Document:

Exhibit 10.9

 

SHARE UNIT PLAN

FOR SENIOR EXECUTIVES OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY AND ITS SUBSIDIARIES

 

Effective January 1, 2011

 

 

1.                                      PLAN OBJECTIVES

 

The main goals of the Plan are to:

 

a.                                       attract qualified candidates to act as senior management of the Participating Corporations;

 

b.                                      retain members of senior management of the Participating Corporations;

 

c.                                       motivate the Senior Executives to execute the strategic plan of each business segment; and

 

d.                                      prompt the Senior Executives to create economic value for the shareholders of Lifeco through aligning the interests of the executives with those of the shareholders.

 

2.                                      DEFINED TERMS

 

a.                                       Account has the meaning set out in Section 6.1;

 

b.                                      Applicable Law means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities and tax legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder, and Stock Exchange Rules;

 

c.                                       Award means an award of PSUs granted by the Committee to a Participant in accordance with Section 5;

 

d.                                      Award Date means the effective date of the grant of an Award;

 

e.                                       Award Notice means the notice, in such form as may be prescribed by the Committee from time to time, evidencing an Award and setting out the Vesting Conditions applicable to such Award;

 

f.                                        Beneficiary means an individual who, on the date of a Participant’s death, is the person who has been designated in accordance with Section 13 and Applicable Law, or where no such individual has been validly designated by the Participant, or where the individual does not survive the Participant, the Participant’s estate;

 

g.                                     Board means the Board of Directors of Great-West Life & Annuity Insurance Company;

 

h.                                     Code means the United States Internal Revenue Code of 1986, as amended from time to time;

 

i.                                         Committee means the Compensation Committee of the Board;

 

 

j.                                         Dividend Equivalents means additional PSUs credited to a Participant’s Account in accordance with Section 6.2 in respect of dividends paid on Shares;

 

k.                                      Employed or Employment means, with respect to a Participant at a particular time, that at such time (i) he or she is performing work on a full-time basis at a workplace of a Participating Corporation; or (ii) he or she is not actively at work at a workplace of a Participating Corporation due to an approved leave of absence, maternity or parental leave or Short Term Disability, and Employee means a person who is Employed;

 

l.                                         Initial Award Value means a notional value determined for a Senior Executive by the Committee in respect of a Performance Period to be used to determine the number of PSUs to be granted to such Senior Executive as an Award for such Performance Period;

 

m.                                   Lifeco means Great-West Lifeco Inc. and any successor corporation, whether by amalgamation, merger or otherwise;

 

n.                                     Long Term Disability means a mental or physical impairment that renders a Participant unable to perform the duties that the Participant was engaged to perform before the commencement of the impairment and that qualifies as a long term disability under the applicable group insurance plan of the Participating Corporation under which the Participant is covered;

 

o.                                     Market Value means, with respect to any particular date, the average closing price per Share on the Stock Exchange during the immediately preceding twenty Trading Days;

 

p.                                     Participant means a Senior Executive who has received an Award that has not been settled or redeemed in full;

 

q.                                     Participating Corporation means Great-West Life & Annuity Insurance Company and its subsidiaries;

 

r.                                        Performance Period means, with respect to a PSU, the 3-year period that begins on January 1 of the year that includes the Award Date of such Award and ends on December 31 of the second calendar year commencing after such Award Date;

 

s.                                      Performance Ratio means the average of the business segment performance to target during each Performance Period.

 

t.                                        Plan means this Share Unit Plan for Senior Executives of Great-West Life & Annuity Insurance Company and Its Subsidiaries including any schedules and appendices hereto, as amended from time to time;

 

u.                                     PSU means a performance share unit granted to a Participant that is represented by a bookkeeping entry, the value of which on any particular date shall be equal to the Market Value, and which shall, if it becomes Vested, be settled in accordance with Section 9;

 

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v.                                     Retirement or Retires means the termination of the Participant’s Employment when he or she has retired at or subsequent to normal retirement age as defined in the Great-West Life & Annuity Insurance Company Employees’ and Agents’ Pension Benefits Plan or because of retirement prior to such normal retirement age with the approval of the Chief Executive Officer of Great-West Life & Annuity Insurance Company. The Committee shall have the discretion to determine other circumstances surrounding a termination of Employment which would qualify the Participant as a retiree for purposes of the Plan;

 

w.                                   Senior Executive means any person Employed by a Participating Corporation and is otherwise ranked in an officer job grade, and any other employee of a Participating Corporation who is designated, or is a member of a class of employee that is designated, by the Committee as a “Senior Executive” eligible to participate in the Plan;

 

x.                                       Share means a common share of Lifeco and such other share as may be substituted for it as a result of amendments to the articles of Lifeco, arrangement, reorganization or otherwise, including any rights that form a part of the common share or substituted share;

 

y.                                     Short Term Disability means a mental or physical impairment that renders a Participant temporarily unable to perform the duties that the Participant was engaged to perform before the commencement of the impairment and that qualifies as a short term disability under the applicable short term disability policy of the Participating Corporation under which the Participant is covered;

 

z.                                       Stock Exchange means the Toronto Stock Exchange, or if the Shares are not listed on the  Toronto Stock Exchange, such other stock exchange on which the Shares are listed, or if the Shares are not listed on any stock exchange, then the over-the-counter market;

 

aa.                                Stock Exchange Rules means the applicable rules of the Stock Exchange;

 

bb.                              Termination or Termination Date (or any derivative thereof) shall mean (i) the date of termination of a Participant’s Employment with a Participating Corporation (other than in connection with the Participant’s transfer to Employment with another Participating Corporation), being the date on which the Participant ceases to be Employed by a Participating Corporation, whether such termination is lawful or otherwise, without giving effect to any period of notice or compensation in lieu of notice, but not including a Participant’s absence from active work during a period of vacation, temporary illness, authorized leave of absence or Short Term Disability, and (ii) in the case of a Participant who does not return to active Employment with a Participating Corporation immediately following a period of absence due to vacation, temporary illness, authorized leave of absence or Short Term Disability, the last day of such period of absence;

 

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cc.                                Trading Day means any day on which the Stock Exchange is open for the trading of Shares and on which Shares are actually traded;

 

dd.                              US Taxpayer means an individual who is subject to income tax under the Code with respect to his or her PSUs;

 

ee.                                Vested means the applicable Vesting Conditions in relation to the PSUs included in an Award made pursuant to the Plan (i) have been met; (ii) have been waived or have been deemed to have been met pursuant to Section 8.2 and 8.4, or (iii) or are otherwise waived pursuant to Section 4.3, and “Vesting” has a comparable meaning;

 

ff.                                    Vesting Conditions means (a) such financial and/or personal performance criteria as may be determined by the Committee in respect of an Award and which are set out in an Award Notice. Such criteria may relate to Lifeco, to any other Participating Corporation, to all Participating Corporations as a group, to a business unit of any Participating Corporation or group comprised of some of the Participating Corporations, either individually, alternatively or in any combination, and may be measured either in total, incrementally or cumulatively over a specified performance period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparator group, or otherwise, and including a percentage in excess of 100%; and (b) such criteria relating to continued Employment with a Participating Corporation for such period of time as may be determined by the Committee in respect of an Award and which are set out in an Award Notice; and

 

gg.                              Vesting Date means the earliest of the dates on which the applicable Vesting Conditions for a PSU are met, deemed to have been met or waived as contemplated in Section 2(ee) and which shall occur no later than the last day of the applicable Performance Period.

 

3.                                      CONSTRUCTION AND INTERPRETATION

 

3.1                               Masculine/Feminine; Singular/Plural

 

In the Plan, references to the masculine include the feminine and reference to the singular shall include the plural and vice versa, as the context shall require.

 

3.2                               Governing Law

 

To the extent not governed by U.S. federal law, the Plan shall be governed by and interpreted in accordance with the laws of Colorado.  Notwithstanding any provision of the Plan to the contrary, the Plan will be interpreted and operated to comply with, or be exempt from, the requirements of Code Section 409A to avoid the imposition of any tax or interest thereunder.  No provision of the Plan, however, is intended or shall be interpreted to create any right with respect to the tax treatment of the amounts paid or payable hereunder, and none of the Participating

 

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Corporations nor any of their affiliates or any of its or their officers, directors, employees, agents or service providers shall under any circumstances have any liability to any person or entity for any taxes, penalties or interest on amounts paid or payable hereunder, including any taxes, penalties or interest imposed under Code Section 409A.

 

3.3                               Severance of Invalid Provision

 

If any provision of the Plan or part hereof is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.

 

3.4                               Headings

 

Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of the provisions herein contained.

 

4.                                      ADMINISTRATION OF THE PLAN

 

4.1                               Administration

 

The Plan shall be administered by the Committee.

 

The Committee shall have the authority in its sole and absolute discretion to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan subject to and not inconsistent with the express provisions of the Plan, including, without limitation, the authority:

 

(a)                                  to make Awards of PSUs to Senior Executives;

 

(b)                                 to determine the Award Date for Awards;

 

(c)                                  to determine the Senior Executives to whom, and the time or times at which, Awards shall be made;

 

(d)                                 to determine the Initial Award Value for each Award;

 

(e)                                  to approve or authorize the applicable form and terms of the related Award Notices;

 

(f)                                    to determine the terms and conditions of Awards granted to any Senior Executive, including, without limitation, (A) the number of PSUs subject to an Award, (B) the Performance Period applicable to a PSU, (C) the Vesting Conditions applicable to any PSUs granted hereunder and the conditions, if any,

 

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upon which Vesting of any PSU will be waived or accelerated without any further action by the Committee, (D) the circumstances upon which a PSU shall be forfeited, cancelled or expire, (E) the consequences of a Termination with respect to a PSU, and (F) the manner of settlement of Vested PSUs;

 

(g)                                 to determine whether and the extent to which any Vesting Condition or other requirement applicable to the Vesting of a PSU has been satisfied or shall be waived or modified;

 

(h)                                 to amend, suspend or terminate the terms of any outstanding Award under the Plan or Award Notice provided, however, that no such amendment, suspension or termination shall be made at any time to the extent such action would materially adversely affect the existing rights of a Participant with respect to any then outstanding PSU without his or her consent in writing and provided further, however, that the Committee may amend the terms of a PSU or Award Notice without the consent of the Participant for purposes of complying with Applicable Law or to preserve the accounting or tax treatment thereof;

 

(i)                                     to determine whether, and the extent to which, adjustments shall be made pursuant to Section 6.3 and the terms of any such adjustments;

 

(j)                                     to interpret the Plan and Award Notices;

 

(k)                                  to prescribe, amend and rescind such rules and regulations and make all determinations necessary or desirable for the administration and interpretation of the Plan and Award Notices;

 

(l)                                     to determine the terms and provisions of Award Notices (which need not be identical) to be issued to Participants in respect of Awards; and

 

(m)                               to make all other determinations deemed necessary or advisable for the administration of the Plan.

 

4.2                               Effects of Interpretation by Committee

 

Any interpretation, rule, regulation, determination or other act of the Committee hereunder shall be made in its sole discretion and shall be conclusively binding upon all persons.

 

4.3                               Discretion of the Committee

 

Notwithstanding any other provision hereof or of any applicable instrument of grant, the Committee may accelerate or waive any Vesting Condition applicable to any Award, all Awards, any class of Awards or Awards held by any Participant or any group of Participants.

 

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4.4                               Liability Limitation

 

No member of the Committee, or of the Board of Directors of any Participating Corporation, or any officer or employee of any Participating Corporation shall be liable for any action or determination made in good faith pursuant to the Plan or any Award Notice under the Plan. To the fullest extent permitted by law, the Participating Corporations shall indemnify and save harmless each person made, or threatened to be made, a party to any action or proceeding in respect of the Plan by reason of the fact that such person is or was a member of any Committee or Board of Directors or is or was an officer or employee of any Participating Corporation.

 

4.5                               Delegation and Administration

 

The Committee may, in its discretion, delegate such of its powers, rights and duties under the Plan, in whole or in part, to any committee or any one or more directors, officers or employees of a Participating Corporation as it may determine from time to time, on such terms and conditions as it may determine, except that the Committee shall not, and shall not be permitted to, delegate any such powers, rights or duties to the extent such delegation is not consistent with Applicable Law.  The Committee may also appoint or engage a trustee, custodian or administrator to administer or implement the Plan or any aspect of it, except that the Committee shall not, and shall not be permitted to, appoint or engage such a trustee, custodian or administrator to the extent such appointment or engagement is not consistent with Applicable Law.

 

5.                                      AWARDS

 

5.1                               Awards

 

The Committee shall, in its sole discretion, determine (i) the Senior Executives to whom Awards shall be made under the Plan and (ii) the Initial Award Value of each Award that is granted, and shall issue an Award Notice to each Senior Executive to whom an Award is made.

 

5.2                               Number of PSUs Awarded

 

The number of PSUs granted under an Award shall be determined by dividing the Initial Award Value by the Market Value on the Award Date.

 

6.                                      ACCOUNTS AND DIVIDEND EQUIVALENTS

 

6.1                               Accounts

 

An account (“Account”) shall be maintained by Great-West Life & Annuity Insurance Company, as specified by the Committee, for each Participant and will be credited with such notional grants of PSUs as are awarded to a Participant

 

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from time to time pursuant to Section 5, together with any Dividend Equivalents received pursuant to Section 6.2.  PSUs awarded to a Participant under Section 5 shall be credited to his or her Account as of the applicable Award Date and Dividend Equivalents shall be credited to a Participant’s Account as of the applicable dividend payment date.  PSUs shall be adjusted up or down by the Performance Ratio at the end of the Performance Period.  PSUs that fail to Vest pursuant to Section 7, or that are paid out to a Participant or his or her Beneficiary, shall be cancelled and shall cease to be recorded in the Participant’s Account as of the date on which such PSUs are forfeited or cancelled under the Plan or are paid out, as the case may be.

 

6.2                               Dividend Equivalents

 

Unless otherwise specified in the Award Notice relating to an Award, if and when cash dividends (other than any extraordinary dividend) are paid to persons who are holders of Shares as of a record date occurring during the period from the Award Date under an Award Notice to the date of settlement of the PSUs awarded hereunder, a number of additional PSUs, as the case may be, shall be credited to the Account of the Participant to whom the Award Notice was issued equal to the (i) the cash dividend paid with respect to a Share divided by the Market Value on the dividend payment date, multiplied by (ii) the number of PSUs credited to the Participant’s Account as of the record date for the dividend. The additional PSUs credited to a Participant’s Account shall be subject to the same terms and conditions, including Vesting and settlement terms, as the PSUs in respect of which the additional PSUs were credited.

 

6.3                               Changes to Share Capital

 

In the event of any stock dividend, stock split, combination or exchange of shares, capital reorganization, consolidation, spin-off or other distribution (other than normal cash dividends) of Lifeco’s assets to shareholders, or any other similar changes affecting the Shares, a proportionate adjustment to reflect such change or changes shall be made with respect to the number of PSUs outstanding under the Plan, or securities into which the Shares are changed or are convertible or exchangeable may be substituted for Shares under this Plan, on a basis proportionate to the number of PSUs in a Participant’s Account or some other appropriate basis, all as determined by the Committee in its sole discretion.

 

7.                                      VESTING OF PSUS

 

7.1                               Satisfaction of Vesting Conditions

 

Subject to Section 8, PSUs subject to an Award and Dividend Equivalents credited to the Participant’s Account in respect of such PSUs shall become Vested in such number and on such Vesting Date as may be determined in accordance with the Plan and the Award Notice governing such Award.  For

 

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greater certainty, a Participant shall not be considered to be Employed on a Vesting Date if, prior to such Vesting Date, such Participant received a payment in lieu of notice of Termination of Employment, whether under a contract of Employment, as damages or otherwise.

 

7.2                               Forfeiture of PSUs

 

Any PSUs awarded to a Participant that do not become Vested shall be forfeited by the Participant, and no cash or other compensation shall at any time be paid to a Participant or any other person in respect of any PSUs which do not become Vested.

 

8.                                      EMPLOYMENT TERMINATION, DEATH AND SHORT AND LONG TERM DISABILITY

 

8.1                               Termination of Employment

 

Unless otherwise determined by the Committee, and except as otherwise provided in Sections 8.2 and 8.4 or in a Participant’s written Employment agreement, if any, with a Participating Corporation, on a Participant’s Termination Date, any PSUs credited to the Participant’s Account which are not Vested PSUs shall terminate and be forfeited.

 

8.2                               Death and Retirement

 

Unless otherwise determined by the Committee and except as otherwise provided in a Participant’s written Employment agreement, if any, in the event a Participant dies or Retires prior to the end of the Performance Period relating to an Award, any unvested PSUs  then credited to the Participant’s Account shall be deemed to be Vested as of the Participant’s date of death or Retirement, as adjusted up or down by the Performance Ratio achieved during such Performance Period (if and as specified in the relevant Award Notice).  For purposes of such Performance Ratio adjustment,  the ratio for the year of death or Retirement and for any subsequent years of the Performance Period shall be deemed to be 100%.

 

8.3                               Short Term Disability

 

Unless otherwise determined by the Committee and except as otherwise provided in a Participant’s written Employment agreement,  if any, in the event a Participant experiences a Short Term Disability prior to the end of the Performance Period relating to an Award of PSUs, the terms of the Plan and of the relevant Award Notice shall continue to apply to such Participant, except that in adjusting the number of such Participant’s PSUs at the end of the relevant Performance Period up or down by the Performance Ratio during such Performance Period (if and as specified in the relevant Award Notice), the ratio for the year in which the Short Term Disability commences and for the

 

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subsequent years of the Performance Period during which the Short Term Disability continues shall be deemed to be 100%.  Should a Participant’s Short Term Disability cease prior to the end of any Performance Period the Vesting Conditions set out in the relevant Award Notice shall resume.

 

8.4                               Long Term Disability

 

Unless otherwise determined by the Committee and except as otherwise provided in a Participant’s written Employment agreement, if any,  in the event a Participant experiences a Long Term Disability prior to the end of the Performance Period relating to an Award, any unvested PSUs  then credited to the Participant’s Account shall be deemed to be Vested as of the date on which the Participant becomes eligible for Long Term Disability, as adjusted up or down by the Performance Ratio achieved during such Performance Period (if and as specified in the relevant Award Notice).  For purposes of such Performance Ratio adjustment, the ratio for the year in which the Participant experiences the Long Term Disability and for any subsequent years of the Performance Period shall be deemed to be 100%.

 

9.                                      SETTLEMENT OF PSUS

 

9.1                               Timing of Settlement

 

Subject to Sections 8.2, 8.3 and 8.4, Vested PSUs shall be settled on or as soon as reasonably practicable following the date on which the Committee makes its determination as to the Vesting thereof and in any event no later than March 15 of the year following the year that includes the Vesting Date thereof; provided, however, that PSUs granted to a Senior Executive and who is or will become eligible for Retirement before the final calendar year in which the Performance Period ends shall in all cases be settled within 90 days after the last day of the Performance Period as established at the time the Senior Executive first obtains a legally binding right to the PSUs, without regard to any subsequent changes thereto, or upon the Participant’s death if earlier.

 

9.2                               Settlement Payment

 

Settlement shall be made by way of a cash payment (net of applicable statutory withholdings) to the Participant or to his or her Beneficiary, as the case may be, of an aggregate amount equal to the product of:

 

A                                      the Market Value as of the Vesting Date,

 

multiplied by

 

B                                        the number of Vested PSUs then being settled.

 

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10.                               SHAREHOLDER’S RIGHTS

 

PSUs are not Shares and an Award of PSUs will not entitle any Participant or other person to any shareholder rights, including, without limitation, voting rights, dividend entitlement or rights on liquidation of Lifeco.

 

11.                               MISCELLANEOUS

 

11.1                        Compliance with Laws and Policies

 

The Participating Corporations’ obligation to make any payments under the Plan is subject to compliance with Applicable Law.  Each Participant shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Participant will, at all times, act in strict compliance with Applicable Law and all other laws and any policies of Lifeco and the Participating Corporations applicable to the Participant in connection with the Plan including, without limitation, furnishing to the applicable Participating Corporation all information and undertakings as may be required to permit compliance with Applicable Law.

 

11.2                        Withholdings

 

So as to ensure that each Participating Corporation, as applicable, will be able to comply with the applicable provisions of any federal, state, local or foreign law relating to the withholding of tax or other required deductions each Participating Corporation, as applicable, shall withhold or cause to be withheld from any amount payable to a Participant, either under this Plan, or otherwise, such amount as may be necessary to permit such Participating Corporation, as applicable, to so comply.

 

11.3                        No Right to Continued Employment

 

Nothing in the Plan or in any Award Notice issued pursuant hereto shall confer upon any Participant the right to continue in the employ of any Participating Corporation, to be entitled to any remuneration or benefits not set forth in the Plan or an Award Notice or to interfere with or limit in any way the right of any Participating Corporation to terminate a Participant’s employment with such Participating Corporation.

 

11.4                        No Additional Rights

 

Neither the designation of a Senior Executive as a Participant nor the grant of any PSUs to any Participant entitles any person to an Award, or any additional Award, as the case may be.

 

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11.5                        Amendment, Termination

 

The Plan may be amended or terminated at any time by the Board in whole or in part.  No amendment of the Plan shall, without the consent of the Participants affected by the amendment, or unless required by Applicable Law, materially adversely affect the rights accrued to such Participants with respect to PSUs granted prior to the date of the amendment.  Notwithstanding the foregoing, any amendment or termination of the Plan shall be such that the Plan and each Award thereunder, continuously meets, or remains exempt from, the requirements of Code Section 409A to avoid the imposition of any tax, penalty or interest under such section.

 

11.6                        Administration Costs

 

The Participating Corporations will be responsible for all costs relating to the administration of the Plan.

 

11.7                        Currency

 

All references in the Plan to currency refer to lawful Canadian currency.

 

12.                               ASSIGNMENT

 

Subject to Section 13, the assignment or transfer of the PSUs, or any other benefits under this Plan, shall not be permitted other than by operation of law.

 

13.                               BENEFICIARY DESIGNATION

 

Where permitted under Applicable Law, a Participant may designate in writing a beneficiary to receive any rights and benefits under the Plan arising or payable upon the death of such Participant and may change such designation from time to time.  Such designation or change must be in accordance with any Applicable Law governing the Participant and shall be in such form and executed in such manner as the HR Department of Great-West Life & Annuity Insurance Company may from time to time determine.  Any designation or change must be filed with the HR Department of Great-West Life & Annuity Insurance Company.  Subject to Applicable Law, benefits payable as a result of the death of a Participant shall be paid in accordance with the most recent designation filed with the HR Department of Great-West Life & Annuity Insurance Company and, in the absence of an effective designation of a beneficiary, the applicable Participating Corporation shall pay, or shall cause the payment of any benefits under this Plan to be made, to the estate of the Participant.  Payment in accordance with this provision shall completely discharge the liability of the Participating Corporations and the administrator of the Plan.

 

14.                               EFFECTIVE DATE OF PLAN

 

The Plan is established effective January 1, 2011.

 

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SHARE UNIT PLAN FOR SENIOR EXECUTIVES OF

 

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

 

AND ITS SUBSIDIARIES

 

DESIGNATION OF BENEFICIARY FORM

 

To:                              [insert name of applicable Participating Corporation]

 

I,                                                  , being a participant in the Plan hereby designate the following person as my beneficiary for purposes of the Plan:

 

	
 
    	
Name:
    
	
 
    	
 
    
	
 
    	
Address: 
    
	
 
    	
 
    
	
 
    	
 
    

 

Under the terms of the Plan, I reserve the right to revoke this designation and to designate another person as my beneficiary.

 

	
 
    	
 
    
	
 
    	
Signature
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Date
    

 

By signing this form I acknowledge and confirm the following:

 

(i) I have obtained, or considered obtaining and elected not to obtain, independent legal advice regarding the implications of making and revoking beneficiary designations under the Plan;

 

(ii) the validity of this beneficiary designation will depend on the law in effect at the date of my death, including the law in the jurisdiction where I am domiciled at the time of my death; and

 

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(iii) all benefits payable under the Plan will be paid in accordance with applicable law notwithstanding the existence of any beneficiary designation in respect of my Plan account.

 

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SHARE UNIT PLAN

 

FOR SENIOR EXECUTIVES OF

 

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

 

AND ITS SUBSIDIARIES

 

ACKNOWLEDGEMENT

 

I confirm and acknowledge that:

 

1.                                      I have received and reviewed a copy of the terms of the Plan and agree to be bound by them.

 

2.                                      I understand that have no right to a specific Initial Award Value or an Award based thereon with respect to any Performance Period.

 

3.                                      Any PSUs awarded to me under the Plan for a Performance Period will be subject to the Vesting Conditions set out in the Award Notice for the Performance Period.  Only PSUs that become Vested in accordance with the Plan and the Award Notice will be redeemed for a cash payment.

 

4.                                      Upon settlement of any Vested PSUs, the Participating Corporations will make all appropriate tax and other withholdings as required by law at that time.

 

5.                                      The values of all PSUs are based on the value of the common shares of Lifeco and therefore are not guaranteed.

 

6.                                      No funds will be set aside to guarantee the payment of PSUs.  Future payment of PSUs will remain an unfunded and unsecured liability recorded on the books of Great-West Life & Annuity Insurance Company.

 

7.                                      The foregoing is only a brief outline of certain key provisions of the Plan.  In the event of any discrepancy between the terms of the Plan and the terms of this Acknowledgement, the terms of the Plan shall prevail.  All capitalized expressions used herein shall have the same meaning as in the Plan unless otherwise defined herein.

 

8.                                      I consent to the holding and processing of personal data provided by me to Lifeco or any Participating Corporation or to any third party service provider for all purposes relating to the operation of the Plan, including (i) administering and maintaining records with respect to me; (ii) providing information to Lifeco (or its affiliates), their agents and any third party

 

 

administrators of the Plan; (iii) providing information to future purchasers of Lifeco, any affiliate or the business in which I work; and (iv) transferring information about me to a country or territory outside his or her home country that may not provide the same statutory protection for the information as Canada.  This consent shall remain in force for as long as is necessary for purposes of administering the Plan.

 

 

	
 
    	
 
    	
 
    
	
Date
    	
(Name of Senior Executive)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Signature of Senior Executive)
    

 

2Exhibit 10.2

 

 

 

CREDIT AGREEMENT

 

 

NYTIS EXPLORATION COMPANY LLC

 

and

 

BANK OF OKLAHOMA, NATIONAL ASSOCIATION

 

 

 

 

May 31, 2010

 

 

 

 

TABLE OF CONTENTS

 

	
ARTICLE I   — Definitions and References
    	
 
    	
1
    
	
Section 1.1. Defined Terms
    	
 
    	
1
    
	
Section 1.2. Incorporation of Exhibits
    	
 
    	
11
    
	
Section 1.3. Amendment of Defined Instruments
    	
 
    	
11
    
	
Section 1.4. References and Titles
    	
 
    	
12
    
	
Section 1.5. Calculations and Determinations
    	
 
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE II   — The Loans
    	
 
    	
12
    
	
Section 2.1. The Revolving Loan
    	
 
    	
12
    
	
Section 2.2. The Hedging Loan
    	
 
    	
13
    
	
Section 2.3. The Note; ISDA Agreement;   Interest
    	
 
    	
14
    
	
Section 2.4. Mandatory Principal Payments
    	
 
    	
15
    
	
Section 2.5. Voluntary Prepayments
    	
 
    	
16
    
	
Section 2.6. Termination of Agreement
    	
 
    	
16
    
	
Section 2.7. Payments to BOK
    	
 
    	
16
    
	
Section 2.8. Use of Proceeds
    	
 
    	
16
    
	
Section 2.9. Borrowing Base Procedures
    	
 
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE III   — Security; Fees; LIBOR Provisions; Taxes; Increased Capital
    	
 
    	
17
    
	
Section 3.1. The Security
    	
 
    	
17
    
	
Section 3.2. Perfection and Protection of   Security Interests and Liens
    	
 
    	
17
    
	
Section 3.3. Bank Accounts and Offset
    	
 
    	
17
    
	
Section 3.4. Fees
    	
 
    	
18
    
	
Section 3.5. Special LIBOR Provisions
    	
 
    	
19
    
	
Section 3.6. Increased Capital Costs
    	
 
    	
20
    
	
Section 3.7. Taxes
    	
 
    	
20
    
	
Section 3.8. Obligations Absolute
    	
 
    	
21
    
	
Section 3.9. Indemnification
    	
 
    	
22
    
	
Section 3.10. Liability of BOK
    	
 
    	
22
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   — Conditions Precedent to Loans
    	
 
    	
23
    
	
Section 4.1. Initial Conditions Precedent
    	
 
    	
23
    
	
Section 4.2. Additional Conditions Precedent
    	
 
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE V   — Representations and Warranties
    	
 
    	
25
    
	
Section 5.1. Borrower’s Representations and   Warranties
    	
 
    	
25
    
	
Section 5.2. Representations by BOK
    	
 
    	
29
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   — Covenants of Borrower
    	
 
    	
29
    
	
Section 6.1. Affirmative Covenants
    	
 
    	
29
    
	
Section 6.2. Negative Covenants
    	
 
    	
35
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   — Events of Default and Remedies
    	
 
    	
38
    
	
Section 7.1. Events of Default
    	
 
    	
38
    
	
Section 7.2. Remedies
    	
 
    	
41
    
	
Section 7.3. Indemnity
    	
 
    	
41
    

 

i

 

	
ARTICLE VIII   — Miscellaneous
    	
 
    	
42
    
	
Section 8.1. Waiver and Amendment
    	
 
    	
42
    
	
Section 8.2. Survival of Agreements; Cumulative Nature
    	
 
    	
43
    
	
Section 8.3. Notices
    	
 
    	
43
    
	
Section 8.4. Parties in Interest
    	
 
    	
44
    
	
Section 8.5. Governing Law
    	
 
    	
44
    
	
Section 8.6. Limitation on Interest
    	
 
    	
44
    
	
Section 8.7. Severability
    	
 
    	
45
    
	
Section 8.8. Counterparts
    	
 
    	
45
    
	
Section 8.9. Conflicts
    	
 
    	
45
    
	
Section 8.10. Entire Agreement
    	
 
    	
45
    
	
Section 8.11. WAIVER OF JURY TRIAL
    	
 
    	
45
    
	
Section 8.12. USA Patriot Act Notice
    	
 
    	
46
    
	
Section 8.13. Supersession
    	
 
    	
46
    
	
 
    	
 
    	
 
    
	
EXHIBITS:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
EXHIBIT A   — ALLONGE
    	
 
    	
A-l
    
	
EXHIBIT B   — ADVANCE REQUEST
    	
 
    	
B-l
    
	
EXHIBIT C   — REQUEST FOR ISSUANCE OF LETTER OF CREDIT
    	
 
    	
C-l
    
	
EXHIBIT D   — INTEREST RATE ELECTION
    	
 
    	
D-l
    
	
EXHIBIT E   — COMPLIANCE REPORT
    	
 
    	
E-l
    

 

ii

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 31, 2010, is by and between NYTIS EXPLORATION COMPANY LLC, a Delaware limited liability company (“Borrower”), and BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association (“BOK”).

 

RECITALS

 

A. BOK and Borrower are parties to a Credit Agreement dated as of June 21, 2005 (the “Prior Credit Agreement”), setting forth the terms upon which BOK would make certain loans and credit extensions to Borrower (herein collectively referred to as the “Prior Loan”) and by which such loans and credit extensions would be governed and repaid.

 

B. Borrower and BOK desire that this Amended and Restated Credit Agreement be executed and delivered in order to amend and restate in their entirety the terms and provisions of the Prior Credit Agreement, to provide for the terms upon which the Prior Loan will be refinanced, to provide for the terms upon which BOK will make available to Borrower a revolving line of credit and will issue letters of credit upon the request of Borrower and by which such revolving line of credit and letters of credit will be governed and repaid and, in connection with certain hedging activities of Borrower through BOK, to provide for the terms upon which BOK will extend credit to Borrower in order to facilitate such hedging activities and by which such extensions of credit will be governed and repaid.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions and References

 

Section 1.1. Defined Terms. As used in this Agreement, each of the following terms shall have the meaning given it in this Section 1.1 or in the sections and subsections referred to below:

 

“Advance” means an advance of funds by BOK to or for the account of Borrower pursuant to Section 2.1 below.

 

 

“Affiliate” means, as to any Person, each Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, that Person; provided that, for the purposes of this definition, a Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or control the direction of the management and policies of such entity, whether through the ownership of capital stock, partnership or membership interests or other interests therein, by contract or otherwise, and shall include without limitation any general partner or any controlling stockholder, controlling member or controlling owner thereof.

 

“Agreement” means this Amended and Restated Credit Agreement.

 

“Alternate Base Rate” means, for any day, the rate per annum equal to the greatest of the following: (a) the Federal Funds Rate for such day, plus one-half of one percentage point, (b) the Prime Rate for such day, or (c) LIBOR (Adjusted) for a one-month LIBOR Interest Period beginning on such day (or, if such day is not a Business Day for the purpose of LIBOR Tranches, the immediately preceding day that is a Business Day for the purpose of LIBOR Tranches) plus one percentage point; provided that, for the avoidance of doubt and for the purposes of this definition, the LIBOR Rate (Adjusted) for any day shall be determined by BOK from Reuters BBA LIBOR Rates Page 3750 (or on any successor or substitute page of such page), in accordance with its customary practices. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the LIBOR Rate (Adjusted) shall be effective automatically (and without notice to Borrower) on the effective date of such change in the Prime Rate, the Federal Funds Rate or the LIBOR Rate (Adjusted), respectively.

 

“Alternate Base Rate Portion” means the portion of the Revolving Loan bearing interest based upon the Alternate Base Rate.

 

“Alternate Base Rate Spread” means, for any day, the following: (a) if the Borrowing Base Usage is less than 50 percent as of the close of business on the preceding Business Day, 1.50 percentage points per annum; (b) if the Borrowing Base Usage is greater than or equal to 50 percent but less than 75 percent as of the close of business on the preceding Business Day, 1.75 percentage points per annum; (c) if the Borrowing Base Usage is greater than or equal to 75 percent but less than 90 percent as of the close of business on the preceding Business Day, 2.00 percentage points per annum; and (d) if the Borrowing Base Usage is greater than or equal to 90 percent as of the close of business on the preceding Business Day, 2.25 percentage points per annum.

 

2

 

“Applicable Environmental Laws” means any laws, orders, rules or regulations pertaining to health or the environment (as the same now exist or are hereafter enacted and/or amended), including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called “CERCLA”), the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the solid Waste Disposal Act Amendments of 1980 and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called “RCRA”) and applicable state law.

 

“Borrower” means Nytis Exploration Company LLC, a Delaware limited liability company.

 

“Borrower/BOK Hedging Obligations” means Hedging Obligations incurred by Borrower to BOK in connection with any one or more hedging transactions of Borrower arranged through BOK and as to which BOK is acting as the counterparty.

 

“Borrowing Base” means, at any time, the aggregate loan value of all Borrowing Base Properties, as then most recently determined by BOK, in its sole and absolute discretion, pursuant to Section 2.9 below, using such assumptions as to pricing, discount factors, discount rates, expenses and other factors as BOK customarily uses as to borrowing-base oil and gas loans at the time of such determination, such amount to be included in a Borrowing Base Notice sent to Borrower; provided that the Borrowing Base shall be set at $8,000,000 as of the date of this Agreement, subject to reduction as set forth above as of each subsequent Payment Date.

 

“Borrowing Base Notice” means a written notice sent to Borrower by BOK notifying Borrower of the Borrowing Base determined by BOK for the upcoming Borrowing Base Period or other period.

 

“Borrowing Base Period” means: (a) the time period from the date of this Agreement through October 31, 2010; (b) thereafter, each six-month period beginning on May 1 or November 1 of each year, until the latest May 1 or November 1 preceding the Maturity Date (Revolving); and (c) thereafter, the time period from the latest May 1 or November 1 preceding the Maturity Date (Revolving) through the Maturity Date (Revolving).

 

“Borrowing Base Properties” means any and all interests of Borrower, whether now owned or hereafter acquired, in any and all oil and/or gas properties, wells, leases, gathering systems, processing plants and other related rights and assets to which BOK now or hereafter gives value in determining the Borrowing Base.

 

3

 

“Borrowing Base Usage” means, as of the close of business on any Business Day, the ratio of: (a)(1) the aggregate amount of all Advances outstanding hereunder, including any Advances made on that Business Day, plus (2) the sum of the face amounts of all Letters of Credit, including any Letters of Credit issued on that Business Day, to (b) the Borrowing Base in effect at that time.

 

“Business Day” means: (a) with respect to the making, prepaying, repaying or issuance of, or otherwise relating to, any LIBOR Tranche, any day which is not a Saturday, a Sunday or a legal holiday on which commercial banks are authorized or required to be closed in Denver, Colorado, in Tulsa, Oklahoma or in New York, New York and which is also a day on which dealings are carried on in the London interbank eurocurrency market, and (b) for all other purposes hereof, any day which is not a Saturday, a Sunday or a legal holiday on which commercial banks are authorized or required to be closed in Denver, Colorado or in Tulsa, Oklahoma.

 

“Collateral” means all tangible or intangible real or personal property which, under the terms of any Security Document, is or is purported to be covered thereby or subject thereto.

 

“Commitment Amount” means, at any time, the lesser of: (a) the Maximum Loan Amount, or (b) the Borrowing Base at that time.

 

“Commitment Fee Rate” means 0.50 percentage point per annum.

 

“Cumulative Net Income” means, with respect to Borrower, the sum of Borrower’s net income, determined in accordance with GAAP, for each completed Fiscal Quarter after the date from which such calculation is being made; provided that if Borrower’s net income is negative for any such Fiscal Quarter, for the purpose of making the above-described computation, Borrower’s net income shall be deemed to be zero for that Fiscal Quarter.

 

“Current Ratio” means, at any time and from time to time, the ratio of: (a) Borrower’s current assets (including as a current asset any unused availability under the Revolving Loan, but excluding assets resulting from any mark-to-market of unliquidated commodity hedge contracts and any and all other items included as current assets under the provisions of FAS 123, FAS 133 or FAS 143); to (b) the sum of Borrower’s current liabilities (excluding current maturities of the Revolving Loan and liabilities resulting from any mark-to-market of unliquidated commodity hedge contracts and any and all other items included as current liabilities under the provisions of FAS 123, FAS 133 or FAS 143), all determined in a manner consistent with GAAP, except as otherwise provided above.

 

4

 

“Debt” means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether primary or secondary, direct or indirect, absolute or contingent.

 

“Default” means any Event of Default and any default, event or condition which would, with the giving of any requisite notice and/or the passage of time, constitute an Event of Default.

 

“Distribution” means any distribution payable in cash or property to any member of Borrower, or any purchase, redemption or retirement of, or other payment with respect to, any membership interest in Borrower.

 

“EBITDAX” means, for any Fiscal Quarter: (a) net income for that Fiscal Quarter, excluding any and all gains and losses from any mark-to-market of unliquidated commodity hedge contracts, any and all gains and losses from the sale of capital assets and any other item properly classified as an “extraordinary item” or the “discontinuance of a business” in accordance with GAAP, plus (b) the following, to the extent, and only to the extent, that they have been deducted in computing net income for that Fiscal Quarter: interest expenses, income taxes, depreciation, depletion, amortization, exploration expenses and other non-cash charges, all determined in accordance with GAAP.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto.

 

“ERISA Plan” means any employee pension benefit plan subject to Title IV of ERISA maintained by any Obligated Person or any Affiliate of any Obligated Person with respect to which any Obligated Person or any Affiliate of any Obligated Person has a fixed or contingent liability.

 

“Event of Default” has the meaning given such term in Section 7.1 below.

 

“Federal Funds Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of one percent) 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, 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 one percent) of the quotations for such day for such transactions received by BOK from three Federal funds brokers of recognized standing selected by it.

 

“Fiscal Quarter” means a three-month period ending on the last day of March, June, September or December of any year.

 

5

 

“Fiscal Year” means a twelve-month period ending on December 31 of any year.

 

“Funded Debt Ratio” means, as of the end of any Fiscal Quarter of Borrower, the ratio of: (a) the outstanding balance at that time of any and all interest-bearing indebtedness owed by Borrower (including without limitation any and all outstanding Advances hereunder and any and all Subordinated Debt); to (b)(1) for the calculation to be made as of March 31, 2010, four times EBITDAX for Borrower’s Fiscal Quarter ending March 31, 2010, (2) for the calculation to be made as of June 30, 2010: (A) two times (B) the sum of EBITDAX for Borrower’s Fiscal Quarter ending March 31, 2010 and EBITDAX for Borrower’s Fiscal Quarter ending June 30, 2010, (3) for the calculation to be made as of September 30, 2010: (A) 1.333333 times (B) the sum of EBITDAX for Borrower’s Fiscal Quarter ending March 31, 2010, EBITDAX for Borrower’s Fiscal Quarter ending June 30, 2010, and EBITDAX for Borrower’s Fiscal Quarter ending September 30, 2010, and (4) for the calculation to be made as of the end of any subsequent Fiscal Quarter, four times EBITDAX for Borrower’s then most recently completed four consecutive Fiscal Quarters.

 

“GAAP” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Borrower: (a) are applied for all periods in a consistent manner, and (b) are consistently applied for all periods after the date hereof so as to properly reflect the financial condition, and the results of operations and changes in financial position, of Borrower.

 

“Guarantor” means Nytis Exploration (USA) Inc., a Delaware corporation.

 

“Guaranty” means the Guaranty executed and delivered by Guarantor to BOK to guaranty the Obligations.

 

“Hedging Loan” has the meaning given such term in Section 2.2 below.

 

“Hedging Obligations” means, with respect to any Person, all liabilities of such Person under commodity hedge, commodity swap, exchange, collar or cap agreements, fixed price agreements and all other agreements and arrangements designed to protect such Person against changes in interest rates and currency exchange rates and fluctuations in the price of oil, gas, hydrocarbons or other commodities.

 

“Hedging Settlement Date” means, with respect to any Borrower/BOK Hedging Obligation, the first date upon which, under the ISDA Agreement (and without consideration of any extensions granted thereunder or in connection therewith), payment or

 

6

 

delivery is due from Borrower to BOK for any amount payable in respect of such Borrower/BOK Hedging Obligation.

 

“Initial Advance” means the first Advance of the Revolving Loan.

 

“Initial Engineering Report” means the report or reports covering the Borrowing Base Properties dated effective as of January 1, 2010, prepared by Borrower.

 

“Initial Financial Statement” means the financial statements of Guarantor and Borrower dated as of December 31, 2009, copies of which have heretofore been delivered by Guarantor and Borrower to BOK.

 

“Interest Rate Election” means an election delivered by Borrower to BOK from time to time in the form of Exhibit D attached hereto and made a part hereof.

 

“ISDA Agreement” means an ISDA Master Agreement hereafter entered into between Borrower and BOK governing hedging transactions arranged by BOK on behalf of Borrower and as to which BOK is named as the counterparty.

 

“Letter of Credit” means a standby letter of credit issued by BOK pursuant to Section 2.1 below or any letter of credit issued under the Prior Credit Agreement that remains outstanding as of the date hereof.

 

“LIBOR (Adjusted)” means, with respect to each LIBOR Tranche and the related LIBOR Interest Period, the rate of interest per annum determined pursuant to the following formula:

 

	
 
    	
 
    	
 
    	
LIBOR (Unadjusted)
    	
 
    
	
 
    	
LIBOR (Adjusted)
    	
=
    	
1.00 – LIBOR Reserve Percentage
    	
 
    

 

“LIBOR Interest Period” means, with respect to each LIBOR Tranche, a time period of one, two, three or six months, as specified in the Interest Rate Election submitted by Borrower pursuant to Section 2.3(b) below with respect thereto, beginning on and including the date specified in such Interest Rate Election (which must be a Business Day) and ending on (but not including, for the purpose of computing the number of days in the LIBOR Interest Period) the date which corresponds numerically to such beginning date one, two, three or six months thereafter (or if such month has no numerically corresponding date, on the last Business Day of such month); provided that each LIBOR Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day unless such next succeeding Business Day is the first Business Day of a calendar month, in which case such LIBOR Interest Period shall end on the Business Day next preceding such numerically

 

7

 

corresponding day. No LIBOR Interest Period may be elected which would end after the Maturity Date.

 

“LIBOR Reserve Percentage” means, with respect to any LIBOR Interest Period, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the Board of Governors of the Federal Reserve System and then applicable to assets or liabilities consisting of and including “Eurocurrency Liabilities”, as currently defined in Regulation D of the Board of Governors of the Federal Reserve System, having a term approximately equal or comparable to such LIBOR Interest Period.

 

“LIBOR Spread” means, with respect to any LIBOR Tranche, the following: (a) if the Borrowing Base Usage is less than 50 percent as of the close of business on the first day of the LIBOR Interest Period for such LIBOR Tranche, 2.50 percentage points per annum; (b) if the Borrowing Base Usage is greater than or equal to 50 percent but less than 75 percent as of the close of business on the first day of the LIBOR Interest Period for such LIBOR Tranche, 2.75 percentage points per annum; (c) if the Borrowing Base Usage is greater than or equal to 75 percent but less than 90 percent as of the close of business on the first day of the LIBOR Interest Period for such LIBOR Tranche, 3.00 percentage points per annum; and (d) if the Borrowing Base Usage is greater than or equal to 90 percent as of the close of business on the first day of the LIBOR Interest Period for such LIBOR Tranche, 3.25 percentage points per annum.

 

“LIBOR Tranche” means a portion of the Revolving Loan outstanding for a specific LIBOR Interest Period and bearing interest at a fixed rate based upon LIBOR (Adjusted).

 

“LIBOR (Unadjusted)” means, with respect to each LIBOR Tranche and the related LIBOR Interest Period, the rate of interest per annum determined by BOK from Reuters BBA LIBOR Rates Page 3750 (or on any successor or substitute page of such page) as of two Business Days prior to the first day of such LIBOR Interest Period, in accordance with its customary practices, to be representative of the rates at which deposits of U.S. dollars are being offered in the London interbank eurocurrency market for delivery on the first day of such LIBOR Interest Period in an amount equal or comparable to the amount of such LIBOR Tranche and for a period of time equal or comparable to the length of such LIBOR Interest Period. LIBOR (Unadjusted), as determined by BOK with respect to a particular LIBOR Tranche, shall be fixed at such rate for the duration of the associated LIBOR Interest Period. If BOK is unable so to determine LIBOR (Unadjusted) for any LIBOR Tranche, or if the associated LIBOR (Adjusted) would

 

8

 

exceed the maximum rate of interest, if any, then permitted to be charged on the Note under applicable law, Borrower shall be deemed to have elected to have included in the Alternate Base Rate Portion the portion of the Revolving Loan that would otherwise have been included in such LIBOR Tranche.

 

“Lien” means, with respect to any property or assets, any right or interest therein of a creditor to secure Debt owed to him or any other arrangement with such creditor which provides for the payment of such Debt out of such property or assets or which allows him to have such Debt satisfied out of such property or assets prior to the general creditors of any owner thereof, including without limitation any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, or any other charge or encumbrance for security purposes, whether arising by law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of business.

 

“Loan Documents” means this Agreement, the Security Documents, the Note, the Guaranty, applications for Letters of Credit, Advance requests and all other agreements, certificates, legal opinions and other documents, instruments and writings heretofore or hereafter delivered in connection herewith or therewith.

 

“Loans” means the Revolving Loan and the Hedging Loan.

 

“Maturity Date (Hedging)” means the earlier of: (a) May 31, 2012, or (b) such date on which the Hedging Loan is due and payable in full by reason of the occurrence of an Event of Default, as established pursuant to Section 7.1 below; provided that, upon the request of Borrower, BOK may, in its sole discretion, extend said date to a date not later than December 31, 2015 by giving written notice of such extension to Borrower, but nothing contained in this Agreement, the ISDA Agreement or any other Loan Document shall be deemed to commit or require BOK to grant any such extension.

 

“Maturity Date (Revolving)” means the earlier of: (a) May 31, 2 012, or (b) such date on which the Revolving Loan is due and payable in full by reason of the occurrence of an Event of Default, as established pursuant to Section 7.1 below; provided that, upon the request of Borrower, BOK may, in its sole discretion, extend said date to a date not later than December 31, 2015 by giving written notice of such extension to Borrower, but nothing contained in this Agreement, the Note or any other Loan Document shall be deemed to commit or require BOK to grant any such extension.

 

“Maximum Hedging Amount” means $2,700,000, as such amount may be increased or decreased from time to time, in the

 

9

 

sole discretion of BOK; provided that nothing contained in this Agreement, the ISDA Agreement or any other Loan Document shall be deemed to commit or require BOK to grant any increase in such amount.

 

“Maximum Loan Amount” means $8,000,000; provided that, upon the request of Borrower, BOK may, in its sole discretion and upon such terms and conditions as BOK may determine, increase said amount to an amount not greater than $50,000,000 by giving written notice of such increase to Borrower, but nothing contained in this Agreement, the Note or any other Loan Document shall be deemed to commit or require BOK to grant any such increase.

 

“Note” means the Promissory Note executed and delivered pursuant to the Prior Credit Agreement, as heretofore amended and as amended by an Allonge in the form of Exhibit A attached hereto and made a part hereof, duly executed and delivered by Borrower and BOK, which Promissory Note and Allonge shall evidence Borrower’s obligation to repay the Revolving Loan.

 

“Obligated Person” means Borrower or Guarantor.

 

“Obligations” means all Debt from time to time owing by Borrower to BOK under or pursuant to any of the Loan Documents. “Obligation” means any part of the Obligations.

 

“Oil and Gas Interests” means any and all oil and/or gas properties, wells, leases, gas gathering systems, processing plants and other related real and/or personal property and interests now or hereafter owned by Borrower.

 

“Outstanding Balance” means, at any time, the outstanding principal balance of all Advances at that time plus the sum of the face amounts of all outstanding Letters of Credit at that time.

 

“Overborrowed Condition” means, at any time, a condition whereby the outstanding principal balance of all Advances made hereunder plus the sum of the face amounts of all Letters of Credit outstanding hereunder exceeds the Commitment Amount.

 

“Payment Date” means the last Business Day of each calendar month, commencing June 30, 2010.

 

“Person” means an individual, corporation, partnership, association, joint-stock company, trust or trustee thereof, estate or executor thereof, limited liability company, unincorporated organization or joint venture, court or governmental unit or any agency or subdivision thereof, or any other legally recognizable entity.

 

10

 

“Prime Rate” means the fluctuating interest rate per annum determined from time to time by BOK Financial Corporation (or any successor thereto), in its sole discretion, and published as the “BOKF National Prime Rate” (which may not be the lowest interest rate charged by BOK), adjusted effective as of the effective date of any change in the “BOKF National Prime Rate” so determined and published by BOK Financial Corporation (or any successor thereto). The “Prime Rate” was 4.00 percent per annum as of May 31, 2010.

 

“Prior Credit Agreement” has the meaning given such term in Recital A above.

 

“Prior Loan” has the meaning given such term in Recital A above.

 

“Release Date” means the earlier of the following two dates: (a) the date on which the Obligations have been paid and performed in full and the Security Documents have been released of record, or (b) the date on which the liens of the Security Documents have been foreclosed or a deed in lieu of such foreclosure has become fully effective and has been recorded.

 

“Revolving Loan” has the meaning given such term in Section 2.1 below.

 

“Security Documents” means all security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements and other agreements or instruments now, heretofore, or hereafter delivered by any or all of the Obligated Persons or any other person to BOK in connection with this Agreement, the Prior Credit Agreement or any transaction contemplated hereby or thereby, to secure or guaranty the payment of any part of the Obligations or the performance of any other duties and obligations of any or all of the Obligated Persons under the Loan Documents, whenever made or delivered.

 

“Subordinated Debt” means any indebtedness or other obligations of Borrower, to the extent that the rights of the holders thereof to enforce the indebtedness and other obligations of Borrower thereunder have been subordinated to the rights of BOK hereunder or in connection herewith by subordination agreements executed by the holders of the Subordinated Debt and satisfactory in form and substance to BOK.

 

Section 1.2. Incorporation of Exhibits. All Exhibits attached to this Agreement are a part hereof for all purposes.

 

Section 1.3. Amendment of Defined Instruments. Unless the context otherwise requires or unless otherwise provided herein, the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and

 

11

 

include all renewals, extensions and modifications of such agreement, instrument or document, provided that nothing contained in this section shall be construed to authorize any such renewal, extension or modification.

 

Section 1.4. References and Titles. All references in this Agreement to Exhibits, Schedules, articles, sections, subsections and other subdivisions refer to the Exhibits, Schedules, articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases “this section” and “this subsection” and similar phrases refer only to the sections or subsections hereof in which such phrases occur. The word “or” has the inclusive meaning frequently identified by the phrase “and/or”. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.

 

Section 1.5. Calculations and Determinations. All interest accruing under the Loan Documents shall be calculated on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. Unless otherwise expressly provided herein or unless BOK otherwise consents, all financial statements and reports furnished to BOK hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in a manner consistent with the accounting system used in the preparation of the Initial Financial Statement of Borrower or with another accounting system agreed to in writing by BOK.

 

ARTICLE II

 

The Loans

 

Section 2.1. The Revolving Loan. (a) Subject to the other terms and conditions of this Agreement, BOK agrees to: (1) refinance the outstanding principal balance of the “Revolving Loan” (as defined in Prior Credit Agreement) by converting such outstanding principal balance into the initial outstanding principal balance of a revolving loan hereunder, effective as of the date hereof, (2) make Advances to Borrower from time to time requested upon written notice to BOK from Borrower no later than noon, Denver time, at least, one Business Day prior to any Advance, and (3) issue Letters of Credit from time to time

 

12

 

requested upon written notice to BOK from Borrower no later than three Business Days prior to the date of issuance of such Letter of Credit.

 

(b) Each request by Borrower for an Advance shall be in the form of Exhibit B attached hereto and made a part hereof. Each request by Borrower for the issuance of a Letter of Credit shall be in the form of Exhibit C attached hereto and made a part hereof and shall be accompanied by an application for issuance of a letter of credit on BOK’s then-standard form, duly executed by Borrower.

 

(c) BOK shall not have any obligation to: (1) make an Advance on or after the Maturity Date (Revolving), (2) issue or renew a Letter of Credit which expires after the Maturity Date (Revolving), (3) issue a LIBOR Tranche as to which the LIBOR Interest Period does not expire prior to the Maturity Date (Revolving), (4) issue a LIBOR Tranche at any time when four or more prior LIBOR Tranches remain outstanding, (5) make an Advance in an amount less than $50,000, (6) issue a LIBOR Tranche in an amount less than $500,000, (7) issue or renew a Letter of Credit if, after such Letter of Credit is issued or renewed, the aggregate of the face amounts of all Letters of Credit outstanding would exceed $500,000, or (8) make an Advance or issue or renew a Letter of Credit if, after such Advance is made or such Letter of Credit is issued or renewed, the Outstanding Balance would exceed the Commitment Amount.

 

(d) Each payment by BOK under a Letter of Credit shall be deemed to be an Advance included in the Alternate Base Rate Portion, bearing interest from the date of such payment, shall be entitled to all benefits of the Security Documents and shall be subject to all terms of this Agreement and any and all other applicable Loan Documents.

 

(e) The Advances and Letters of Credit described in this Section 2.1 shall be herein collectively referred to as the “Revolving Loan”. Within the limitations set forth in this Section 2.1 and subject to the other terms and provisions of this Agreement, Borrower may borrow, repay and reborrow the Revolving Loan hereunder.

 

Section 2.2. The Hedging Loan. (a) Subject to the other terms and conditions of this Agreement, BOK agrees to provide a hedging guidance line of credit to Borrower, as more fully described in the ISDA.

 

(b) BOK shall not have any obligation to make any credit extension to Borrower in connection with any Borrower/BOK Hedging Obligation: (1) which arises on or after the Maturity Date (Hedging), (2) as to which the Hedging Settlement Date is on or after one year after the Maturity Date (Hedging), (3) which relates to a hedging transaction not arranged through BOK or as

 

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to which BOK is not acting as the counterparty, (4) which relates to any time period prior to the Hedging Settlement Date for the applicable Borrower/BOK Hedging Obligation, including without limitation any applicable margin requirements payable in accordance with the ISDA Agreement, or (5) if, immediately after such credit extension, the aggregate amount of all credit extensions from BOK to Borrower in connection with Borrower/BOK Hedging Obligations would exceed the Maximum Hedging Amount.

 

(c) Each credit extension from BOK to Borrower in connection with Borrower/BOK Hedging Obligations pursuant to the terms of this Section 2.2 shall be entitled to all benefits of the Security Documents and shall be subject to all terms of this Agreement and any and all other applicable Loan Documents.

 

(d) Any and all credit extensions from BOK to Borrower in connection with Borrower/BOK Hedging Obligations pursuant to the terms of this Section 2.2 shall be herein collectively referred to as the “Hedging Loan”.

 

Section 2.3. The Note; ISDA Agreement; Interest. (a) Borrower’s obligation to repay the Revolving Loan, with interest thereon, shall be evidenced by the Note. Borrower’s obligation to repay the Hedging Loan, with interest, if any, thereon, shall be evidenced by the ISDA Agreement. In the event any provision contained in the Note conflicts with a provision contained in this Agreement, the provisions of this Agreement shall control. In the event any provision contained in the ISDA Agreement conflicts with a provision contained in this Agreement, the provisions of the ISDA Agreement shall control.

 

(b) At any time and from time to time hereafter, if Borrower desires to include in a LIBOR Tranche all or any portion of the Revolving Loan which is not already included in a LIBOR Tranche for the relevant time period, Borrower shall deliver an Interest Rate Election to BOK at least three Business Days prior to the first day of the requested LIBOR Interest Period, specifying the dollar amount it desires to have included in the LIBOR Tranche, the first day of the LIBOR Interest Period and the duration of the LIBOR Interest Period. Any portion of the Revolving Loan which is not included in a LIBOR Tranche shall be included in the Alternate Base Rate Portion.

 

(c) (1) Except as otherwise provided in (4) below, interest on each LIBOR Tranche shall accrue at a fixed annual rate equal to the greater of: (A) LIBOR (Adjusted) with respect to such LIBOR Tranche plus the LIBOR Spread, or (B) four and one-half percent per annum. (2) Except as otherwise provided in (4) below, interest on the Alternate Base Rate Portion shall accrue at a fluctuating annual rate equal to the greater of: (A) the Alternate Base Rate plus the Alternate Base Rate Spread, or (B) four and one-half percent per annum. (3) Except as otherwise provided in (4) below, interest on the Hedging Loan

 

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shall accrue as described in the ISDA Agreement. (4) From and after the occurrence, and during the continuance, of any Event of Default or Overborrowed Condition hereunder, interest shall accrue, from the date of occurrence of the Event of Default or Overborrowed Condition until the date the Event of Default or Overborrowed Condition is cured: (A) as to the Alternate Base Rate Portion, at a fluctuating annual rate equal to the Alternate Base Rate plus 4.25 percentage points per annum, and (B) as to any LIBOR Tranche, at a fluctuating annual rate equal to LIBOR (Adjusted) for such LIBOR Tranche plus 5.25 percentage points per annum.

 

(d) Interest accrued on the Alternate Base Rate Portion shall be due and payable on each Payment Date. Interest accrued on each LIBOR Tranche shall be due and payable on the last day of the LIBOR Interest Period for such LIBOR Tranche (and, in the case of any LIBOR Tranche having a LIBOR Interest Period in excess of three months, on the three-month anniversary of the first day of such LIBOR Interest Period). Any then-outstanding interest on the Revolving Loan shall be due and payable not later than the Maturity Date (Revolving). Any then-outstanding interest on the Hedging Loan shall be due and payable not later than the Maturity Date (Hedging).

 

Section 2.4. Mandatory Principal Payments. (a) If, at any time, the outstanding Balance shall exceed the Commitment Amount, Borrower shall, not later than 10 days after written notice thereof from BOK: (1) pay the excess to BOK in a lump sum; or (2) commence (and thereafter continue) an amortization schedule under which Borrower repays an amount at least equal to the excess in six equal monthly principal installments on the last Business Day of each calendar month, which amounts shall be in addition to the monthly interest payments and any other principal payments otherwise due, such that the entire excess is paid within six months; or (3) execute and deliver to BOK additional mortgages, supplements to mortgages or other instruments satisfactory in form and substance to BOK, by which Borrower mortgages, pledges or hypothecates to BOK, or creates a security interest in for the benefit of BOK, sufficient additional Oil and Gas Interests to induce BOK to make a redetermination of the Borrowing Base such that the Commitment Amount is increased to an amount no less than the Outstanding Balance.

 

(b) The outstanding principal balance of the Revolving Loan, together with all unpaid fees and expenses relating thereto, shall be due and payable not later than the Maturity Date (Revolving).

 

(c) The outstanding principal balance of the Hedging Loan, together with all unpaid fees and expenses relating thereto, shall be due and payable not later than the Maturity Date (Hedging).

 

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Section 2.5. Voluntary Prepayments. Borrower shall have the right to prepay the Loans at any time, in whole or in part, without penalty or premium (except as otherwise described in Section 3.5 below).

 

Section 2.6. Termination of Agreement. Borrower shall have the right at any time and from time to time, upon not less than three Business Days’ prior written notice to BOK, to terminate this Agreement. Upon any termination of this Agreement, Borrower shall, at the time of such termination, prepay the Loans in full, including without limitation all principal, interest, fees, costs and expenses payable hereunder or in connection herewith, and cause all outstanding Letters of Credit and all outstanding Borrower/BOK Hedging Obligations to be terminated and BOK released from any and all liabilities thereunder or in connection therewith. Any such prepayment shall be without penalty or premium (except as otherwise described in Section 3.5 below).

 

Section 2.7. Payments to BOK. Borrower will pay to BOK each payment which Borrower owes under the Loan Documents not later than 12:00 noon, Denver time, on the due date, in lawful money of the United States of America and in immediately available funds. Any payment received after such time will be deemed to have been made on the next following Business Day. Except as otherwise provided in this Agreement as to LIBOR Tranches, should any such payment become due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, in the case of a payment of principal or past due interest, interest shall accrue and be due and payable thereon for the period of such extension. Each payment under a Loan Document shall be due and payable at the place provided therein or, if no specific place of payment is provided, shall be due and payable at the place of payment of the Note.

 

Section 2.8. Use of Proceeds. In no event shall the proceeds of any of the Loans be used directly or indirectly for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any “margin stock” (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock or margin securities. Borrower represents and warrants to BOK that Borrower is not engaged principally, or as one of its important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock. The proceeds of the Loans shall be used solely for the refinancing of the Prior Loan, the funding of capital expenditures relating to the acquisition, exploration, drilling and development of oil and gas properties by Borrower, meeting margin calls in connection with Borrower’s hedging activities arranged through BOK, general working capital

 

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purposes, the issuance of Letters of Credit on terms reasonably acceptable to BOK and other uses in the ordinary course of Borrower’s business.

 

Section 2.9. Borrowing Base Procedures. Based upon the engineering reports submitted by Borrower pursuant to Section 6.1(b) below and upon such other information and data as BOK deems relevant, BOK will redetermine the Borrowing Base as of the first day of each Borrowing Base Period and at such other times as BOK may deem appropriate. BOK shall advise Borrower of each redetermination of the Borrowing Base by providing to Borrower a Borrowing Base Notice approximately 10 days prior to the effectiveness of the redetermined Borrowing Base; provided that if, due to any failure by Borrower to submit in a timely manner any engineering report or other information required to be submitted by Borrower hereunder or, if requested in writing by BOK, any additional information or data needed in connection with a redetermination of the Borrowing Base or due to any other reason beyond the control of BOK, BOK does not provide a Borrowing Base Notice at the time described above, then, unless BOK gives notice to the contrary to Borrower, the Borrowing Base from the previous period shall be carried over into the new period until a Borrowing Base Notice has been sent to Borrower by BOK.

 

ARTICLE III

 

Security; Fees; LIBOR Provisions; Taxes; Increased Capital

 

Section 3.1. The Security. The Obligations will be secured by any and all Security Documents executed and delivered contemporaneously with the execution and delivery of this Agreement and any additional Security Documents hereafter delivered by any Obligated Person and accepted by BOK.

 

Section 3.2. Perfection and Protection of Security Interests and Liens. Borrower will from time to time deliver to BOK any amendments, financing statements, continuation statements, extension agreements and other documents, properly completed and executed (and acknowledged when required) by Borrower in form and substance reasonably satisfactory to BOK, which BOK may request for the purpose of perfecting, confirming or protecting BOK’s Liens and other rights in the Collateral.

 

Section 3.3. Bank Accounts and Offset. To secure the repayment of the Obligations, Borrower hereby grants to BOK a security interest, a lien, and a right of offset, each of which shall be upon and against: (a) any and all moneys, securities or other property (and the proceeds therefrom) of Borrower now or hereafter held or received by or in transit to BOK from or for the account of Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and all deposits (general or special, time or demand, provisional or

 

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final) of Borrower with BOK, and (c) any other credits and claims of Borrower at any time existing against BOK, including without limitation claims under certificates of deposit. Upon the occurrence of any Event of Default, BOK is hereby authorized to foreclose upon, offset, appropriate, and apply, at any time and from time to time, without notice to Borrower, any and all items hereinabove referred to against the Obligations (whether or not such Obligations are then due and payable).

 

Section 3.4. Fees. (a) Borrower shall pay to BOK, for the time period commencing on the date hereof through the Maturity Date (Revolving), on the last day of each calendar quarter prior to the Maturity Date (Revolving) (or, if such last day is not a Business Day, on the next succeeding Business Day), commencing with the calendar quarter ending June 30, 2010, and on the Maturity Date (Revolving) (or, if the Maturity Date (Revolving) is not a Business Day, on the next succeeding Business Day), for the time period from the end of the last such calendar quarter through the Maturity Date (Revolving), a commitment fee in an amount equal to: (1) the Commitment Fee Rate, times (2) the excess, if any, of the Commitment Amount, over the sum of the aggregate outstanding principal balance of all Advances plus the face amounts of all outstanding Letters of Credit, computed on a daily basis for such calendar quarter or other time period, times (3) the length of such calendar quarter or other time period, expressed as a fraction of a year.

 

(b) Borrower shall pay to BOK with respect to each Letter of Credit a fee in an amount equal to the greater of: (1) two and one-half percent per annum times the face amount of such Letter of Credit, or (2) $500.00, which fee shall be due and payable at the time of issuance (and again at the time of any renewal) of such Letter of Credit.

 

(c) Contemporaneously with any and all subsequent increases in the Maximum Loan Amount hereunder, Borrower shall pay to BOK a fee in an amount equal to: (1) three-quarters of one percent, times (2)(A) the amount to which the Maximum Loan Amount is being increased, minus (B) the greater of: (i) $8,000,000, or (ii) the largest Maximum Loan Amount on which Borrower has paid a fee to BOK pursuant to this Section 3.4 (c) after the date hereof.

 

(d) Upon the execution and delivery of this Agreement, Borrower shall pay to BOK a loan origination fee in the amount of $60,000.

 

(e) If BOK determines that market conditions so warrant, upon notice from BOK to Borrower, Borrower shall pay to BOK monthly at the times requested by BOK, a margin use fee in an amount of up to three percent per annum (as determined by BOK) of the margin BOK is required to post in connection with hedging transactions arranged by BOK for the benefit of Borrower.

 

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Section 3.5. Special LIBOR Provisions. (a) If BOK shall reasonably determine (which determination shall, upon notice thereof to Borrower, be conclusive and binding upon Borrower and BOK) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority having jurisdiction asserts that it is unlawful, for BOK to fund, continue or maintain any LIBOR Tranche, the obligation of BOK to fund, continue or maintain any such LIBOR Tranche shall, upon such determination, forthwith be suspended until BOK shall notify Borrower that the circumstances causing such suspension no longer exist, and all LIBOR Tranches shall automatically be converted into the Alternate Base Rate Portion at the end of the then-current LIBOR Interest Periods with respect thereto or sooner, if required by such law or assertion.

 

(b) If BOK shall reasonably determine that:

 

(1) U.S. Dollar deposits in the relevant amount and for the relevant LIBOR Interest Period are not available to BOK in its relevant market; or

 

(2) By reason of circumstances affecting BOK’s relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBOR Tranches;

 

then, upon notice from BOK to Borrower, the obligation of BOK to include any portion of the Loan in a LIBOR Tranche shall forthwith be suspended until BOK shall notify Borrower that the circumstances causing such suspension no longer exist.

 

(c) Borrower agrees to reimburse BOK for any increase in the cost to BOK of, or any reduction in the amount of any sum receivable by BOK in respect of, funding, continuing or maintaining (or of its obligation to fund, continue or maintain) any LIBOR Tranche; provided that the foregoing shall not apply to increases resulting from general increases in interest rates or general increases in BOK’s administrative expenses or overhead costs. BOK shall promptly notify Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate BOK for such increased cost or reduced amount. Such additional amount shall be due and payable by Borrower to BOK within fifteen days of Borrower’s receipt of such notice, and such notice shall, in the absence of clear error, be conclusive and binding on Borrower.

 

(d) In the event BOK shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by BOK to fund, continue or maintain any portion of the principal amount of any LIBOR Tranche) as a result of:

 

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(1) Any conversion, repayment or prepayment (whether voluntary or mandatory) of the principal amount of any LIBOR Tranche on a date other than the scheduled last day of the LIBOR Interest Period applicable thereto; or

 

(2) Any requested LIBOR Tranche not being funded as a LIBOR Tranche in accordance with the provisions of this Agreement or the Interest Rate Election therefor;

 

then, upon the written notice by BOK to Borrower, Borrower shall, within fifteen days of receipt thereof, pay BOK such amount as will (in the reasonable determination of BOK) reimburse BOK for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of clear error, be conclusive and binding upon Borrower.

 

Section 3.6. Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by BOK or any Person controlling BOK, and BOK reasonably determines that the rate of return on its or such controlling Person’s capital as a consequence of the Loan is reduced to a level below that which BOK or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by BOK to Borrower, Borrower hereby agrees to pay to BOK, within fifteen days of the effective date of such notice, such additional amount (as may be reasonably determined by BOK) sufficient to compensate BOK or such controlling Person for such reduction in rate of return. A statement to Borrower by BOK as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of clear error, be conclusive and binding upon Borrower.

 

Section 3.7. Taxes. All payments by Borrower of principal of, and interest on, the Loan and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by BOK’s net income or receipts (such non-excluded items being called “Taxes”). In the event that any withholding or deduction from any payment to be made by Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, Borrower will:

 

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(a) Pay directly to the relevant authority the full amount required to be so withheld or deducted;

 

(b) Promptly forward to BOK an official receipt or other documentation satisfactory to BOK evidencing such payment to such authority; and

 

(c) Pay BOK such additional amount or amounts as may be necessary to ensure that the net amount actually received by BOK will equal the full amount BOK would have received had no such withholding or deduction been required.

 

Moreover, if any Taxes are directly asserted against BOK with respect to any payment received by BOK hereunder, BOK may pay such Taxes and Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as may be necessary in order that the net amount received by BOK after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount BOK would have received had not such Taxes been asserted.

 

If Borrower fails to pay any Taxes when due to the appropriate taxing authority or fail to remit to BOK the required receipts or other required documentary evidence, then Borrower shall indemnify, save and hold harmless BOK from and against any incremental Taxes, interest or penalties that may become payable by BOK as a result of any such failure.

 

Section 3.8. Obligations Absolute. The obligation of Borrower to repay any amount drawn on BOK pursuant to the terms of a Letter of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation the following circumstances:

 

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

 

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

 

(c) Payment by BOK under any Letter of Credit against presentation of a draft or certificate which does not comply in all material respects with the terms of such Letter of Credit.

 

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Payment by Borrower of a reimbursement obligation in connection with a Letter of Credit issued pursuant to this Agreement shall not be deemed a waiver of any rights of Borrower against BOK under Section 3.10(d) below.

 

Section 3.9. Indemnification. Borrower hereby indemnifies and holds harmless BOK from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever which BOK may incur (or which may be claimed against BOK by any Person) by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit; provided, however, that Borrower shall not be required to indemnify BOK for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the willful misconduct, bad faith or gross negligence of BOK in connection with paying a draft presented under a Letter of Credit. Nothing in this Section 3.9 is intended to limit the obligation of Borrower to repay any amount drawn on BOK pursuant to the terms of a Letter of Credit.

 

Section 3.10. Liability of BOK. Borrower assumes all risks of the acts or omissions of any beneficiary or permitted transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither BOK nor any of its employees, officers or directors shall be liable or responsible for:

 

(a) The use which may be made of any Letter of Credit or for any acts or omissions of any beneficiary or transferee thereof in connection therewith;

 

(b) The validity, sufficiency or genuineness of documents, or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged;

 

(c) Except as otherwise provided in Section 3.10(d) below, payment by BOK against presentation of documents which do not comply with the terms of the applicable Letter of credit, including failure of any documents to bear any reference or adequate reference to the applicable Letter of Credit; or

 

(d) Any other circumstance whatsoever in making or failing to make payment under the Letter of Credit, except only that Borrower shall have a claim against BOK, and BOK shall be liable to Borrower, to the extent, but only to the extent, of any direct (as opposed to consequential) damages suffered by Borrower which were caused by:

 

(1) BOK’s willful misconduct, bad faith or gross negligence in connection with the Letter of Credit; or

 

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(2) BOK’s bad-faith or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a draft and certificate strictly complying with the terms and conditions of such Letter of Credit.

 

ARTICLE IV

 

Conditions Precedent to Loans

 

Section 4.1. Initial Conditions Precedent. BOK shall have no obligation to make the Initial Advance or any subsequent Advance, to issue any Letter of Credit or to make any extension of Credit under the Hedging Loan unless BOK shall have received all of the following at its office in Denver, Colorado, duly executed and delivered and in form, substance and date satisfactory to BOK:

 

(a)                    The Note.

 

(b)                   An “Omnibus Certificate” of an officer, member or manager of Borrower, which shall contain the names and signatures of the officers, members or managers of Borrower authorized to execute Loan Documents and which shall certify to the truth, correctness and completeness of the following exhibits attached thereto: (1) a copy of the articles of organization of Borrower and all amendments thereto, (2) a copy of the operating agreement of Borrower and all amendments thereto, and (3) a copy of the resolutions of the members or managers of Borrower, as applicable, authorizing this Agreement and the transactions contemplated hereby.

 

(c)                    A “Compliance Certificate” of an officer, member or manager of Borrower in which such person certifies to the satisfaction of the conditions set out in subsections (a), (b), and (c) of Section 4.2 below.

 

(d)                   The Security Documents, including without limitation any and all additional Security Documents required to be executed and delivered so that the Security Documents cover a percentage by value of the Borrowing Base Properties satisfactory to BOK.

 

(e)                    Such title opinions, supplemental title opinions, UCC searches and other title information concerning Borrower’s title to the Borrowing Base Properties or any portions thereof as may be satisfactory to BOK.

 

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(f)                      Evidence satisfactory to BOK that the Collateral has been and continues to be operated in a reasonable and prudent manner without giving rise to any liabilities or obligations under any Applicable Environmental Law.

 

(g)                   The fee payable upon the execution and delivery of this Agreement pursuant to Section 3.4(d) above and, if so requested by BOK, reimbursement for BOK’s estimated legal fees and other expenses incurred in connection herewith.

 

(h)      Any and all other Loan Documents.

 

Section 4.2. Additional Conditions Precedent. BOK shall have no obligation to make the Initial Advance or any subsequent Advance, to issue any Letter of Credit or to make any extension of credit under the Hedging Loan unless the following conditions precedent have been satisfied:

 

(a)                    All representations and warranties made by any Obligated Person in any Loan Document shall be true on and as of the date of the Advance, the date of the extension of credit under the Hedging Loan or the date of issuance of the Letter of Credit as if such representations and warranties had been made as of the date hereof.

 

(b)                   No Default shall exist as of the date of the Advance, the date of the extension of credit under the Hedging Loan or the date of issuance of the Letter of Credit.

 

(c)                    Each Obligated Person shall have performed and complied with all agreements and conditions herein required to be performed or complied with by it on or prior to the date of the Advance, the date of the extension of credit under the Hedging Loan or the date of issuance of the Letter of Credit.

 

(d)                   The making of the Advance, the extension of credit under the Hedging Loan or the issuance of the Letter of Credit shall not be prohibited by any law or any regulation or order of any court or governmental agency or authority and shall not subject BOK to any penalty or other onerous condition under or pursuant to any such law, regulation or order.

 

(e)                    If an extension of credit under the Hedging Loan is to be made, an ISDA Agreement in form and substance satisfactory to BOK shall have been

 

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executed and delivered and shall be in full force and effect between Borrower and BOK.

 

ARTICLE V

 

Representations and Warranties

 

Section 5.1. Borrower’s Representations and Warranties. To induce BOK to enter into this Agreement and to make the Loans, Borrower represents and warrants to BOK (which representations and warranties shall survive the delivery of the Note and shall be deemed to be continuing representations and warranties until repayment in full of the Loans) that:

 

(a)                    No Default. Borrower is not in default in any material respect in the performance of any of the covenants and agreements contained herein. No event has occurred and is continuing which constitutes a Default.

 

(b)                   Organization and Good Standing. Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Borrower is duly qualified, in good standing, and authorized to do business in all other jurisdictions wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary.

 

(c)                    Authorization. Borrower has duly taken all action necessary to authorize the execution and delivery by it of the Loan Documents and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder.

 

(d)                   No Conflicts or Consents. The execution and delivery by the various Obligated Persons of the Loan Documents to which each is a party, the performance by each of its obligations under such Loan Documents, and the consummation of the transactions contemplated by the various Loan Documents, do not and will not: (1) conflict with any provision of: (A) any domestic or foreign law, statute, rule or regulation, (B) the governing documents of any Obligated Person, or (C) any agreement, judgment, license, order or permit applicable to or binding upon any Obligated Person, (2) result in the

 

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acceleration of any Debt owed by any Obligated Person, or (3) result in or require the creation of any Lien upon any assets or properties of any Obligated Person except as expressly contemplated by the Loan Documents. Except as expressly contemplated by the Loan Documents, no consent, approval, authorization or order of, and no notice to or filing with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by any Obligated Person of any Loan Document or to consummate any transactions contemplated by the Loan Documents.

 

(e)                    Enforceable Obligations. This Agreement is, and the other Loan Documents when duly executed and delivered will be, legal and binding obligations of each Obligated Person which is a party hereto or thereto, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights and as limited by general equitable principles.

 

(f)                      Initial Financial Statement. The Initial Financial Statement fairly presents Borrower’s financial position at the date thereof. Since the date of the Initial Financial Statement no material adverse change has occurred in Borrower’s financial condition or business.

 

(g)                   Other Obligations. Borrower has no outstanding Debt of any kind (including contingent obligations, tax assessments, and unusual forward or long-term commitments) which is not shown in the Initial Financial Statement or which has not been previously disclosed in writing to BOK.

 

(h)                   Full Disclosure. No certificate, statement or other information delivered herewith or heretofore by Borrower to BOK in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby contains any untrue statement of a material fact or omits to state any material fact known to Borrower necessary to make the statements contained herein or therein not misleading in any material respect as of the date made or deemed made. At the date of this Agreement, Borrower is not aware of any material fact that has not been disclosed to BOK in

 

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writing which could materially and adversely affect Borrower’s properties, businesses, prospects or condition (financial or otherwise). To the best of Borrower’s knowledge, the Initial Engineering Report is based upon complete and accurate factual information in all material respects, it being understood that the Initial Engineering Report is necessarily based upon professional opinions, estimates and projections and that Borrower does not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

 

(i)                       Litigation. Except as disclosed in the Initial Financial Statement or as otherwise previously disclosed in writing by Borrower to BOK: (1) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of Borrower threatened, against any Obligated Person before any federal, state, municipal or other court, department, commission, body, board, bureau, agency, or instrumentality, domestic or foreign, which do or may materially and adversely affect any Obligated Person, any Affiliate of Borrower, any Obligated Person’s ownership or use of any of its assets or properties, its business or financial condition or prospects, or the right or ability of any Obligated Person to enter into the Loan Documents or perform its obligations thereunder and (2) there are no outstanding judgments, injunctions, writs, rulings or orders by any such governmental entity against any Obligated Person which have or may have any such effect.

 

(j)                       Title to Properties. To the best of Borrower’s knowledge, Borrower has good and defensible title to the Borrowing Base Properties, free and clear of all liens, encumbrances and defects of title, except for covenants, restrictions, rights, easements, liens, encumbrances and minor irregularities in title which do not materially interfere with the occupation, use and enjoyment of such Borrowing Base Properties in the normal course of business as presently conducted or materially impair the value thereof for such business. Borrower enjoys peaceful and undisturbed possession under all material leases under which it operates, and all such leases are valid and subsisting, with no material default existing thereunder.

 

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(k)                    Place of Business. The chief executive office and principal place of business of Borrower are located at the address of Borrower set out in Section 8.3 below.

 

(1)                    Taxes. All tax returns required to be filed by Borrower in any jurisdiction prior to the date hereof have been filed; all taxes, assessments, fees and other governmental charges upon Borrower or upon any of its properties, income or franchises, which are due and payable have been paid, or adequate reserves have been provided for payment thereof.

 

(m)                 Use of Proceeds. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of either of the Loans will be used to purchase or carry any such margin stock or to extend credit to any Person for the purpose of purchasing or carrying any such margin stock. Neither Borrower nor any Person acting on Borrower’s behalf has taken or will take any action which might cause this Agreement, the Note or the ISDA Agreement or the application of the proceeds of either of the Loans to violate either of said Regulations U or X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Securities Exchange Act of 1934, in each case as now in effect or as the same may hereafter be in effect.

 

(n)                   Environmental Matters. Borrower will not in any material respect cause or permit the Borrowing Base Properties or Borrower to be in violation of, or do anything or permit anything to be done which will subject the Borrowing Base Properties to, any remedial obligations under any applicable Environmental Laws, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances, if any, pertaining to the Borrowing Base Properties, and Borrower will promptly notify BOK in writing of any existing, pending or, to the best knowledge of Borrower, threatened investigation or inquiry by any governmental authority in connection with any Applicable Environmental Laws. Borrower will take all reasonable steps necessary to determine

 

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that no hazardous substances or solid wastes have been disposed of or otherwise released on or to the Borrowing Base Properties. Borrower will not cause or permit the disposal or other release of any hazardous substance or solid waste (as defined in the Applicable Environmental Laws) on or to the Borrowing Base Properties and covenants and agrees to keep or cause the Borrowing Base Properties to be kept free of any hazardous substance or solid waste and to remove the same (or if removal is prohibited by law, to take whatever actions are required by law) promptly upon discovery at its sole expense. Upon BOK’s reasonable request, at any time and from time to time during the existence of this Agreement, Borrower will provide, at Borrower’s sole expense, an inspection or audit of the Borrowing Base Properties from an engineering or consulting firm approved by BOK, indicating the presence or absence of hazardous substances and solid waste on the Borrowing Base Properties.

 

(o)                   ERISA Liabilities. No Obligated Person has any currently existing ERISA Plan or any other obligations governed by ERISA, except for a 401(k) plan now or hereafter maintained by any Obligated Person.

 

(p)                   Investment Company Act Not Applicable. Borrower is not an “investment company” or a person “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 5.2. Representations by BOK. BOK hereby represents that it will acquire the Note for its own account in the ordinary course of its commercial banking business; however, the disposition of BOK’s property shall at all times be and remain within its control and this section does not prohibit BOK’s sale of the Note or of any participation in the Note to any bank, financial institution, investor or other purchaser.

 

ARTICLE VI

 

Covenants of Borrower

 

Section 6.1. Affirmative Covenants. Borrower warrants, covenants and agrees that, until the full and final payment of the Obligations and the termination of this Agreement, unless BOK has previously agreed otherwise in writing:

 

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(a)                    Payment and Performance. Borrower will pay all amounts due under the Loan Documents in accordance with the terms thereof and will in all material respects observe, perform and comply with every covenant, term and condition express or implied in the Loan Documents. Borrower will also use its best efforts to cause Guarantor to observe, perform and comply with every such term, covenant and condition, to the extent applicable to Guarantor.

 

(b)                   Books, Financial Statements and Records. Borrower will at all times maintain full and accurate books of account and records, will maintain a standard system of accounting in accordance with GAAP and will furnish the following statements and reports to BOK at Borrower’s expense:

 

(1)                     As soon as available, and in any event within 120 days after the end of each Fiscal Year, commencing with the Fiscal Year ending December 31, 2010, complete audited consolidated financial statements of Guarantor (together with a supplement showing the complete unaudited financial statements of Borrower), prepared by an independent certified public accountant chosen by Guarantor and acceptable to BOK, in reasonable detail and in accordance with GAAP. These financial statements shall contain at least a balance sheet as of the end of such Fiscal Year and statements of earnings and cash flow, setting forth in comparative form, where applicable, the corresponding figures for the preceding Fiscal Year;

 

(2)                     As soon as available and in any event within 60 days after the end of each Fiscal Quarter (except the last Fiscal Quarter of each Fiscal Year), commencing with the Fiscal Quarter ending June 30, 2010, unaudited and unconsolidated financial statements of Borrower and consolidated, unaudited financial statements of Guarantor for such Fiscal Quarter and for the then-current Fiscal Year, prepared by Borrower and Guarantor in reasonable detail and in accordance with GAAP and containing at least a

 

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balance sheet, statements of earnings and cash flow and a reconciliation of Borrower’s and Guarantor’s equity, setting forth in comparative form the corresponding figures for the preceding Fiscal Year;

 

(3)                     At the time of submission of the financial statements described in (1) and (2) above, a report in the form of Exhibit E attached hereto and made a part hereof, signed by the chief financial officer of Guarantor: (A) attesting to the authenticity of such financial statements, (B) stating that he has read this Agreement and the Security Documents, (C) stating that after reviewing the financial statements described above he has concluded that there did not exist any condition or event as of the date of such financial statements or at the time of his report which constituted an Event of Default or a Default, or, if he did conclude that such condition or event existed, specifying the nature and period of existence of any such condition or event, and (D) showing the calculation of, and Borrower’s compliance or non-compliance with, all of the financial covenants contained herein;

 

(4)                     By: (A) March 1 of each year, commencing March 1, 2011, an engineering report and economic evaluation prepared as of the preceding December 31 by a petroleum engineer chosen by Borrower and reasonably acceptable to BOK, covering all oil and gas properties and interests included in the Borrowing Base Properties, and (B) October 1 of each year, commencing October 1, 2010, an engineering report and economic evaluation prepared as of the preceding June 30 by Borrower, covering all oil and gas properties and interests included in the Borrowing Base Properties. Each such engineering report shall be in form and substance satisfactory to BOK and shall contain information and analysis comparable in scope to that contained in the Initial Engineering Report;

 

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(5)                     As soon as available, and in any event within 60 days after the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending June 30, 2010, a report describing, for each calendar month during such Fiscal Quarter, the gross 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 Borrowing Base Properties, and describing the related ad valorem, severance and production taxes and lease operating expenses attributable thereto and incurred for each such calendar month;

 

(6)                     By March 1 of each Fiscal Year, commencing March 1, 2011, a monthly cash flow budget for Borrower for that Fiscal Year in form and substance satisfactory to BOK; and

 

(7)                     At the time when each set of annual or quarterly financial statements is submitted by Borrower, commencing with the financial statements for the period ending June 30, 2010, a report describing Borrower’s hedging positions as of the end of such Fiscal Quarter or Fiscal Year, including without limitation a description of the commodity hedged, the derivative type, the volume, the strike price, the tenor and the counterparty, and, if Borrower had any outstanding hedging positions as of the end of such Fiscal Quarter or Fiscal Year, indicating Borrower’s compliance or non-compliance with Section 6.2(m) below.

 

(c) Other Information and Inspections. Borrower will furnish to BOK any information which BOK may from time to time reasonably request concerning any covenant, provision or condition of the Loan Documents or any matter in connection with Borrower’s business and operations. Borrower will permit representatives appointed by BOK, including independent accountants, agents, attorneys, appraisers and any other persons, to visit and inspect, at their sole risk (and, except during the continuance of an Event of Default, at their cost and expense), any of Borrower’s property, including its books of account, other books and records, and any facilities or other business assets, and to make extra copies therefrom and photocopies and

 

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photographs thereof, and to write down and record any information such representatives obtain, and Borrower shall permit BOK or its representatives to investigate and verify the accuracy of the information furnished to BOK in connection with the Loan Documents and to discuss all such matters with its officers, managers, employees and representatives.

 

(d) Notice of Material Events. Borrower will promptly notify BOK: (1) of any material adverse change in the financial condition of Borrower, (2) of the occurrence of any Default, (3) of the acceleration of the maturity of any Debt owed by Borrower or of any default by Borrower under any indenture, mortgage, agreement, contract or other instrument to which Borrower is a party or by which Borrower or any of Borrower’s properties is bound, (4) of any uninsured claim of $300,000 or more asserted against Borrower or any of its properties, (5) of the filing of any suit or proceeding against Borrower (or the occurrence of any material development in any such suit or proceeding) in which an adverse decision could have a material adverse effect upon Borrower’s financial condition, business or operations (or could result in a judgment not covered by insurance of $300,000 or more against Borrower), (6) of the adoption by Borrower of any ERISA Plan, except for a 401(k) plan now or hereafter maintained by Borrower, (7) of the merger or consolidation of Borrower with any other business entity, (8) of the sale, transfer, lease, exchange or disposal by Borrower of any material assets or properties or any proved oil or gas reserves with a value in excess of $300,000, except sales of already-severed hydrocarbons and other products in the ordinary course of Borrower’s business, and (9) of the occurrence of any of the following: a material adverse change in the financial condition of Guarantor, a default by Guarantor with respect to any material indebtedness owed by Guarantor to any Person or the filing by Guarantor of any petition for bankruptcy protection. Upon the occurrence of any of the foregoing, Borrower will take all necessary or appropriate steps to remedy promptly any such material adverse change, Default, or default, to protect against any such adverse claim, to defend any such suit or proceeding, and to resolve all controversies on account of any of the foregoing. Borrower will also notify BOK in writing at least twenty Business Days prior to the date that Borrower changes its name or the location of its chief executive office or principal place of business or the place where it keeps its books and records concerning the collateral, furnishing with such notice any necessary financing statement amendments or requesting BOK and its counsel to prepare the same.

 

(e) Maintenance of Existence and Qualifications. Borrower will maintain and preserve its existence and its rights and franchises in full force and effect and will qualify to do business in all states or jurisdictions where required by applicable law, except where the failure so to qualify will not have any material adverse effect on Borrower.

 

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(f) Maintenance of Properties. Borrower will in all material respects maintain, preserve, protect and keep all property used or useful in the conduct of its business in accordance with the standards of a reasonable and prudent operator.

 

(g) Payment of Trade Debt, Taxes, etc. Borrower will: (1) timely file all required tax returns; (2) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property; (3) pay all Debt owed by it on ordinary trade terms to vendors, suppliers and other Persons providing goods and services used by it in the ordinary course of its business; and (4) maintain appropriate accruals and reserves for all of the foregoing Debt in accordance with its present system of accounting. Borrower will pay and discharge in all material respects, when due, all other Debt, taxes or assessments now or hereafter owed by it. Borrower may, however, delay paying or discharging any such Debt so long as it is in good faith contesting the validity thereof by appropriate proceedings and has set aside on its books adequate reserves therefor.

 

(h) Insurance. Borrower will maintain with financially sound and reputable insurance companies, insurance with respect to its business, operations and properties in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business.

 

(i) Payment of Expenses. Borrower will promptly (and in any event within 30 days after any invoice or other statement or notice) pay all reasonable costs and expenses incurred by or on behalf of BOK (including attorneys’ fees) in connection with: (1) the preparation, execution and delivery of this Agreement and the other Loan Documents (including without limitation any and all future amendments or supplements thereto or restatements thereof), and any and all consents, waivers or other documents or instruments relating thereto, (2) the filing, recording, refiling and re-recording of any Security Documents and any other documents or instruments or further assurances required to be filed or recorded or refiled or re-recorded by the terms of any Loan Document, (3) the examination of Borrower’s title to the Collateral; provided that the reimbursable costs and expenses associated with any such title examination performed at or prior to the time of execution and delivery of this Agreement shall not exceed $10,000, and (4) the enforcement, after the occurrence of a Default or an Event of Default, of the Loan Documents.

 

(j) Performance on Borrower’s Behalf. If Borrower fails to pay any taxes, insurance premiums or other amounts it is required to pay under any Loan Document, BOK may pay the same. Borrower shall immediately reimburse BOK for any such payments,

 

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and each amount paid shall constitute a part of the Obligations, shall be secured by the Security Documents and shall bear interest at the rate described in Section 2.3(c)(4) above, from the date such amount is paid by BOK until the date such amount is repaid to BOK.

 

(k) Compliance with Agreements and Law. Borrower will perform all material obligations it is required to perform under the terms of each indenture, mortgage, deed of trust, security agreement, lease, franchise, agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound in such a way that they result in no material adverse effect upon the Borrowing Base Properties or Borrower’s ability to perform its obligations under this Agreement. Borrower will in all material respects conduct its business and affairs in compliance with all laws, regulations, and orders applicable thereto (including those relating to pollution and other environmental matters).

 

(1) Certifications of Compliance. Borrower will furnish to BOK at Borrower’s expense all certifications which BOK from time to time reasonably requests, as to the accuracy and validity of or compliance with all representations, warranties and covenants made by Borrower in the Loan Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto.

 

(m) Additional Security Documents. Promptly after a request therefor by BOK at any time and from time to time, Borrower will execute and deliver to BOK such additional Security Documents and/or amendments to existing Security Documents as BOK may deem necessary or appropriate in order to grant to BOK a perfected lien on and security interest in any or all oil and/or gas interests owned by Borrower.

 

Section 6.2. Negative Covenants. Borrower warrants, covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless BOK has previously agreed otherwise in writing:

 

(a) Financial Tests. (1) The Current Ratio of Borrower will not, at any time after the date hereof, be less than 1.0:1.0. (2) Borrower’s Funded Debt Ratio will not exceed 3.50:1.00 as of the end of any Fiscal Quarter ending on or after March 31, 2010.

 

(b) Limitation on Liens. Borrower will not create, assume or permit to exist any mortgage, deed of trust, pledge, encumbrance, lien or charge of any kind (including any security interest in or vendor’s lien on property purchased under conditional sales or other title retention agreements and including any lease intended as security or in the nature of a

 

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title retention agreement) upon any of Borrower’s properties or assets, whether now owned or hereafter acquired, except:

 

(1)                    Liens at any time existing in favor of BOK;

 

(2)                    statutory Liens for taxes, statutory or contractual mechanics’ and materialmen’s Liens incurred in the ordinary course of business, and other similar Liens incurred in the ordinary course of business; provided that such Liens secure only Debt which is not delinquent or which is being contested as provided in Section 6.1(g) above; and

 

(3)                    purchase-money security interests granted by Borrower on office equipment, vehicles and other personal property acquired by Borrower in the ordinary course of business; provided that the aggregate amount secured by all such security interests outstanding at any one time shall not exceed $300,000.

 

(c) Additional Debt. Borrower will not create, incur, assume or permit to exist Debt of Borrower except: (1) the Loans, (2) trade debt owed to suppliers, pumpers, mechanics, materialmen and others furnishing goods or services to Borrower in the ordinary course of Borrower’s business, (3) Debt incurred in the ordinary course of Borrower’s business in connection with commodity-price hedging transactions and gas-balancing contracts, (4) Debt of the types permitted to be secured by the security interests described in Section 6.2(b)(3) above; provided that the amount of such Debt does not exceed the limits set forth in said Section; (5) Subordinated Debt; and (6) other unsecured Debt in an aggregate amount not in excess of $250,000 at any time outstanding.

 

(d) Limitation on Sales of Property. Borrower will not sell, transfer, lease, exchange, alienate or dispose of any of its assets except as follows (and the following exceptions shall be subject to any limitations contained in the Security Documents):

 

(1)                    oilfield equipment, service and supply assets sold in the ordinary course of business;

 

(2)                    inventory (including oil and gas sold as produced) which is sold in the ordinary course of business;

 

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(3)                    oil or gas properties having a value not in excess of $500,000 in the aggregate for any calendar year; provided that Borrower shall have given BOK at least 20 days’ prior notice of any sale that includes any one or more Borrowing Base Properties; and

 

(4)                    any sale as to which: (A) no Default has occurred and is continuing at the time of such sale, (B) Borrower has given at least 20 days’ prior notice to BOK, identifying the properties to be sold and the price and other terms of the sale, during which time BOK may make any and all adjustments to the Borrowing Base and/or the Maximum Loan Amount that BOK deems appropriate in connection therewith, and (C) Borrower has made (or, immediately upon the receipt of proceeds of the sale, shall make) any required principal payment on the Loan in order that the sum of the aggregate outstanding principal balance of all Advances plus the face amounts of all outstanding Letters of Credit shall not be in excess of the Commitment Amount.

 

(e) Limitation on Credit Extensions. Borrower will not extend credit, make advances or make loans other than normal and prudent extensions of credit to customers buying goods and services in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner.

 

(f) Fiscal Year. Borrower will not change its fiscal year.

 

(g) Amendment of Contracts. Borrower will not amend or permit any amendment to (to the extent that Borrower has the power to prevent such amendment) any contract which could reasonably be foreseen to release, qualify, limit, make contingent or otherwise have any material adverse effect upon, the rights and benefits of BOK under or acquired pursuant to any of the Security Documents.

 

(h) Limitation on Guaranties. Borrower will not assume, guaranty, endorse or be or become secondarily liable for any Debt which is the primary obligation of any other Person.

 

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(i) ERISA. Neither Borrower nor any of its Affiliates will incur any obligation governed by ERISA, except for a 401(k) plan now or hereafter maintained by Borrower or any of its Affiliates.

 

(j) Distributions. Borrower will not make any Distribution after the date hereof, except as follows (and such exception shall not apply if, immediately before any such Distribution, immediately after any such Distribution or as of the end of the Fiscal Quarter in which any such Distribution is to occur, a Default or Overborrowed Condition shall have occurred and be continuing hereunder or Borrower shall be out of compliance with any of its covenants, including without limitation any of its financial covenants, contained in this Agreement or any of the other Loan Documents): Borrower may make Distributions as required by the terms of Section 5.2 of Borrower’s Operating Agreement, as in effect on the date of the Prior Credit Agreement.

 

(k) Reorganizations; Combinations. Borrower will not change its name or the nature of its business, reorganize, liquidate, dissolve or enter into any merger or other combination.

 

(1) Ownership; Control. Borrower will not permit to occur any change in ownership or control of Borrower from that in existence on the date hereof other than an interest change that would not result in Guarantor owning less than 50 percent of the equity in Borrower.

 

(m) Hedging Transactions. Borrower will not at any time enter into or be or become a party to any one or more hedging transactions with respect to its oil and gas production, except for hedging transactions: (1) covering, as of any date of measurement, any one or more of the then-current spot month or any of the immediately succeeding 35 calendar months, and (2) in amounts not in excess of 80 percent of the volume of Borrower’s proved, developed, producing reserves expected to be produced during the months covered by such hedging transactions (timed in accordance with the expected production rates of such reserves), according to the then most recent engineering report submitted pursuant to Section 6.1(b) above.

 

ARTICLE VII

 

Events of Default and Remedies

 

Section 7.1. Events of Default. Each of the following events constitutes an Event of Default under this Agreement:

 

(a) Borrower fails to pay any Obligation when due and payable, whether at a date for the payment of a fixed

 

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installment or contingent or other payment to BOK or as a result of acceleration or otherwise; or

 

(b) Any “default” or “event of default” occurs under any Loan Document which defines either term; or

 

(c) Borrower fails to duly observe, perform or comply with any covenant, agreement, condition or provision of any Loan Document; provided that, except with respect to: (1) any such covenant, agreement, condition or provision which may constitute an Event of Default under one or more of the other subsections of this Section 7.1, or (2) any covenant, agreement, condition or provision contained in the ISDA Agreement or any of Sections 2.3, 2.4, 3.4, 3.5, 3.6, 3.7, 6.1(i) or 6.2 above, Borrower shall have a 30-day grace period to cure such failure;

 

(d) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Obligated Person in connection with any Loan Document shall prove to have been false or incorrect in any material respect on any date on or as of which made; or

 

(e) Any Obligated Person:

 

(1)                    suffers the entry against it of a judgment, decree or order for relief by a court of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it which remains undismissed for a period of 60 days; or

 

(2)                    suffers the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for a substantial part of its assets or for any part of the Borrowing Base Properties in a proceeding brought against or initiated by it, and such appointment is neither made ineffective nor discharged within 30 days after the making thereof, or such appointment is consented to, requested by, or acquiesced to by it; or

 

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(3)                    commences a voluntary case under any applicable bankruptcy, insolvency or similar law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official of any substantial part of its assets or any part of the Borrowing Base Properties; or makes a general assignment for the benefit of creditors; or fails generally to pay (or admits in writing its inability to pay) its debts as such debts become due; or takes action in furtherance of any of the foregoing; or

 

(4)                    suffers the entry against it of a final judgment for the payment of money in excess of $300,000 (not covered by insurance), unless the same is discharged within 30 days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or

 

(5)                    suffers the entry of an order issued by any court or tribunal taking, seizing or apprehending all or any substantial part of its property or any part of the Borrowing Base Properties and bringing the same into the custody of such Court or tribunal, and such order is not stayed or released within thirty days after the entry thereof; or

 

(f) The Guaranty ceases to be in full force and effect and applicable to any and all of the Obligations covered thereby in accordance with its terms (or Guarantor takes that position), whether by operation of law, revocation or attempted revocation or otherwise; or

 

(g) Any default, including the expiration of any applicable period of grace, occurs with respect to any other indebtedness owed by Borrower to any Person.

 

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Upon the occurrence of an Event of Default described in subsection (e)(l), (e)(2) or (e)(3) of this section, all of the Obligations shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, declaration or notice of acceleration or intention to accelerate, or any other notice or declaration of any kind, all of which are hereby expressly waived by Borrower. During the continuance of any other Event of Default, BOK at any time and from time to time (unless all Events of Default have theretofore been remedied) may declare any or all of the Obligations immediately due and payable, and all such Obligations shall thereupon be immediately due and payable.

 

Section 7.2. Remedies. If any Default or Event of Default shall occur and be continuing, the obligation of BOK to make Advances and to issue Letters of Credit under this Agreement shall terminate immediately. If any Event of Default shall occur, BOK may protect and enforce its rights under the Loan Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or agreement contained in any Loan Document, and BOK may enforce the payment of any Obligations due or enforce any other legal or equitable right. All rights, remedies and powers conferred upon BOK under the Loan Documents shall be deemed cumulative and not exclusive of any other rights, remedies or powers available under the Loan Documents or at law or in equity.

 

Section 7.3. Indemnity. Borrower hereby agrees to indemnify, defend and hold harmless BOK and its successors and assigns and the respective agents, affiliates, officers, directors and employees of BOK and its successors and assigns from and against any and all claims, losses, demands, actions, causes of action and liabilities whatsoever (including without limitation reasonable attorneys’ fees and expenses and costs and expenses reasonably incurred in investigating, preparing or defending against any litigation or claim, action, suit, proceeding or demand of any kind or character) arising out of or resulting from: (a) the Loan Documents (including without limitation the enforcement thereof), except to the extent such claims, losses and liabilities are proximately caused by BOK’s gross negligence, bad faith or willful misconduct, (b) any violation on or prior to the Release Date of any Applicable Environmental Law, (c) any act, omission, event or circumstance existing or occurring on or prior to the Release Date (including without limitation the presence on the Borrowing Base Properties or release from the Borrowing Base Properties of hazardous substances or solid wastes disposed of or otherwise released, resulting from or in connection with the ownership, construction, occupancy, operation, use and/or maintenance of the Borrowing Base Properties, regardless of whether the act, omission, event or circumstance constituted a

 

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violation of any Applicable Environmental Law at the time of its existence of occurrence, and (d) any and all claims or proceedings (whether brought by a private party or governmental agencies) for bodily injury, property damage, abatement or remediation, environmental damage or impairment or any other injury or damage resulting from or relating to any hazardous or toxic substance, solid waste or contaminated material located upon or migrating into, from or through any of the Borrowing Base Properties (whether or not the release of such materials was caused by Borrower, a tenant or subtenant or a prior owner, tenant or subtenant on the Borrowing Base Properties and whether or not the alleged liability is attributable to the handling, storage, generation, transportation, removal or disposal of such substance, waste or material or the mere presence of such substance, waste or material on the Borrowing Base Properties), for which BOK may have liability due to the making of the Loan, the granting of the Security Documents, the exercise of BOK’s rights under the Loan Documents or otherwise. WITHOUT LIMITATION, IT IS THE INTENTION OF BORROWER, AND BORROWER AGREES, THAT THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS’ FEES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY. However, such indemnities shall not apply to any particular indemnified party (but shall apply to the other indemnified parties) to the extent the subject of the indemnification is caused by or arises out of the gross negligence, bad faith or willful misconduct of such particular indemnified party. The foregoing indemnities shall not terminate upon the Release Date or upon the release, foreclosure or other termination of the Security Documents, but will survive the Release Date, foreclosure of the Security Documents or conveyances in lieu of foreclosure, and the repayment of the Loan and the discharge and release of the Security Documents and the other documents evidencing and/or securing the Loan.

 

ARTICLE VIII

 

Miscellaneous

 

Section 8.1. Waiver and Amendment. No failure or delay by BOK in exercising any right, power or remedy which it may have under any of the Loan Documents shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by BOK of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of any Loan Document and no consent to any departure therefrom shall ever be effective unless it is in writing and

 

42

 

signed by BOK, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. No notice to or demand on any Obligated Person shall in any case of itself entitle any Obligated Person to any other or further notice or demand in similar or other circumstances. No modification or amendment of or supplement to this Agreement or the other Loan Documents shall be valid or effective unless the same is in writing and signed by the party against whom it is sought to be enforced.

 

Section 8.2. Survival of Agreements; Cumulative Nature. All of the Obligated Persons’ various representations, warranties, covenants and agreements in the Loan Documents shall survive the execution and delivery of this Agreement and the other Loan Documents and the performance hereof and thereof, including without limitation the making or granting of the Loans and the delivery of the Note and the other Loan Documents, and shall further survive until all of the Obligations are paid in full to BOK and all of BOK’s obligations to Borrower are terminated. All statements and agreements contained in any certificate or other instrument delivered to BOK under any Loan Document shall be deemed representations and warranties by Borrower to BOK and/or agreements and covenants of Borrower under this Agreement. The representations, warranties, and covenants made by the Obligated Persons in the Loan Documents, and the rights, powers, and privileges granted to BOK in the Loan Documents, are cumulative, and no Loan Document shall be construed in the context of another to diminish, nullify, or otherwise reduce the benefit to BOK of any such representation, warranty, covenant, right, power or privilege. In particular and without limitation, no exception set out in this Agreement to any representation, warranty or covenant herein contained shall apply to any similar representation, warranty or covenant contained in any other Loan Document, and each such similar representation, warranty or covenant shall be subject only to those exceptions which are expressly made applicable to it by the terms of the various Loan Documents.

 

Section 8.3. Notices. All notices, requests, consents, demands and other communications required or permitted under any Loan Document shall be in writing and, unless otherwise specifically provided in such Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by expedited delivery service with proof of delivery, or by registered or certified United States mail, return receipt requested, postage prepaid, at the addresses specified below (unless changed by similar notice in writing given by the particular Person whose address is to be changed). Any such notice or communication shall be deemed to have been given upon receipt:

 

43

 

	
Borrower’s   address:
    	
 
    	
2501   Broadway
    
	
 
    	
 
    	
Catlettsburg,   Kentucky 41129
    
	
 
    	
 
    	
Attention:   Michael Robinson
    
	
 
    	
 
    	
 
    
	
with   a copy to Guarantor at:
    	
 
    	
1700   Broadway, Suite 2020
    
	
 
    	
 
    	
Denver,   Colorado 80290
    
	
 
    	
 
    	
Attention:   Kevin Struzeski
    
	
 
    	
 
    	
 
    
	
BOK’s   address:
    	
 
    	
1675   Broadway, Suite 1650
    
	
 
    	
 
    	
Denver,   Colorado 80202
    
	
 
    	
 
    	
Attention:   Thomas M. Foncannon
    

 

Section 8.4. Parties in Interest. All grants, covenants and agreements contained in the Loan Documents shall bind and inure to the benefit of the parties thereto and their respective successors and assigns; provided, however, that no Obligated Person may assign or transfer any of its rights or delegate any of its duties or obligations under any Loan Document without the prior consent of BOK.

 

Section 8.5. Governing Law. The Loan Documents shall be deemed contracts and instruments made under the laws of the State of Colorado and shall be construed and enforced in accordance with and governed by the laws of the state of Colorado and the laws of the United States of America, except (a) to the extent that the law of another jurisdiction is expressly elected in a Loan Document, and (b) with respect to specific Liens, or the perfection thereof, evidenced by Security Documents covering real or personal property which by the laws applicable thereto are required to be construed under the laws of another jurisdiction. Borrower hereby irrevocably submits itself to the non-exclusive jurisdiction of the state and federal courts of the State of Colorado.

 

Section 8.6. Limitation on Interest. BOK and the Obligated Persons intend to contract in strict compliance with applicable usury law from time to time in effect. In furtherance thereof such persons stipulate and agree that none of the terms and provisions contained in the Loan Documents shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be charged by applicable law from time to time in effect. Neither any Obligated Person nor any present or future guarantors, endorsers, or other Persons hereafter becoming liable for payment of any Obligation shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully charged under applicable law from time to time in effect, and the provisions of this section shall control over all other provisions of the Loan Documents which may be in conflict or apparent conflict herewith. BOK expressly disavows any

 

44

 

intention to charge or collect excessive unearned interest or finance charges in the event the maturity of any Obligation is accelerated. If: (a) the maturity of any Obligation is accelerated for any reason, (b) any Obligation is prepaid and as a result any amounts held to constitute interest are determined to be in excess of the legal maximum, or (c) BOK or any other holder of any or all of the Obligations shall otherwise collect moneys which are determined to constitute interest which would otherwise increase the interest on any or all of the Obligations to an amount in excess of that permitted to be charged by applicable law then in effect, then all such sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then outstanding principal of the related Obligations or, at BOK’s option, promptly returned to Borrower or the other payor thereof upon such determination.

 

Section 8.7. Severability. If any term or provision of any Loan Document shall be determined to be illegal or unenforceable all other terms and provisions of the Loan Documents shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable law.

 

Section 8.8. Counterparts. This Agreement may be separately executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Agreement. Delivery of this Agreement and the other documents to be delivered in connection herewith by any party may be effected, without limitation, by faxing a signed counterpart of any such document to BOK (any party that effects delivery in such manner hereby agreeing to transmit promptly to each of the other parties an actual signed counterpart).

 

Section 8.9. Conflicts. To the extent of any irreconcilable conflicts between the provisions of this Agreement and the provisions of any of the Loan Documents, the provisions of this Agreement shall prevail.

 

Section 8.10. Entire Agreement. This Agreement, the Note, the Security Documents and the other Loan Documents from time to time executed in connection herewith state the entire agreement between the parties with respect to the subject matter hereof.

 

SECTION 8.11. WAIVER OF JURY TRIAL. EACH OF BORROWER AND BOK HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION: (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. EACH OF BORROWER AND BOK HEREBY

 

45

 

AGREES THAT THE OTHER MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.

 

Section 8.12. USA Patriot Act Notice. BOK hereby notifies Borrower that, pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Act”)), it is required to obtain, verify and record information that identifies Borrower and other information that will allow BOK to identify Borrower in accordance with the Act.

 

Section 8.13. Supersession. At the time that BOK makes the initial Advance of the Revolving Loan hereunder, the terms and provisions of this Agreement shall supersede the terms and provisions of the Prior Credit Agreement; provided that the Note (as defined in the Prior Credit Agreement), as amended pursuant hereto, and the security documents securing the Prior Loan shall remain in full force and effect.

 

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

 

	
 
    	
NYTIS   EXPLORATION COMPANY LLC
    
	
 
    	
By:
    	
Nytis   Exploration (USA) Inc.,
    
	
 
    	
 
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Kevin Struzeski
    
	
 
    	
 
    	
 
    	
Kevin   Struzeski,
    
	
 
    	
 
    	
 
    	
Treasurer
    

 

	
 
    	
BANK   OF OKLAHOMA, NATIONAL ASSOCIATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas M. Foncannon
    
	
 
    	
 
    	
Thomas   M. Foncannon,
    
	
 
    	
 
    	
Senior   Vice President
    

 

46

 

EXHIBIT A

 

ALLONGE

 

Reference is made to the Promissory Note dated June 21, 2005, as heretofore amended (as so amended, the “Note”), in the original face amount of $20,000,000, subsequently increased to $50,000,000, made by NYTIS EXPLORATION COMPANY LLC, a Delaware limited liability company, payable to the order of BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association.

 

The Note shall be, and is hereby, modified as follows:

 

1. By substituting “Amended and Restated Credit Agreement dated as of May 31, 2010” for “Credit Agreement dated as of June 21, 2005” in lines 2 and 3 of the second paragraph on page 1 of the Note.

 

2. By substituting the following for the sixth paragraph of the Note, at the bottom of page 1 and the top of page 2 of the Note:

 

Notwithstanding anything to the contrary contained in this Note, upon the occurrence and during the continuance of any Overborrowed Condition or Event of Default under the Credit Agreement, interest under this Note shall accrue at the applicable default rate described in the Credit Agreement, and shall be due and payable monthly or, at the option of the holder hereof, on demand.

 

EXECUTED as of May 31, 2010.

 

	
 
    	
NYTIS   EXPLORATION COMPANY LLC
    
	
 
    	
By:
    	
Nytis   Exploration (USA) Inc.,
    
	
 
    	
 
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Kevin   Struzeski,
    
	
 
    	
 
    	
 
    	
Treasurer
    

 

	
 
    	
BANK   OF OKLAHOMA, NATIONAL ASSOCIATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Thomas   M. Foncannon,
    
	
 
    	
 
    	
Senior   Vice President
    

 

A-1

 

EXHIBIT B

 

ADVANCE REQUEST

 

           ,       

 

Bank of Oklahoma, National Association

1675 Broadway, Suite 1650

Denver, Colorado 80202

Attention: Thomas M. Foncannon

 

Gentlemen:

 

1. This Advance Request is delivered to you pursuant to Section 2.1 of the Amended and Restated Credit Agreement dated as of May 31, 2010 (the “Credit Agreement”), between Nytis Exploration Company LLC and Bank of Oklahoma, National Association. Except as otherwise defined herein, terms defined in the Credit Agreement shall have the same meanings when used herein.

 

2. Borrower hereby requests an Advance as follows:

 

(a)    Proposed Date of Advance:

(b)    Amount of Advance:

 

3. Borrower hereby represents and warrants that as of the date hereof and as of the date of the Advance requested hereunder, all statements contained in Section 4.2(a), (b) and (c) of the Credit Agreement are and will be true and correct in all material respects.

 

4. Borrower agrees that if, at any time prior to the date of the Advance requested by Borrower hereunder, any representation or warranty of Borrower contained herein is not true and correct as of such time, Borrower will immediately so notify BOK. Except to the extent of any such notification by Borrower, the acceptance by Borrower of any Advance requested hereunder shall be deemed a re-certification by Borrower as of the date of such Advance of the representations and warranties made by Borrower herein.

 

 

	
 
    	
NYTIS   EXPLORATION COMPANY LLC
    
	
 
    	
By:
    	
Nytis   Exploration (USA) Inc.,
    
	
 
    	
 
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
                                         ,
    
	
 
    	
 
    	
 
    	
 
    

 

B-1

 

EXHIBIT C

 

REQUEST FOR ISSUANCE OF LETTER OF CREDIT

 

           ,       

 

Bank of Oklahoma, National Association

1675 Broadway, Suite 1650

Denver, Colorado 80202

Attention: Thomas M. Foncannon

 

Gentlemen:

 

1. This Request for Issuance of Letter of Credit is delivered to you pursuant to Article II of the Amended and Restated Credit Agreement dated as of May 31, 2010 (the “Credit Agreement”), between Nytis Exploration Company LLC and Bank of Oklahoma, National Association. Except as otherwise defined herein, terms defined in the Credit Agreement shall have the same meanings when used herein.

 

2. Borrower hereby requests that BOK issue a Letter of Credit as follows:

 

(a)                     Name of Beneficiary:

(b)                    Proposed Issuance Date:

(c)                     Expiration Date:

(d)                    Face Amount:

(e)                     Payment Instructions (if any):

 

3. Borrower hereby represents and warrants that as of the date hereof and as of the date of issuance of the Letter of credit requested hereunder, all statements contained in Section 4.2(a), (b) and (c) of the Credit Agreement are and will be true and correct in all material respects.

 

4. Borrower agrees that if, at any time prior to the date of issuance of the Letter of Credit requested by Borrower hereunder, any representation or warranty of Borrower contained herein is not true and correct as of such time, Borrower will immediately so notify BOK. Except to the extent of any such notification by Borrower, the acceptance by Borrower of any Letter of Credit requested hereunder shall be deemed a re-certification by Borrower as of the date of such Advance of the representations and warranties made by Borrower herein.

 

	
 
    	
NYTIS   EXPLORATION COMPANY LLC
    
	
 
    	
By:
    	
Nytis   Exploration (USA) Inc.,
    
	
 
    	
 
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
                                         ,
    
	
 
    	
 
    	
 
    	
 
    

 

C-1

 

EXHIBIT D

 

INTEREST RATE ELECTION

 

              ,     

 

Bank of Oklahoma, National Association

1675 Broadway, Suite 1650

Denver, Colorado 80202

Attention: Thomas M. Foncannon

 

Gentlemen:

 

1. This Interest Rate Election is delivered to you pursuant to Article II of the Amended and Restated Credit Agreement dated as of May 31, 2010 (the “Credit Agreement”), between Nytis Exploration Company LLC and Bank of Oklahoma, National Association. Except as otherwise defined herein, terms defined in the Credit Agreement shall have the same meanings when used herein.

 

2. Borrower hereby requests a LIBOR Tranche as follows:

 

(a)                     Dollar Amount:

 

(b)                    First Day of LIBOR Interest Period:

 

(c)                     Duration (month(s)):

 

	
 
    	
NYTIS   EXPLORATION COMPANY LLC
    
	
 
    	
By:
    	
Nytis   Exploration (USA) Inc., 
     Manager
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
                                    ,
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

D-1

 

EXHIBIT E

 

COMPLIANCE REPORT

 

              ,    

 

Bank of Oklahoma, National Association

1675 Broadway, Suite 1650

Denver, Colorado 80202

Attention: Thomas M. Foncannon

 

Gentlemen:

 

1. This Compliance Report is delivered to you pursuant to Section 6.1(b)(3) of the Amended and Restated Credit Agreement dated as of May 31, 2010 (the “Credit Agreement”), between Nytis Exploration Company LLC and Bank of Oklahoma, National Association. Except as otherwise defined herein, terms defined in the Credit Agreement shall have the same meanings when used herein.

 

2. The undersigned is the chief financial officer of Borrower.

 

3. Enclosed herewith are true and complete copies of the financial statements of Borrower for the Fiscal Quarter/Year ended                   , 20   (the “Financial Statements”).

 

4. The undersigned has read the Credit Agreement and the Security Documents.

 

5. After reviewing the Financial Statements, the undersigned has concluded as follows:

 

·                            As of the date of the Financial Statements and as of the date hereof, there did not exist any condition or event which constituted an Event of Default or a Default; or

 

·                            As of the date of the Financial Statements or as of the date hereof, there did exist a condition or an event which constituted an Event of Default or a Default, and the following is a description of the nature and period of existence of any such condition or event:

 

 

 

 

 

E-1

 

6. The following computation shows Borrower’s compliance or non-compliance, as of           , 20    , with the financial test referred to below:

 

(a)                     Current Ratio:

 

	
Actual
    	
 
    	
 
    
	
Current Assets of Borrower:
    	
$              
    	
 
    
	
Unused availability under Revolving Loan:
    	
+   $              
    	
 
    
	
Assets resulting from mark-to-market of   unliquidated commodity hedge contracts:
    	
-   $              
    	
 
    
	
Result:
    	
$              
    	
 
    
	
Current Liabilities of Borrower:
    	
$              
    	
 
    
	
Current Maturities of Revolving Loan:
    	
-   $              
    	
 
    
	
Liabilities resulting from mark-to-market of   unliquidated commodity hedge contracts:
    	
-   $              
    	
 
    
	
Result:
    	
$              
    	
 
    
	
Current Ratio:
    	
        :1.0
    	
 
    
	
Minimum Per Agreement:
    	
1.0:1.0
    	
 
    

 

(b)                    Funded Debt Ratio:

	
Actual
    	
 
    	
 
    
	
(1)  Outstanding interest-bearing   indebtedness of Borrower (including Subordinated Debt):
    	
$              
    	
 
    
	
(2)  EBITDAX of Borrower for last four   completed Fiscal Quarters (or for times prior to December 31, 2010, as   calculated per Agreement):
    	
$              
    	
 
    
	
Funded Debt Ratio ((l)/(2)):
    	
      /1.00
    	
 
    
	
Maximum Per Agreement:
    	
3.50/1.00
    	
 
    

 

 

	
 
    	
Signed:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

E-2

 

ALLONGE

 

Reference is made to the Promissory Note dated June 21, 2005, as heretofore amended (as so amended, the “Note”), in the original face amount of $20,000,000, subsequently increased to $50,000,000, made by NYTIS EXPLORATION COMPANY LLC, a Delaware limited liability company, payable to the order of BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association.

 

The Note shall be, and is hereby, modified as follows:

 

1. By substituting “Amended and Restated Credit Agreement dated as of May 31, 2010” for “Credit Agreement dated as of June 21, 2005” in lines 2 and 3 of the second paragraph on page 1 of the Note.

 

2. By substituting the following for the sixth paragraph of the Note, at the bottom of page 1 and the top of page 2 of the Note:

 

Notwithstanding anything to the contrary contained in this Note, upon the occurrence and during the continuance of any Overborrowed Condition or Event of Default under the Credit Agreement, interest under this Note shall accrue at the applicable default rate described in the Credit Agreement, and shall be due and payable monthly or, at the option of the holder hereof, on demand.

 

EXECUTED as Of May 31, 2010.

 

	
 
    	
NYTIS   EXPLORATION COMPANY LLC
    
	
 
    	
By:
    	
Nytis   Exploration (USA) Inc., 

  Manager
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Kevin Struzeski
    
	
 
    	
 
    	
 
    	
Kevin   Struzeski, 
   Treasurer
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
BANK   OF OKLAHOMA, NATIONAL ASSOCIATION
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas M. Foncannon
    
	
 
    	
 
    	
Thomas   M. Foncannon, 

Senior   Vice President

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