provisions (i.e., corresponding pricing mechanics, delivery dates and points and volumes) such that no "position" is taken and (B) for which appropriate credit support has been taken to alleviate the material credit risks of the counterparty thereto.

 

Section 9.20    Changes in Fiscal Year and Amendments to Organizational Documents. The Borrower shall not, and shall not permit any other Credit Party to (a) have its fiscal year end on a date other than December 31 or change its method of determining fiscal quarters or (b) alter, amend or modify in any manner materially adverse to the interests of the Lenders, its Organizational Documents.

 

Section 9.21    Non-Qualified ECP Guarantors. The Borrower shall not permit any Credit Party that is not a Qualified ECP Guarantor to own, at any time, any Proved Oil and Gas Properties or any Equity Interests in any Subsidiaries.

 

Section 9.22    Sales and Leasebacks . The Borrower will not, and will not permit any other Credit Party to enter into any arrangement with any Person providing for the leasing by any Credit Party of real or personal property that has been or is to be sold or transferred by such Credit Party to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Credit Party.

 

CREDIT AGREEMENT – Page 95

 

 

Section 9.23    Limitations on Redemptions of 2024 Senior Notes. The Borrower will not, and will not permit any other Credit Party to, voluntarily Redeem the 2024 Senior Notes prior to the 2024 Senior Notes Scheduled Maturity Date; provided, however, the Borrower and the other Credit Parties may convert the 2024 Senior Notes into Equity Interests in the Borrower (other than Disqualified Capital Stock) and the Borrower or Subsidiaries may otherwise voluntarily Redeem the 2024 Senior Notes (i) with payment made with the proceeds of other Specified Additional Debt so long as (a) such Redemption is made no later than October 1, 2023, and (b) at the time of and immediately after giving pro forma effect to such Redemption, no Default or Event of Default shall have occurred and be continuing, (ii) with net proceeds of an offering of Equity Interests (other than Disqualified Capital Stock) in the Borrower, so long as, in the case of this clause (ii), no Default or Event of Default has occurred and is continuing both before and after giving effect to such Redemption and such Redemption occurs substantially contemporaneously with the receipt of such proceeds, (iii) with cash (excluding proceeds of Loans), so long as, in the case of this clause (iii), (a) no Default or Event of Default exists or would result therefrom and (b) after giving pro forma effect to such Redemption, the Borrower is in pro forma compliance with Section 9.01 and (iv) with the Special Mandatory Redemption, as defined in and pursuant to the terms of the 2022 Indenture.

 

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

 

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

 

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

 

(b)    the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 10.01(a)) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) Business Days.

 

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

 

(d)    the Borrower or any Restricted Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in Section 8.01(i), Section 8.02, Section 8.03, Section 8.12, Section 8.14, Section 8.17, Section 8.19, Section 8.20, or in Article IX.

 

(e)    the Borrower or any Restricted Subsidiary shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or any other Loan Document, and such failure shall continue unremedied for a period of thirty (30) days after the earlier of (i) receipt of notice thereof by the Borrower from the Administrative Agent or (ii) the date a Responsible Officer of the Borrower knew or should have known of such failure.

 

CREDIT AGREEMENT – Page 96

 

 

(f)    the Borrower or any Restricted Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Debt, when and as the same shall become due and payable and such failure to pay continues beyond any applicable grace period.

 

(g)    any event or condition occurs that results in any Material Debt becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Debt or any trustee or agent on its or their behalf to cause any Material Debt to become due, or to require the Redemption thereof or any offer to Redeem to be made in respect thereof, prior to its scheduled maturity or require the Borrower or any Restricted Subsidiary to make an offer in respect thereof and such event or condition continues beyond any applicable grace period.

 

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

 

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

 

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

 

(k)    (i) one or more judgments for the payment of money in an aggregate amount in excess of the greater of (i) $3,000,000 and (ii) ten percent (10%) of the Aggregate Elected Commitments in effect at such time (to the extent not covered by independent third party insurance as to which the insurer does not dispute coverage and is not subject to an insolvency proceeding) or (ii) any one or more non-monetary judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, shall be rendered against the Borrower, any Restricted Subsidiary or any combination thereof and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any such judgment.

 

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

 

CREDIT AGREEMENT – Page 97

 

 

(m)    a Change in Control shall occur.

 

(n)    an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

Section 10.02    Remedies.

 

(a)    In the case of an Event of Default other than one described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter during the continuance of such Event of Default, the Administrative Agent may, and at the request of the Required Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Notes and the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.08(j)), shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor; and in case of an Event of Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the Commitments shall automatically terminate and the Notes and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and the other obligations of the Borrower and the Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.08(j)), shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and each Guarantor.

 

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

 

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

 

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

 

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

 

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

 

CREDIT AGREEMENT – Page 98

 

 

(iv)    fourth, pro rata to payment of principal outstanding on the Loans, LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time, Indebtedness referred to in clause (b) of the definition of Indebtedness owing to Secured Swap Providers, to serve as cash collateral to be held by the Administrative Agent to secure the remaining LC Exposure and to any other Indebtedness; and

 

(v)    fifth, any excess, after all of the Indebtedness shall have been indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental Requirement.

 

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

 

Section 10.03    Right to Cure Financial Covenant Non-Compliance.

 

(a)    Notwithstanding anything to the contrary contained in Section 10.01 or Section 10.02, if:

 

(i)    the Borrower fails to comply with the requirements of Section 9.01(a) or Section 9.01(b) (collectively, the "Specified Financial Covenants") as of the last day of any fiscal quarter, and

 

(ii)    during the period (the "Cure Period") beginning on the first day of the following fiscal quarter and ending ten Business Days after the date on which financial statements with respect to any Rolling Period with respect to which (or as of the end of which) such covenant is being measured (each such period, a "Test Period") are required to be delivered pursuant to Section 8.01, the Borrower receives a Specified Equity Contribution,

 

then the Specified Financial Covenants shall be recalculated giving effect to the following pro forma adjustments:

 

(x)         EBITDAX and consolidated current assets for the last fiscal quarter of such Test Period shall, for the purposes of the Specified Financial Covenants and subject to the limitations set forth in Section 10.03(c)(iii) below, shall each be deemed increased by an amount of the net cash proceeds so contributed; provided that to the extent the Specified Equity Contribution is being applied to cure a failure to comply with both Specified Financial Covenants, the Specified Equity Contribution (or portion thereof) applied to each Specified Financial Covenant shall be the minimum amount required to remedy the respective failure to comply; or

 

(y)         Total Debt as of the last fiscal quarter of such Test Period shall, for the purposes of the Specified Financial Covenants and subject to the limitations set forth in Section 10.03(c)(iii) below, shall be deemed to be decreased by an amount of the net cash proceeds so contribution so long as the proceeds of any Specified Equity Contribution received by the Borrower are actually used to repay Debt.

 

CREDIT AGREEMENT – Page 99

 

 

(b)    The parties hereby acknowledge and agree that (i) this Section 10.03 may not be relied on or used for purposes of determining permitted amounts with respect to covenants in this Agreement other than the Specified Financial Covenants and (ii) that such deemed increase to EBITDAX and consolidated current assets, in any fiscal quarter shall be applied solely for the purpose of determining the existence of a Default or Event of Default under Section 9.01 with respect to any Test Period that includes such fiscal quarter and not for any other purpose under any Loan Document.

 

(c)    If, after receipt of the Specified Equity Contribution and the recalculations pursuant to clause (a) above, the Borrower shall then be in compliance with the requirements of the Specified Financial Covenants during such Test Period, the Borrower shall be deemed to have satisfied the requirements of the Specified Financial Covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable Default and Event of Default under Section 10.01 that had occurred shall be deemed cured; provided that:

 

(i)    no more than three (3) Specified Equity Contributions will be permitted in the aggregate during the term of this Agreement;

 

(ii)    in each Rolling Period there shall be at least two fiscal quarters in respect of which no Specified Equity Contribution is made;

 

(iii)    the amount of any Specified Equity Contribution shall be no greater than the minimum amount required to cause the Borrower to be in compliance with the Specified Financial Covenants for any applicable period; and

 

(iv)    to the extent, if any, that EBITDAX or consolidated current assets is calculated under this Agreement for any purpose other than determining compliance with the Specified Financial Covenants, the Specified Equity Contribution shall not be included in such calculation.

 

ARTICLE XI

THE AGENTS

 

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

 

CREDIT AGREEMENT – Page 100

 

 

Section 11.02    Duties and Obligations of Administrative Agent. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing (the use of the term "agent" herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties), (b) the Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or as to those conditions precedent expressly required to be to the Administrative Agent's satisfaction, (vi) the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower and its Subsidiaries or any other obligor or guarantor, or (vii) any failure by the Borrower or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or observance of any covenants, agreements or other terms or conditions set forth herein or therein. For purposes of determining compliance with the conditions specified in Article VI, each Lender and the Issuing Bank shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender or the Issuing Bank unless the Administrative Agent shall have received written notice from such Lender prior to the proposed closing date specifying its objection thereto.

 

Section 11.03    Action by Administrative Agent. The Administrative Agent shall have no duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) and in all cases the Administrative Agent shall be fully justified in failing or refusing to act hereunder or under any other Loan Documents unless it shall (a) receive written instructions from the Required Lenders or the Lenders, as applicable, (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto by the Administrative Agent shall be binding on all of the Lenders. If a Default has occurred and is continuing, then the Administrative Agent shall take such action with respect to such Default as shall be directed by the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. In no event, however, shall the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement, the Loan Documents or applicable law. If a Default has occurred and is continuing, no Agent (other than the Administrative Agent) shall have any obligation to perform any act in respect thereof. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or the Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02), and otherwise the Administrative Agent shall not be liable for any action taken or not taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.

 

CREDIT AGREEMENT – Page 101

 

 

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

 

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

 

Section 11.06    Resignation of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this Section 11.06, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor reasonably acceptable to the Borrower. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article XI and Section 12.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

 

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

 

CREDIT AGREEMENT – Page 102

 

 

Section 11.08    No Reliance. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is a party. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. The Agents shall not be required to keep themselves informed as to the performance or observance by the Borrower or any of its Subsidiaries of this Agreement, the Loan Documents or any other document referred to or provided for herein or to inspect the Properties or books of the Borrower or its Subsidiaries. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent or the Arranger shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of such Agent or any of its Affiliates. In this regard, each Lender acknowledges that Winstead PC is acting in this transaction as special counsel to the Administrative Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each other party hereto will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein.

 

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

 

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

 

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

 

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

 

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

 

CREDIT AGREEMENT – Page 103

 

 

Section 11.10    Authority of Administrative Agent to Release Collateral, Liens and Guarantors. Each Lender and the Issuing Bank, and by accepting the benefits of the Collateral, each Secured Swap Provider and each Bank Products Provider hereby authorizes the Administrative Agent to release (a) any collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents (including, without limitation, any collateral owned by a Restricted Subsidiary that is redesignated as an Unrestricted Subsidiary in accordance with Section 9.06(b)) and (b) any Guarantor if 100% of the Equity Interests in such Guarantor are sold in a transaction permitted under the Loan Documents. Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to execute and deliver to the Borrower, at the Borrower's sole cost and expense, any and all releases of Liens, termination statements, assignments or other documents reasonably requested by the Borrower in connection with any sale or other disposition of Property to the extent such sale or other disposition is permitted by the terms of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.

 

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

 

Section 11.12         Acknowledgements Regarding Erroneous Payments         .

 

(a)         Each Lender and Issuing Bank hereby agrees that (x) if the Administrative Agent notifies such Lender or such Issuing Bank that the Administrative Agent has determined in its sole discretion that any funds received by such Lender or such Issuing Bank from the Administrative Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a "Payment") were erroneously transmitted to such Lender or such Issuing Bank (whether or not known to such Lender or such Issuing Bank), and demands the return of such Payment (or a portion thereof), such Lender or such Issuing Bank shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender or such Issuing Bank to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender or such Issuing Bank shall not assert, and hereby waives, as to the Administrative Agent, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Payments received, including without limitation any defense based on "discharge for value" or any similar doctrine. A notice of the Administrative Agent to any Lender or such Issuing Bank under this Section 11.12 shall be conclusive, absent manifest error.

 

(b)         Each Lender and each Issuing Bank hereby further agrees that if it receives a Payment from the Administrative Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such Payment (a "Payment Notice") or (y) that was not preceded or accompanied by a Payment Notice, it shall be on notice, in each such case, that an error has been made with respect to such Payment. Each Lender and each Issuing Bank agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender or such Issuing Bank shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender or such Issuing Bank to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.

 

CREDIT AGREEMENT – Page 104

 

 

(c)         Each Borrower and each other Credit Party hereby agrees that (x) in the event an erroneous Payment (or portion thereof) is not recovered from any Lender or such Issuing Bank that has received such Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such Lender or such Issuing Bank with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Indebtedness owed by any Borrower or any other Credit Party.

 

(d)         Each party's obligations under this Section 11.12 shall survive the resignation or replacement of the Administrative Agent or any transfer of rights or obligations by, or the replacement of, a Lender or an Issuing Bank, the termination of the Commitments or the repayment, satisfaction or discharge of all Indebtedness under any Loan Document.

 

ARTICLE XII

MISCELLANEOUS

 

Section 12.01    Notices.

 

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

 

(i)    if to the Borrower, to it at

 

HighPeak Energy, Inc.

421 W. 3rd St., Suite 1000

Fort Worth, Texas 76102

Attention: Jack Hightower

Email: jhightower@highpeakenergy.com

 

(ii)   if to the Administrative Agent or to the Issuing Bank, to it at

 

Fifth Third Bank, National Association

1001 Fannin Street

Houston, Texas 77002

Attention: Dan Condley

Email: Dan.Condley@53.com; and

 

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

 

CREDIT AGREEMENT – Page 105

 

 

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

 

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

 

Section 12.02    Waivers; Amendments.

 

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

 

(b)    Neither this Agreement nor any provision hereof nor any Security Instrument nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment or the Maximum Credit Amount, or the portion of the Aggregate Elected Commitments of any Lender without the written consent of such Lender, (ii) increase the Borrowing Base or modify Section 2.07 in any manner that results in an increase of the Borrowing Base (except as provided in clause (iii) below) without the written consent of all of the Lenders (iii) decrease (other than pursuant to Section 2.07(e) or Section 2.07(f)) or maintain the Borrowing Base or waive a reduction to the Borrowing Base without the written consent (or deemed approval, as set forth herein) of the Required Lenders; provided that a Borrowing Base redetermination may be delayed by the Majority Lenders, (iv) postpone the scheduled date of payment or prepayment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or any other Indebtedness hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Termination Date without the written consent of each Lender affected thereby, (v) change Section 4.01(b), Section 4.01(c) or any other term or condition hereof in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (vi) waive or amend Section 6.01, Section 10.02(c) or Section 12.14 or change the definition of the terms "Domestic Subsidiary", "Foreign Subsidiary" or "Subsidiary", without the written consent of each Lender (other than any Defaulting Lender), (vii) release any Guarantor (except as set forth in Section 11.10 or in the Guaranty Agreement), release or subordinate all or substantially all of the collateral (other than as provided in Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less than 90%, without the written consent of each Lender (other than any Defaulting Lender), or (viii) change any of the provisions of this Section 12.02(b) or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or make any determination or grant any consent hereunder or any other Loan Documents, without the written consent of each Lender (other than any Defaulting Lender); provided, further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any other Agent or the Issuing Bank hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, such other Agent or the Issuing Bank, as the case may be. Notwithstanding the foregoing, (A) any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked as such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the Lenders, (B) the Borrower and the Administrative Agent may amend this Agreement or any other Loan Document without the consent of the Lenders in order to correct, amend or cure any ambiguity, inconsistency or defect or correct any typographical error or other manifest error in any Loan Document, (C) the Administrative Agent and the Borrower (or other applicable Credit Party) may enter into any amendment, modification or waiver of this Agreement or any other Loan Document or enter into any agreement or instrument to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Mortgaged Property or Property to become Mortgaged Property to secure the Indebtedness for the benefit of the Lenders or as required by any Governmental Requirement to give effect to, protect or otherwise enhance the rights or benefits of any Lender under the Loan Documents without the consent of any Lender and (D) the Administrative Agent may, without the consent of any Lender, enter into amendments or modifications to this Agreement or any of the other Loan Documents or to enter into additional Loan Documents as the Administrative Agent reasonably deems appropriate in order to implement any Successor Rate or otherwise effectuate the terms of Section 3.03(b) in accordance with the terms of Section 3.03(b).

 

CREDIT AGREEMENT – Page 106

 

 

Section 12.03    Expenses, Indemnity; Damage Waiver.

 

(a)    The Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including, without limitation, the reasonable fees, charges and disbursements of counsel and other outside consultants for the Administrative Agent, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental invasive and non-invasive assessments and audits and surveys and appraisals, in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Administrative Agent as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all documented costs, expenses and Other Taxes incurred by the Administrative Agent in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein, (iii) all reasonable and documented out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iv) all documented out-of-pocket expenses incurred by the Administrative Agent or the Issuing Bank or, during the continuance of any Event of Default, any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 12.03, or in connection with the Loans made or Letters of Credit issued hereunder, including, without limitation, all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

 

CREDIT AGREEMENT – Page 107

 

 

(b)    THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY (OTHER THAN EXPENSES IN CONNECTION WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS DATED OF EVEN DATE HEREWITH AND ANY AMENDMENTS, MODIFICATION OR WAIVERS OF OR CONSENTS RELATED THERETO, WHICH EXPENSES SHALL ONLY BE PAID BY THE BORROWER TO THE EXTENT PROVIDED IN SECTION 12.03(a)), THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY RESTRICTED SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (i) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (v) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vi) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (vii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES OR OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (viii) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (ix) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (x) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xi) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiii) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR ITS RELATED PARTIES, (Y) RESULT FROM A CLAIM BROUGHT BY THE BORROWER OR ANY OTHER CREDIT PARTY AGAINST AN INDEMNITEE FOR MATERIAL BREACH IN BAD FAITH OF SUCH INDEMNITEE'S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IF THE BORROWER OR SUCH CREDIT PARTY HAS OBTAINED A FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A COURT OF COMPETENT JURISDICTION OR (Z) RESULT FROM A PROCEEDING SOLELY BETWEEN OR AMONG INDEMNITEES THAT DOES NOT INVOLVE ANY ACTION OR OMISSION BY THE BORROWER OR ANY OTHER CREDIT PARTY, OTHER THAN CLAIMS AGAINST ANY OF THE ADMINISTRATIVE AGENT OR THE LENDERS OR ANY OF THEIR AFFILIATES IN ITS CAPACITY OR IN FULFILLING ITS ROLE AS THE ADMINISTRATIVE AGENT OR THE ISSUING BANK UNDER THIS AGREEMENT. THIS SECTION SHALL NOT APPLY WITH RESPECT TO TAXES, WHICH SHALL BE GOVERNED SOLELY BY SECTION 5.03.

 

CREDIT AGREEMENT – Page 108

 

 

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

 

(d)    All amounts due under this Section 12.03 shall be payable promptly after written demand therefor.

 

Section 12.04    Successors and Assigns.

 

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

 

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

 

(A)    the Borrower, provided that no consent of the Borrower shall be required if such assignment is to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, is to any other assignee; and provided further that the Borrower shall be deemed to have consented to any such assignment unless it has objected thereto by written notice to the Administrative Agent within ten (10) days after the Borrower having received notice thereof;

 

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

 

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

 

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

 

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

 

CREDIT AGREEMENT – Page 109

 

 

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

 

(C)    the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $4,000;

 

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

 

(E)    in no event may any Lender assign all or a portion of its rights and obligations under this Agreement to the Borrower, any Affiliate of the Borrower or any natural person; and

 

(F)    the Applicable Percentage of the Maximum Credit Amount and the portion of the Aggregate Elected Commitments assigned are equal.

 

(iii)    Subject to Section 12.04(b)(iv) and the acceptance and recording thereof, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.04(c).

 

(iv)    The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Maximum Credit Amount and the portion of the Aggregate Elected Commitments of, and principal amount (and stated interest) of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. In connection with any changes to the Register, if necessary, the Administrative Agent will reflect the revisions on Annex I and forward a copy of such revised Annex I to the Borrower, the Issuing Bank and each Lender.

 

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

 

CREDIT AGREEMENT – Page 110

 

 

(c)    Any Lender may, without the consent of the Borrower, the Administrative Agent or the Issuing Bank, sell participations to one or more banks or other Persons (other than the Borrower, any Affiliate of the Borrower or any natural person) (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the proviso to Section 12.02 that affects such Participant. In addition such agreement must provide that the Participant be bound by the provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.04(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant's interest in the Loans or other obligations under the Loan Documents (the "Participant Register"); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

(ii)    Each Participant agrees (A) to be subject to the provisions of Section 5.03 (subject to the requirements and limitations therein, including the requirements under Section 5.03(f) (it being understood that the documentation required under Section 5.03(f) shall be delivered to the participating Lender)) as if it were an assignee under paragraph (b) of this Section; and (B) that it shall not be entitled to receive any greater payment under Sections 5.01 or 5.03, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.

 

CREDIT AGREEMENT – Page 111

 

 

(d)    Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank or other central bank having jurisdiction over such Lender, and this Section 12.04 shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(e)    Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of the interests or obligations of any Lender or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Borrower and the Guarantors to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any state.

 

Section 12.05    Survival; Revival; Reinstatement.

 

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

 

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

 

Section 12.06    Counterparts; Integration; Effectiveness.

 

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

 

CREDIT AGREEMENT – Page 112

 

 

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

 

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

 

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

 

Section 12.08    Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind including, without limitation, obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any Restricted Subsidiary against any of and all the obligations of the Borrower or any Restricted Subsidiary owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.

 

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

 

(a)    THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. CHAPTER 346 OF THE TEXAS FINANCE CODE (RELATING TO REVOLVING LOAN AND REVOLVING TRIPARTY ACCOUNTS), SHALL NOT APPLY TO THIS AGREEMENT OR ANY LOANS OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

CREDIT AGREEMENT – Page 113

 

 

(b)    EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS (AND THE BORROWER SHALL CAUSE EACH CREDIT PARTY TO SUBMIT) FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS, THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS AND APPELLATE COURTS FROM ANY THEREOF; PROVIDED THAT NOTHING CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT WILL PREVENT ANY LENDER OR THE ADMINISTRATIVE AGENT FROM BRINGING ANY ACTION TO ENFORCE ANY AWARD OR JUDGMENT OR EXERCISE ANY RIGHT UNDER THE SECURITY INSTRUMENTS OR AGAINST ANY COLLATERAL OR ANY OTHER PROPERTY OF ANY CREDIT PARTY IN ANY OTHER FORUM IN WHICH JURISDICTION CAN BE ESTABLISHED. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.

 

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

 

(d)    EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; PROVIDED THAT NOTHING CONTAINED IN THIS SECTION 12.09(d)(ii) SHALL LIMIT THE BORROWER'S INDEMNIFICATION OBLIGATIONS TO THE EXTENT SET FORTH IN SECTION 12.03 TO THE EXTENT SUCH SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARE INCLUDED IN ANY THIRD PARTY CLAIM IN CONNECTION WITH WHICH SUCH INDEMNITEE IS OTHERWISE ENTITLED TO INDEMNIFICATION HEREUNDER; (i) 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 (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

 

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

 

CREDIT AGREEMENT – Page 114

 

 

Section 12.11    Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 12.11, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap Agreement relating to the Borrower and its obligations, (g) with the consent of the Borrower, or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section 12.11, "Information" means all information received from the Borrower or any Restricted Subsidiary relating to the Borrower or any Restricted Subsidiary and their businesses, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower or a Restricted Subsidiary; provided that, in the case of information received from the Borrower or any Restricted Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 12.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything herein to the contrary, "Information" shall not include, and the Borrower, the Borrower's Subsidiaries, the Administrative Agent, each Lender and the respective Affiliates of each of the foregoing (and the respective partners, directors, officers, employees, agents, advisors and other representatives of the aforementioned Persons), and any other party, may disclose to any and all Persons, without limitation of any kind (A) any information with respect to the United States federal and state income tax treatment of the transactions contemplated hereby and any facts that may be relevant to understanding the United States federal or state income tax treatment of such transactions ("tax structure"), which facts shall not include for this purpose the names of the parties or any other person named herein, or information that would permit identification of the parties or such other persons, or any pricing terms or other nonpublic business or financial information that is unrelated to such tax treatment or tax structure, and B) all materials of any kind (including opinions or other tax analyses) that are provided to the Borrower, the Administrative Agent or such Lender relating to such tax treatment or tax structure.

 

Section 12.12    Interest Rate Limitation. It is the intention of the parties hereto that each Lender and the Issuing Bank shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender or the Issuing Bank under laws applicable to it (including the laws of the United States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender or such Issuing Bank notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Loans, it is agreed as follows: (a) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender or such Issuing Bank under any of the Loan Documents or agreements or otherwise in connection with the Loans shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender or such Issuing Bank to the Borrower); and (b) in the event that the maturity of the Loans is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender or the Issuing Bank may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender or the Issuing Bank as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender or the Issuing Bank on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender or the Issuing Bank, be amortized, prorated, allocated and spread throughout the stated term of the Loans evidenced by the Loan Documents until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender or the Issuing Bank on any date shall be computed at the Highest Lawful Rate applicable to such Lender or the Issuing Bank pursuant to this Section 12.12 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender or the Issuing Bank would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender or the Issuing Bank, then the amount of interest payable to such Lender or the Issuing Bank in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender or the Issuing Bank until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender or the Issuing Bank if the total amount of interest had been computed without giving effect to this Section 12.12. To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender or the Issuing Bank, such Lender or the Issuing Bank elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the Texas Finance Code does not apply to the Borrower's obligations hereunder.

 

CREDIT AGREEMENT – Page 115

 

 

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

 

Section 12.14    Collateral Matters; Swap Agreements. The benefit of the Security Instruments and of the provisions of this Agreement relating to any collateral securing the Indebtedness shall also extend to and be available to the Secured Swap Providers with respect to any Swap Agreement including any Swap Agreement in existence prior to the date hereof, but excluding any additional transactions or confirmations entered into (a) after such Secured Swap Provider ceases to be a Lender or an Affiliate of a Lender or (b) after assignment by a Secured Swap Provider to another Person that is not a Lender or an Affiliate of a Lender. No Lender or any Affiliate of a Lender shall have any voting or consent rights under any Loan Document as a result of the existence of obligations owed to it under any such Swap Agreements.

 

CREDIT AGREEMENT – Page 116

 

 

Section 12.15    No Third Party Beneficiaries. This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans and the Issuing Bank to issue, amend, renew or extend Letters of Credit hereunder are solely for the benefit of the Borrower, and no other Person (including, without limitation, any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent, the Issuing Bank or any Lender for any reason whatsoever. There are no third party beneficiaries.

 

Section 12.16    USA Patriot Act Notice. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the US Patriot Act.

 

Section 12.17    No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and acknowledges its Subsidiaries' understanding, that: (a) (i) no fiduciary, advisory or agency relationship between the Borrower and its Subsidiaries and the Administrative Agent or any Lender is intended to be or has been created in respect of the transactions contemplated hereby or by the other Loan Documents, irrespective of whether the Administrative Agent or any Lender has advised or is advising the Borrower or any Subsidiary on other matters; (ii) the arranging and other services regarding this Agreement provided by the Administrative Agent and the Lenders are arm's-length commercial transactions between the Borrower and its Subsidiaries, on the one hand, and the Administrative Agent and the Lenders, on the other hand; (iii) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent that it has deemed appropriate; and (iv) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; and (b) (i) the Administrative Agent and the Lenders each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower or any of its Subsidiaries, or any other Person; (ii) neither the Administrative Agent nor the Lenders has any obligation to the Borrower or any of its Subsidiaries with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent and the Lenders and their respective Affiliates may be engaged, for their own accounts or the accounts of customers, in a broad range of transactions that involve interests that differ from those of the Borrower and its Subsidiaries, and neither the Administrative Agent nor the Lenders has any obligation to disclose any of such interests to the Borrower or its Subsidiaries. To the fullest extent permitted by Law, the Borrower hereby waives and releases any claims that it may have against the Administrative Agent and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

 

Section 12.18    Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)    the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder that may be payable to it by any party hereto that is an Affected Financial Institution; and

 

CREDIT AGREEMENT – Page 117

 

 

(b)    the effects of any Bail-In Action on any such liability, including, if applicable:

 

(i)    a reduction in full or in part or cancellation of any such liability;

 

(ii)    a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(iii)    the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any applicable Resolution Authority.

 

Section 12.19    Certain ERISA Matters.

 

(a)    Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that at least one of the following is and will be true:

 

(i)    such Lender is not using "plan assets" (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments;

 

(ii)    the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender's entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement;

 

(iii)    (A) such Lender is an investment fund managed by a "Qualified Professional Asset Manager" (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender's entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or

 

CREDIT AGREEMENT – Page 118

 

 

(iv)    such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.

 

(b)    In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that none of the Administrative Agent, the Arranger nor any of their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender's entrance into, participation in, and administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

 

(c)    Neither the Administrative Agent nor the Arrangers, or any affiliate thereof, is undertaking to provide individualized investment advice, or to give advice in a fiduciary capacity, that will serve as the primary basis of the Lenders' decision to participate in the transactions contemplated hereby. Accordingly, any communications between the Administrative Agent, Arrangers and Lenders is not intended, and should not be construed, to constitute fiduciary investment advice by the Administrative Agent, the Arrangers, or any affiliate regarding the investment or management of assets held by a Lender.

 

Section 12.20    Acknowledgment Regarding Any Supposed QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for any Swap Agreement or any other agreement or instrument that is a QFC (such support, "QFC Credit Support", and each such QFC, a "Supported QFC"), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the "U.S. Special Resolution Regimes") in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of Texas and/or of the United States or any other state of the United States):

 

In the event a Covered Entity that is party to a Supported QFC (each, a "Covered Party") becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

 

[SIGNATURES BEGIN NEXT PAGE]

 

CREDIT AGREEMENT – Page 119

 

 

 

EXHIBIT B

FORM OF BORROWING REQUEST

 

[                   ], 20[   ]

 

HIGHPEAK ENERGY, INC., a Delaware corporation (the "Borrower"), pursuant to Section 2.03 of the Credit Agreement dated as of December 17, 2020 (together with all amendments, restatements, supplements or other modifications thereto, the "Credit Agreement") among the Borrower, FIFTH THIRD BANK, NATIONAL ASSOCIATION, as Administrative Agent and the other agents and lenders (the "Lenders") which are or become parties thereto (unless otherwise defined herein, each capitalized term used herein is defined in the Credit Agreement), hereby requests a Borrowing as follows:

 

(i)         Aggregate amount of the requested Borrowing is $[                   ];

 

(ii)         Date of such Borrowing is [                   ], 20[   ];

 

(iii)         Requested Borrowing is to be [an ABR Borrowing] [a Tranche Rate Borrowing];

 

(iv)         In the case of a Borrowing of Tranche Rate, the initial Interest Period applicable thereto is [                   ];

 

(v)         Amount of Borrowing Base in effect on the date hereof is $[                   ];

 

(vi)         Amount of Aggregate Elected Commitments in effect on the date hereof is $[                   ];

 

(vii)         Total Revolving Credit Exposures on the date hereof (i.e., outstanding principal amount of Loans and total LC Exposure) is $[                   ]; and

 

(viii)         Pro forma total Revolving Credit Exposures (giving effect to the requested Borrowing) is $[                   ]; and

 

(ix)         Location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05 of the Credit Agreement, is as follows:

 

[                   ]

[                   ]

[                   ]

[                   ]

[                   ]

 

EXHIBIT B, Form of Borrowing Request – Page 1

 

 

The undersigned certifies that he/she is the [                ] of the Borrower, and that as such he/she is authorized to execute this certificate on behalf of the Borrower. The undersigned further certifies, represents and warrants on behalf of the Borrower (and not individually) that the Borrower is entitled to receive the requested Borrowing under the terms and conditions of the Credit Agreement.

 

	
			 

				
			HIGHPEAK ENERGY, INC.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			 

				
			 

			
	
			 

				
			Name:

				
			 

				
			 

			
	
			 

				
			Title:

				
			 

				
			 

			

                                       

EXHIBIT B, Form of Borrowing Request – Page 2

 

 

EXHIBIT C

FORM OF INTEREST ELECTION REQUEST

 

[                ], 20[   ]

 

HIGHPEAK ENERGY, INC., a Delaware corporation (the "Borrower"), pursuant to Section 2.04 of the Credit Agreement dated as of December 17, 2020 (together with all amendments, restatements, supplements or other modifications thereto, the "Credit Agreement") among the Borrower, FIFTH THIRD BANK, NATIONAL ASSOCIATION, as Administrative Agent and the other agents and lenders (the "Lenders") which are or become parties thereto (unless otherwise defined herein, each capitalized term used herein is defined in the Credit Agreement), hereby makes an Interest Election Request as follows:

 

(i)         The Borrowing to which this Interest Election Request applies, and if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information specified pursuant to (iii) and (iv) below shall be specified for each resulting Borrowing) is [                ];

 

(ii)         The effective date of the election made pursuant to this Interest Election Request is [                ], 20[   ]; [and]

 

(iii)         The resulting Borrowing is to be [an ABR Borrowing] [a Tranche Rate Borrowing][; and]

 

[(iv)         [If the resulting Borrowing is a Borrowing of Tranche Rate Loans] The Interest Period applicable to the resulting Borrowing after giving effect to such election is [                ]].

 

EXHIBIT C, Form of Interest Election Request – Page 1

 

 

The undersigned certifies that he/she is the [                ] of the Borrower, and that as such he/she is authorized to execute this certificate on behalf of the Borrower. The undersigned further certifies, represents and warrants on behalf of the Borrower that the Borrower is entitled to receive the requested continuation or conversion under the terms and conditions of the Credit Agreement.

 

	
			 

				
			HIGHPEAK ENERGY, INC.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			 

				
			 

			
	
			 

				
			Name:

				
			 

				
			 

			
	
			 

				
			Title:

				
			 

				
			 

			

                                             

EXHIBIT C, Form of Interest Election Request – Page 2

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